Benefit Beat

Issue No 1 -  November 1998

In this Issue:

Dear Member
Are you in on the Beat?
Tapping into your society
Industry Beat  - costs vs contributions
Where do your contributions go?
QA Care
Members' Healthcare needs: Top priority

Dear Member

We are pleased to present you with this new Benefit Society newsletter – Benefit Beat. As the name suggests, it will keep you informed of what’s happening in the Benefit Society by giving you news, tips on how to make your benefits go further, as well as stories from fellow members.

This issue takes an in-depth look at the Benefit Society, including:

• how your Society works
• how it compares with the industry
• what initiatives are in place to curb spiraling medical costs

We hope that it will give you a better understanding of the Benefit Society and how you as a member can play a vital role.

So get in on the beat and become a regular reader of Benefit Beat!

Regards

ANDY WINGREEN

Manager

ARE YOU IN ON THE BEAT?
Your Benefit Society is currently the oldest medical scheme in SA.

You are one of the 11 500 people who are currently members of the oldest registered medical scheme in South Africa. Your Benefit Society was registered in 1889, making it 109 years old this year. The Society is a traditional medical scheme, and on page two we take a closer look at exactly how your Society works.

The bath must always be at least 25% full to ensure that your Society is able to pay outstanding claims at any time. (This is also a requirement of the Medical Schemes Act.)

As with all medical schemes, your Society is a separate legal entity and operates like a business. Money received from contributions is held for the medical benefits of members only and cannot be used for any other purpose. The only money available to pay medical claims is the money that has accumulated over time in the pool and investment returns earned on this money.

Unlike the De Beers Pension Fund, the employer does not guarantee the benefits. If your society runs out of money, it cannot rely on the employer to help it out.

INDUSTRY BEAT - costs vs contributions
We will bring you news from the healthcare industry to keep you up-to-date on what’s happening out there. This issue looks at medical inflation and the impact it has on medical aid schemes.

The past few years have seen a dramatic increase in the cost of medical care. For example, in 1995 a doctor would have charged you R170 for taking out your tonsils (excluding hospital and other costs). Today you will pay R292 for the same procedure – an effective increase of 24% per year. This is referred to as medical inflation and trends show that it is here to stay.

You may be interested to know what effect medical inflation had on you and your contributions to the Society. This graph shows the difference between the contributions received (member + employer) and the benefits paid out by your Society over the past four years.

As you can see, in both 1996 and 1997, more money was being paid out (benefits) than was being paid in (contributions).

In terms of the bath scenario, if more goes out than comes in, the bath may soon run out of water. As a result of this increase in outflows, the Benefit society experienced an operating shortfall of R5.1 million in 1997. It was only due to the investment income that your Society reflected a small net surplus for 1997.

This is of great concern to your Management Committee.

Medical expenses therefore have to be managed and controlled so that the trend of operating shortfalls does not continue.

You may be consoled by the fact that your current contributions to the De Beers Benefit Society are significantly lower that the industry average.

WHERE DO YOUR CONTRIBUTIONS GO?
Your contributions are pooled together with other members’ contributions. This pool pays for the medical claims that are submitted to the Society.

The pooling of contributions (much like insurance) give you peace of mind that in the unfortunate event of major or other illness, funds are available to settle your medical accounts.

As you know, medical costs tend to increase as you get older as more specialised care and treatments are needed. The Benefit Society currently has a pensioner membership of 2 600 and this is increasing each year as more members retire. This means that each year costs will be higher and, increasingly, you and your Society will need to be able to manage them.

QA CARE
Helping to manage increasing medical expenses

QA Care is an initiative that was introduced by the Management Committee of your Society earlier this year to help manage the costs of hospitalisation – consider the 24.9% increase in hospital costs from 1996 to 1997. You are no doubt familiar with the hospital pre-authorisation process as well as the case management of members who are hospitalised. Both these processes are helping to ensure that benefits are used appropriately, while still making sure that members received the best medical care possible.

MEMBERS’ HEALTH CARE NEEDS: TOP PRIORITY
The increasing costs of medical care cannot be met merely by increasing members’ contributions. This would not be in the best interests of members. More importantly, could members afford to be spending more money on medical care?

For theses and other reasons, the Management Committee of your Benefit Society, together with actuaries, are looking at ways of ensuring that increasing costs can be effectively managed and controlled. The committee will soon be reaching recommendations on what options should be investigated and we look forward to sharing these with you.

The Management committee of your Society has, however, committed itself to the following change objective. Any change that is considered must be:

• accessible
• affordable
• equitable, and
• sustainable

This will ensure that your interests and healthcare needs are top priority and that future benefits provided will be sustained well into the future.

Your active involvement in managing your healthcare costs will go a long way to contributing to a healthier Benefit Society.

The future of your Society is in your hands!

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