Health Squared tells members to find other medical help

Leading South African medical scheme Health Squared has become another casualty of the Covid-19 pandemic as the company takes steps to voluntarily liquidate.

A link in a text message sent Friday to Health Squared members led them to a August 18 lettersigned by Senior Medical Aid Officer Elias Mabena, informing them of the planned voluntary liquidation of the scheme.

The letter advises members “to seriously consider taking steps to obtain new memberships in other medical plans beginning September 1, 2022.”

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The plan says it will do its best to help members in the lead up to August 31, 2022, by providing them with the necessary information so they can apply for membership in new medical plans, including issuing health certificates. membership.

Not much notice

A member of Health Squared told Moneyweb he received the text message containing the link to the letter, which includes a copy of the High Court’s notice of motion, from the scheme’s board at 5.36pm on Friday August 19.

The Registrar of Medical Plans and the Council for Medical Schemes (CMS) are listed as respondents to the motion.

The member said Discovery Health informed them late Friday that he had already received several calls from other Health Squared members asking for Discovery membership information.

Health Squared says in the letter that the application for leave to file for winding up in the High Court will be heard on August 30.

It says the request means “that effective September 1, 2022, the plan will no longer carry on the business of a medical plan.”

Health Squared was created in 2018 by the merger of two long-standing medical aid providers, Resolution Health and Spectramed.

Solvent but downgraded position

According to Independent Financial Consultants (IFC), Health Squared has 48,000 members.

The letter informs members that the scheme will be wound up as a solvent business whose assets currently exceed its liabilities.

He indicates that the board has been informed that the plan currently has sufficient reserves to meet claims that will have been incurred but not declared at the date of the voluntary liquidation.

“However, after receiving actuarial and legal advice, it is clear that the financial situation of the scheme will deteriorate further, as towards the end of 2022 the scheme will have reached a level of reserves so low that it could not not be able to respond to member complaints as they arise,” the letter read.

“The scheme’s ability to meet its obligations to members regarding healthcare costs incurred by them will worsen month by month.”

“Health events” until August 31 will be covered

The letter says the scheme will no longer receive contributions from September 1 in exchange for a commitment to support members’ claims for health services.

He notes that members will be covered for claims resulting from health events occurring until August 31, provided their dues have been duly paid.

“Complaints relating to the period ending August 31, 2022 and questions from members will be dealt with in the normal course of business until the plan is finally wound up.”

Main reasons

The letter lists the main reasons for the board’s decision to ask the court for permission to wind up the plan as follows:

  • High expenses related to Covid-19 claims, which were the main driver of the plan’s financial deterioration in 2020 and 2021, with the plan particularly impacted by medical plan industry standards due to its age profile above average;
  • A considerable loss of limbs lately; and
  • Worse than expected claims in 2021 and 2022.

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Regarding Health Squared’s age profile, the letter indicates that as of July 31, 2022, the plan had an average age of beneficiaries of 49.7 years, which is 16.1 years older than the average of the 33.6-year-old medical diet industry.

It says the combined effect of these factors is that the plan’s solvency ratio, the ratio used to measure a plan’s reserves available to meet claims, has suffered a significant and relentless decline, despite numerous corrective interventions. .

It indicates that Health Squared’s solvency ratio was:

  • 17.32% at the end of 2020;
  • 6.04% at the end of 2021;
  • Around 2.15% at the end of July 2022;
  • And was projected by the plan’s actuaries between 0.2% and 2.3% at the end of the plan’s 2022 year.

(According to CMS, the Medical Schemes Act prescribes that a scheme’s reserves must remain at (at least) 25% of annualized gross contributions, excluding new medical schemes “where phased solvency ratios are apply”.)

Health Squared’s letter says Health Squared has been pursuing various options to avoid liquidation, including proposals to merge with various other plans, adding that those discussions have been ongoing since the start of the year but have not come to fruition.

“Potential merger partners have all expressed concern that the scheme’s risk profile as well as its low reserves as prohibitive for a potential merger,” it says.

“The last response refusing a merger proposal was received on August 15, 2022.”

It indicates that, if granted, the liquidation request will be launched on September 1.

“This will be the effective date of winding up the scheme as per advice received by the board, although it is expected that such a request, which must be made on at least 15 days notice to the Registrar of Physicians Schemes , will be heard on September 20, 2022,” he notes.

Attempts to obtain further comment from Health Squared and the law firm that filed the petition with the High Court have been unsuccessful.

The confident tone of less than a year ago

In a statement to the media on the Heath Squared webpage dated October 12, 2021, Chief Officer Mabena proclaimed that the CMS 2020 Industry Annual Report confirmed that conventional medical regimens were unable to match the value that members of the Health Squared medical plan could gain with the integration of health coverage services exclusively available to them.

“The CMS 2020 reporting period reflects the arrival of the Covid-19 pandemic in South Africa,” he said.

“To date, Health Squared has paid over R120 million in Covid-19 related claims for 2021, including hospitalization, vital care and home visits, as well as Covid-19 testing cover well before it’s written into the regulations.”

Mabena pointed out that unlike many other schemes, Health Squared continued to cover Covid-19 benefits from its risk pool without touching its members’ savings accounts in 2020 and 2021.

“In 2022 and beyond, it will be no different and the scheme will continue to provide cover from all angles throughout the pandemic and beyond, proving that health cover is only worthwhile when it is. meets more than the needs of the individual, and as the pandemic has shown this can be unpredictable – even for healthy young people.

Mabena said the CMS report confirmed that Health Squared’s claims ratio for 2020 was 89.9%.

“Taken in the context of the average age of beneficiaries and the health risks older people face tending to be higher, the scheme’s claims ratio is relatively low.

“This exemplifies the exceptional managed care provided by the plan administrator, Agility Health, making more benefits available to members when needed, providing them with the tools to enjoy better health and quality of life until the golden age.”

Mabena said in his 2021 media statement that the program’s rewards partner announced it was encouraging members to protect against Covid-19 with an R700 cashback reward for Agility Rewards Platinum members who completed their vaccinations in 2022.

He said it was among more than R40,000 in simple cash back rewards that were “accessible for activities such as playing golf, going to the gym, exercising with a pedometer, paying your child’s schooling and air travel”.

This article originally appeared on Moneyweb and has been republished with permission.
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