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PPS HEALTHCARE ADMINISTRATORS
PPS Healthcare Administrators (PPSHA) is a wholly-owned
subsidiary of PPS Insurance. PPSHA administers three medical
aid schemes:
• Profmed: a closed scheme for graduates meeting certain
criteria
• Key Health: an open medical scheme servicing government
employees and growing numbers of private members
• Regular Force Medical Continuation Fund (RFMCF): a
prefunded medical scheme that mainly provides medical,
dental and hospital treatment for retired members of the
South African Defence Force.
Each scheme caters to specific needs, allowing us to tailor make
our health solutions rather than offering a one-size-fits-all
model.
What we do
PPSHA is one of 11 medical scheme administrators serving
South Africa’s private sector. The top three administrators,
being Discovery, MMI and Medscheme, control 80% of the
market. PPSHA is the fourth largest administrator, with a
healthy share of the remaining 20%.
The Council for Medical Schemes (CMS) has recognised that
our administration charges are similar to those of competitors
and our non-healthcare costs remain well below the legally
required 10% threshold.
We intend growing our customer base through superior
services and seamless interactions. As a result, PPSHA has
invested heavily in system upgrades over the last two years,
which contributed significantly to PPSHA exceeding targeted
profit margins throughout the year of review.
Over the past year, Profmed interacted continually with
contracted medical specialists. These interactions included
discussions on hospital bed nights per patient, compiling
and circulating reports on industry matters and offering
peer-reviewed quality assurance by fellow specialists.
In this period, Key Health introduced networks of hospitals and
healthcare providers that members may utilise. This practice is
being adopted by open medical schemes around the world to
manage and reduce risk. Key Health met with some resistance
from members, but was able to minimise annual contribution
increases by passing on cost savings. Key Health’s claims ratio
improved due to discounts being awarded from hospitals and
healthcare providers selected for the network.
A new Key Health incentive that was particularly well received
is a rewards scheme for maintaining healthy lifestyles.
The PPSHA’s solid financial performance was boosted by
introducing an alternative reimbursement model for selected
hospital groups and specialists servicing all three schemes.
Alternative reimbursement in place of the traditional
‘fee-for-service’ approach is gaining popularity in healthcare
around the world.
Performance
Medical scheme competitiveness ismeasured through solvency
levels and claims ratios derived from member contributions
versus
the number of claims paid. PPSHA’s claims ratio remains
aligned with the industry standard of approximately 90%.
PPSHA is working to consistently reduce claims ratios to below
90%, so that all claims are paid and funds kept in reserve for
unusual events or unusually high cost claims.
Prospects
The healthcare administration sector is highly regulated and
the Council for Medical Schemes (CMS) is known for frequent
rule changes. This volatile regulatory environment is partly
responsible for the number of active medical schemes falling
from 124 schemes in 2006 to 82 schemes in 2016.
Regulatory changes to solvency and claims ratios, among
others, are compelling medical schemes to merge, making it
difficult for PPSHA and other administrators to acquire new
medical schemes.
PPSHA’s growth strategy for 2018 is to increase membership in
existing schemes under our administration.
Broker fees remain an issue in growing membership, as these
fees are lower than for selling insurance products.
Industry risks
Although seemingly years away from full implementation, the
impending National Health Insurance (NHI) will profoundly
impact medical aid schemes and private healthcare over time,
though these institutions will continue playing key roles in
national healthcare. At this time we foresee a piecemeal rollout
of elements of the NHI until a funding model is finalised and the
actual funds become available.
PPS
INTEGRATED REPORT
2017
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