How much DHMS pays Discovery to administer your medical aid

Discovery Health Medical Scheme (DHMS) paid R5.389 billion to Discovery Health in administration bills final year.

It pays the entity owned by Discovery for these providers in addition to for managed take care of its members. During a year impacted by Covid-19, it paid Discovery R1.883 billion for the supply of the latter.


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Read: Discovery: Profitable in a pandemic

Administration charges comprised 7.23% of gross contributions final year (2019: 7.38%), whereas managed care charges had been 2.54% of gross contributions (2019: 2.53%).

Discovery Health gives administration and managed care providers not solely to DHMS, however one other 18 restricted schemes too. These providers cover over 3.5 million medical scheme members.

Administration expenditure

DHMS notes in its annual report that its “gross administration expenditure is the seventh lowest [as a percentage of gross contribution income] out of 20 schemes in the open scheme market”.

Read: Discovery Health will increase medical aid contributions

The common administration charge per member in 2020 was R336.84 – 5.25% greater than the prior year, “primarily reflecting the impact of an annual CPI-linked increase”. The common administration charge per member was R366.87 on all however the scheme’s income-linked KeyCare plans (on these, the typical was R106.70 for Core members and R198.81 for Start and Plus members).

DHMS says its “analysis of the CMS [Council for Medical Schemes] Annual Report 2019-2020 shows that, at 7.6% for 2019, DHMS continued to rank below the weighted average gross administration expenditure for open schemes when considered as a proportion of gross contribution income, which was 8.1% excluding the Scheme”.

“This means that the Scheme’s gross administration expenditure is the seventh lowest out of 20 open medical schemes in the market,” it added.

Source: Council for Medical Schemes Annual Report 2019-2020

Critics will level to the dimensions of the scheme (it had a 57% share of the open scheme market as at September 30, 2020) and counsel that efficiencies on the scale at which it operates might imply this share ought to be decrease.

Of open schemes which have at the least 100 000 beneficiaries, DHMS sits fifth out of eight by way of administration prices as a share of gross contribution earnings (or ‘fourth lowest’).

The desk beneath compares the administration expenditure as a share of gross contribution earnings for 2019 (CMS annual stories lag reporting by every scheme, on this case DHMS’s annual report for 2020). It additionally contains the CMS’s calculation of administration bills per energetic beneficiary per 30 days (not per member, which is how DHMS discloses it). A member could have a number of beneficiaries.

Medical scheme Administrator Beneficiaries 2019 gross administration expenditure As % of gross contribution earnings Per energetic beneficiary per 30 days
Makoti Medical Scheme Universal Healthcare Administrators 7 746 R9.3 million 12.6% R101.04
Genesis Medical Scheme Self-administered 21 118 R42.5 million 12.31% R165.48
Momentum Health Momentum Health Solutions 298 852 R597.1 million 11.56% R166.51
Compcare Wellness Medical Scheme Universal Healthcare Administrators 34 858 R73.6 million 11.48% R234.10
Thebemed Momentum Thebe Ya Bophelo 29 040 R42 million 11.11% R115.73
Fedhealth Medical Scheme Medscheme Holdings 156 904 R361 million 10.69% R204.71
Suremed Health Momentum Thebe Ya Bophelo 2 275 R5.8 million 10.38% R216.08
Cape Medical Plan Self-administered 9 240 R19.6 million 10.25% R172.44
Sizwe Medical Fund 3Sixty Health 111 409 R243.5 million 9.9% R180.08
Health Squared Medical Scheme Agility Health 34 936 R110.7 million 9.78% R245.35
Medshield Medical Scheme Self-administered 158 996 R287.2 million 7.87% R148.74
Discovery Health Medical Scheme Discovery Health 2 808 106 R5.3 billion 7.64% R159.11
Hosmed Medical Aid Scheme Medscheme Holdings 54 502 R99.3 million 7.25% R147.64
Keyhealth Professional Provident Society Healthcare Administrators 67 476 R153.8 million 7.09% R191.48
Bonitas Medical Fund Medscheme Holdings 722 943 R1.2 billion 7.01% R141.16
Medimed Medical Scheme Momentum Thebe Ya Bophelo 14 893 R16.7 million 7% R91.03
Medihelp Self-administered 204 305 R322.4 million 6.64% R130.76
Bestmed Medical Scheme Self-administered 199 297 R345.6 million 6.08% R145.50
TOTAL* 4 936 896 R9.4 billion 7.81% R157.31
Government Employees Medical Scheme (GEMS) Metropolitan Health Corporate + Medscheme Holdings 1 892 295 R1.8 billion 4.45% R82.61

* Topmed and Selfmed faraway from this comparability as these schemes amalgamated with others throughout 2019.

Source: Council for Medical Schemes Annual Report 2019-2020

DHMS gives detailed disclosure to the CMS. It is one among solely 4 open schemes to present a breakdown of administration prices. Of the quantity paid to Discovery Health, 7% is used on advertising and marketing. Contrast this with 13.3% at Sizwe Medical Fund and 22.1% at Momentum Health.

With regards to managed care providers expenditure (paid to Discovery Health), DHMS says the 6.64% improve in 2020 “reflects the annual CPI-linked increase and the full-year impact of an expansion in services provided by Discovery Health during 2019 as well as further expended services during the year, including diabetes management services and Covid-19 management services”.

It says the CMS annual report for 2019-2020 “demonstrates that the Scheme’s managed care cost as a proportion of gross contribution income was 2.5%, compared to the weighted average of 3.0% (which excludes the Scheme)”.

Costs ‘slightly higher’ than these of different schemes

“Our managed care costs are slightly higher than those of other open schemes, reflecting the complexity of the Scheme’s benefits, the breadth of managed care services offered, the claims cost savings generated by the managed care services, and the overall value for money provided to our members by our administrator and managed care provider.”

DHMS says in 2019, “claims cost savings of R213.84 (2018: R199.73) per average beneficiary per month were realised through claims review processes, protocols implemented, price negotiations and drug utilisation reviews. This equates to a saving of R3.05 (2017: R2.68) for every rand paid in managed care costs, an exceptional return on investment of 305%”.

DHMS is, after all, separate to Discovery Health and is a non-profit entity regulated by the Council for Medical Schemes. The scheme belongs to its members and any surpluses generated throughout the scheme change into reserves, additionally belonging to members.

It notes in its annual report that “every year, the Trustees assess the value provided by Discovery Health through their administration and managed care services to the Scheme. Since the assessment began in 2014, Discovery Health has provided more value to our members than the Scheme has paid for. In the 2019 financial year, Discovery Health added nominal value of R7.09 billion (2018: R7.34 billion). Put differently, for every R1 paid, our members received R2.03 in value”.

(The comparatives for the above in addition to for the claims-cost-savings benchmarking are for the previous year – 2019 – as “the assessment uses industry information”.)

Listen to Nompu Siziba’s interview with Professor Birgit Kuschke from the Department of Private Law on the University of Pretoria (or learn the transcript right here):

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