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With 98 medical schemes serving some 10 million medical scheme beneficiaries, Medscheme CEO, André Meyer believes that further consolidation in the medical scheme industry is inevitable, and ultimately beneficial for consumers.

“There are simply too many medical schemes serving a static membership base and with government employees continuing to migrate across to GEMS from open medical schemes, their viability is under threat, he says.

Historically, government employees have tended to have a better claims profile than the rest of the market and this having a negative impact on the claims experience of smaller schemes.

“The effect of the deteriorating claims profiles is also exacerbated by the contracting membership bases since larger schemes are able to absorb the impact of these changes.

“Smaller schemes and administrators, faced with lower membership and a worsening membership profile, are not likely to survive and many will be forced to merge with larger players,” he explains.

However Meyer says that there is likely to be a positive spinoff for consumers.

“Medical scheme administrators operate in a high volume, low margin environment which does not favour smaller players. In the context of the current trends, industry consolidation is likely to continue until there are only three large administrators will be left in the market.

“This will benefit the consumer as larger schemes and administrators will have greater influence and bargaining power to help to keep costs down,” he says.

Mayer adds that clients of larger administrators benefit from economies of scale where there is greater scope to reduce costs.

“Every scheme is unique and the more schemes there are, the greater the complexity and infrastructure needed to administer them. The merging of two schemes has the potential to reduce non healthcare costs by as much as 25%.

“Fewer, larger administrators also have more negotiating power and influence with medical service providers which helps contain medical costs more effectively,” he says.

This also applies to investment in advanced technology.

“There are many benefits that administrators can reap from effective technologies that, for example allow members to check their information. Self-service reduces pressure on call centres and this in turn frees up call centre agents to focus on exceptions and complex cases rather than routine queries.

This will enhance efficiency, improve service levels and cuts costs” he says.

“National health insurance is also likely to further drive consolidation in the private healthcare sector but as players move to make cover more affordable for consumers.

“On the whole I believe the NHI will be beneficial for the country and the industry,” he concludes.



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