Medical aid societies tell parliamentarians why they cannot pay more

The medical aid industry last year experienced claims loss ratios of 95 percent, meaning that for every dollar of contributions collected 95 cents was paid in claims, leaving little for overheads and reserves, Parliament's Portfolio Committee on Health and Child Care was told today (Tuesday).

Association of Healthcare Funders of Zimbabwe (AHFoZ) chairperson Cecelia Nyamutswa told the parliamentary committee that the industry was plagued by falling membership numbers, high claims costs, late remittance of contributions and high contribution payment default rates. These challenges were mainly triggered by the macro-economic environment, she said.

"In more recent times we have witnessed errant behaviour by some service providers in respect of fraudulent claims, which ultimately erode member funds and increase claims costs," she said.

She said the best practice utilisation of member contributions was 80 percent for medical costs, 15 percent for administration and other overhead costs and five percent for reserves, which were funds set aside for payment of future claims.

"Current trends show that claims costs are in excess of best practice, which implies that the various funds are not accumulating the cash reserves required for eventual payment of claims in the future," she said.

This had numerous implications, including possible non-compliance with legislation in respect of a society's liquidity ratio and solvency ratio, failure to pay service providers and ultimately members failing to access service.

"It is in this context that health funders are unable to meet persistent service provider requests for increased tariffs," she said.

She pointed out that when the economy was stable funders and providers used to negotiate and agree on fees, which meant patients did not have shortfalls to pay.

When the economic environment became precarious agreeing on fees became difficult, as the expectations of service providers could not be accommodated without increasing subscriptions, which was not feasible since a number of employer organisations were struggling to remit subscriptions at the prevailing rates and, due to liquidity challenges, salaries were not going up.

Responding to questions from the parliamentary committee, Mrs Nyamutswa said medical aid societies were generally complying with Section 16B of Statutory Instrument 35 of 2014, which required them to reimburse health care providers within a stipulated time frame.

Funders were generally non-compliant with the statutory reserve requirements, because of the high claims cost and the failure of some debtors to pay subscriptions. Some were compliant, however.

Commenting on complaints by the Zimbabwe Medical Association that medical aid societies were not paying gazetted tariffs, Mrs Nyamutswa said General Notice 159 of 2014 set out the maximum amounts that service providers were allowed to charge.

"The gazetting of the tariffs by the Minister of Health as per the notice, places the obligation on health care providers not to demand any payment in excess of the amount specified by the Minister by notice in the Gazette and not on medical aid societies to pay the gazetted tariffs," she said.

At the current claim levels, funders could not be in a position to pay the gazetted fees without increasing their contribution fees, she said.

"Funders are already experiencing slow contribution payments and increasing defaults from members and any wholesale increases will exacerbate the situation," she said, adding that paying the gazetted tariffs would push all funders into non-compliance with solvency and liquidity requirements within a matter of months.

Justifying the provision by medical aid societies of health care services, Mrs Nyamutswa said that this had begun in 2004 when an AHFoZ member  was forced to open clinics, as general practitioners were shunning serving its members as hyperinflation escalated.

She said attendances at the facilities opened recently by members of AHFoZ had exceeded expectations. She gave examples of similar vertical integration strategies in other countries.

Cimas Medical Aid Society group operations executive Vulindela Ndlovu told the committee that the society's members were calling for more of these facilities. More than 1.3 million members had accessed these facilities.

While no surplus had been generated recently by medical aid, the society's investments did generate surpluses, which were reinvested.

"Medical aid chews up money and we balance it with investment income," he said.

In terms of the quality of services, Mr Ndlovu said the Cimas Medical Laboratory was the only such laboratory with ISO accreditation.

He emphasised that Cimas did not insist on its members using its health facilities. Members were free to go to any service provider. Nevertheless attendance at Cimas facilities had gone up by 13 percent. Members were calling for more of these facilities.

Asked about foreign treatment of medical aid society members, Mrs Nyamutswa said medical aid societies did not encourage their members to seek treatment outside the country.

However, if an operation cost, for instance $100 000 locally and $2 000 in India and a medical aid society could perhaps pay only $50 000, the member would probably want to go to India for the procedure.

Where an operation was unavailable locally or was cheaper elsewhere, medical aid societies would pay for the foreign treatment.