KPMG damns Medical Aid Funds

The Botswana Medical Aid Schemes are nothing more than crafty operations that pry on gullible customers using suspect regulatory guidelines, a diagnostic study has found. In not so many words the study, from KPMG, appointed by the Non Bank Financial Institutions Regulatory Authority, which supervises the MAFs, shows that half of the eight medical aid schemes in Botswana are self-administered, while 50 percent of the registered are for profit and 13 percent are registered as a society.

The eight medical aid schemes in Botswana are: Botswana Medical Aid Society, Botlhe, Botswana Public Officers Medical Aid Scheme, Botsogo Health Plan, Itekanele, Doctors Aid, Pula Medical Aid and Etudiant Medical Aid. They have over 320 000 clients. Some MAFs have membership restriction by occupation or income level while others are open to everyone who needs coverage. The claims incurred by MAFs in Botswana and South Africa were 79 percent of gross contribution income while the rate was only one percent in Namibia.

The study also shows that the cost of administration is higher in Botswana as it made up to 14 percent of gross contribution income, with South Africa and Namibia at around eight percent. On average, the cost of private healthcare is cheaper in Botswana as the average yearly contribution is almost half of Namibia contribution per beneficiary and 4.5 times less than in South Africa. “Based on regional and international best practice, it would seem that a new legislative framework should be developed specifically for the industry to take into account the specific requirements of private healthcare in Botswana,” the report states. Other trends in the industry indicate that the majority of medical aid schemes use community rating as a pricing policy rather than being risk based.

It also found that only three of the eight MAFs did actuarial assessments on a regular basis to monitor their risk exposure from membership risk, claim and investment risks. Regarding regulatory environment and financial statistics, the findings show that both Namibia and South Africa have a statutory registrar or council for MAFs. There are also specific guidelines in place for them and members. The KPMG study calls for a clear regulatory framework that protects the contributions of members, ensures the sustainability of the industry and most importantly continues to provide health care funding to Botswana. It recommends a new legal framework for medical schemes, which can take on board the best practice from around the region and internationally. It should explicitly define what a medical aid scheme is to ensure there is no confusion by market players and future entrants.

The definition should go as far as defining how medical schemes should be registered as legal entities, their licensing requirements from NBFIRA and the reporting requirements be it on a monthly, quarterly or annual basis to ensure prudent management and monitoring. KPMG is a partnership domiciled in Botswana and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss corperation. The uncomplimentary research was tasked among others to do a diagnostic and assessment of the current MAFs in the country, review of the risk profile for the MAF industry, their financial strengths and weaknesses. It also reviewed the current legislative framework and practices available in Botswana and the region and weighed the pros and cons of drafting a new framework for their regulation and supervision.