Leading South African health programme Health Squared is entering voluntary liquidation after becoming another victim of the Covid-19 epidemic.
Health Squared participants received a link in an SMS on Friday that took them to a letter dated August 18 and signed by Elias Mabena, the scheme’s chief executive, announcing the voluntary liquidation of the programme.
“Seriously consider taking actions to gain new membership of alternative health plans from 1 September 2022,” the letter told members.
Read: Factors to take into account while selecting a doctor.
The programme promises to do all in its power to assist members from now until August 31, 2022, including giving them the information they need to register for the new health plans and presenting membership certificates.
Not particularly noticeable
A Health Squared participant informed Moneyweb that at 5:36 pm on Friday, the scheme’s board of trustees sent them an SMS with a link to a letter including a copy of the high court petition notice (August 19).
The application names the Council for Medical Schemes (CMS) and the Registrar of Medical Schemes as defendants.
The member said that late on Friday, Discovery Health informed them that it had already received many calls from other Health Squared members requesting information on their memberships.
According to a letter from Health Squared, the high court will consider the request for authorization to file for liquidation on August 30.
It says the application means “that from 1 September 2022 the scheme will no longer carry on the business of a medical scheme”.
Resolution Health and Spectramed, two established healthcare organisations, merged to become Health Squared in 2018.
Solvency, but things are getting worse
Independent Financial Consultants (IFC) estimate that 48,000 people belong to Health Squared.
The letter advises participants that the plan would be dissolved as a going concern with surplus assets to liabilities.
It said the board had been informed that the scheme currently had sufficient reserves to meet claims that would arise but had not been reported at the date of voluntary winding up.
However, it said, “Having obtained actuarial and legal advice, it is obvious that the scheme’s financial condition will continue to worsen, reaching such a low level of reserves towards the end of 2022 that it may not be able to fulfil members’ claims as they occur. the letter,
The capacity of the plan to fulfil its duties to members in connection to the medical expenses they incur will become worse month by month.
Up to August 31st, “Healthcare Events” will be covered.
According to the letter, the plan would no longer accept donations in exchange for promises to pay for members’ medical expenses as of September 1.
According to the policy, members who have paid their dues in full will be compensated for health-related claims that happen before August 31.
“Until the plan is ultimately wound down, claims related to the period ending 31 August 2022 and member questions will be handled in the usual course of business.”
Despite the Covid-19 outbreak, the healthcare business is doing well, according to Alexforbes.
The primary causes
The following are the key justifications given in the letter by the board for its choice to ask the court to liquidate the scheme:
Read:
Regarding the age profile of Health Squared, the letter said that as of July 31, 2022, the average beneficiary age under the plan was 49.7 years, which is 16.1 years older than the industry average for the medical plan, which is 33.6 years.
The solvency ratio, which is a ratio used to gauge the scheme’s funds available to satisfy claims, has reportedly experienced a considerable and irreversible fall despite many corrective actions, according to the report.
It said Health Squared’s solvency ratio was:
-
17.32% at the end of 2020;
-
6.04% at the end of 2021;
-
Approximately 2.15% at the end of July 2022;
-
Program actuaries forecast 0.2% to 2.3% for the end of 2022.
Except for new health schemes “where solvency ratios apply,” the Health Schemes Act, according to CMS, requires that plan reserves remain at (at least) 25% of yearly gross premiums.
According to the letter from Health Squared, the company tried a number of ways to prevent going out of business, such as suggested merger arrangements with other plans, but to no avail. The company said that these negotiations had been going on since the beginning of the year.
“All potential merger partners have raised concerns about the scheme’s risk profile as well as its low reserves as being unacceptable for a possible merger,” it said.
On August 15, 2022, the most recent answer denying the proposed merger was received.
According to it, the liquidation application would be made public on September 1 if accepted.
Despite the fact that such an application must be submitted at least 15 days before the Registrar of the Medical Scheme, it is anticipated that it will be heard on September 20, 2022. “This will be the effective date of winding up the scheme in accordance with advice received by the council,” it stated. messages.
It was unable to contact Health Squared or the legal office that submitted the high court application for further information.
A positive attitude a year ago
The 2020 CMS Annual Industry Report confirms that traditional medical schemes cannot match the value that Health Squared Medical Scheme participants can get through the integration of exclusively medical services available to them, CEO Maben stated in a media statement on the Heath Squared webpage dated 12 October 2021.
The start of the Covid-19 epidemic in South Africa is shown in the 2020 CMS reporting period, he said.
Health Squared has already paid out over 120 million rand for 2021 Covid-19-related claims, including hospitalisation, life-saving treatment, home visits, and coverage for Covid-19 testing even before it was included in the regulations.
Mabena pointed out that, in contrast to many other plans, Health Squared continued to fund Covid-19 payments from its risk pool in 2020 and 2021 without having an impact on its members’ savings accounts.
“In 2022 and beyond, it will continue to be the same, and the programme will continue to offer comprehensive coverage throughout the pandemic and beyond, proving that health insurance is only worthwhile when it more than meets the needs of the individual, and the pandemic has shown that it can be unpredictable – even for young people in good health.”
The CMS analysis, according to Mabena, supports Health Squared’s 2020 claims ratio of 89.9%.
“The claim percentage of the programme is surprisingly modest given the median age of participants and the increased health risks older people often encounter.
This exemplifies the outstanding managed care offered by the administrator of the plan, Agility Health, by making additional benefits accessible to members when they need them and equipping them with the knowledge and resources to enhance their health and quality of life in their later years.
In a press release issued in 2021, Mabena said that the rewards programme partner announced that it is urging members to protect themselves against Covid-19 by offering a rebate of R700 for Agility Rewards Platinum members who get the vaccination in 2022.
It was a portion of the more than 40,000 rand in straightforward payback incentives, he said, that were “offered for activities such as playing golf, going to the gym, working out with a pedometer, paying for your child’s school tuition, and air travel.”