Strategy Development

Our starting point in managing a client's healthcare risk is to develop, in association with the client, terms of reference around the following principles:

- Accessibility

This would require determining the levels of accessibility to healthcare according to geographic distribution of members, demographics and the healthcare services that are available.

- Affordability

Notwithstanding unlimited demand for healthcare services and employer assistance one needs to determine what is realistically affordable for both employers and members.
The affordability issue also extends to issues such as post-retirement subsidies.

- Minimal Undesirable Cross-Subsidies

One of the key elements to healthcare risk management is the maintenance of a stable risk pool which can only be achieved by minimising undesirable cross-subsidies e.g. young to old, small families to large families etc. The ability to minimise many of these cross-subsidies is limited by legislation.

- Sustainable

Healthcare cover is required for many decades into the future which requires that strategies are implemented to ensure the stability of risk pools and to plan for any future changes in the risk pool.

- Equitable

Historically, companies have unwittingly and with best intentions implemented many policies that may be attacked as being inequitable. A typical example would be the 50% subsidy option of choice policy which is inequitable in that the employer is locked into subsidies which escalate above wage increases, and members with large families are on more expensive options and therefore receive larger subsidies. There is also the challenge of dealing with the so-called "uncovereds".

- Mitigates liabilities

This is linked to affordability and generally affects employers whose subsidy policies are for both active and pensioner members that incur substantial long-term liabilities.
The final terms of reference become the blue print against which all future healthcare risk management initiatives are made.

Funding Model Design and Management

The key funding model areas where PROVIDENCE provides assistance are:

- Subsidy policy

The subsidy policy is the most significant area for managing healthcare risk from a financial perspective as it not only affects consumer behaviour but also can incur significant and inequitable liabilities for an employer.
Accordingly we provide the following services in defining the subsidy policy:

• Make recommendations for an appropriate subsidy policy for members pre- and post-retirement in accordance with the terms of reference.
• Provide annual actuarial valuations of the liabilities arising out of any post-retirement subsidy obligations.
• Provide a framework within which employers and members can renegotiate outdated subsidy policies which are inequitable and unsustainable.
• Provide recommendations for achieving optimal tax efficiency in the structuring of the subsidy policy.
• Provide legal input on the wording of contractual commitments to current and former employees regarding subsidy policies.
• Develop an appropriate communication strategy to members regarding subsidy policies.

- Post-Retirement Liability Management

Given the complexity of this subject it is handled separately under the subject of pre-funding on the home page.
Services provided by PROVIDENCE in this area include annual actuarial valuations of the liabilities arising out of any post-retirement subsidy obligations. PROVIDENCE also makes recommendations for the optimal funding of such obligations from a vehicle from a financial, legal and tax perspective.

- Contribution Table

These have an impact on many of the key terms of reference e.g. affordability, equity, sustainability and undesirable cross-subsidies.
Against a background of the changing dynamics of a particular risk pool and the costs of delivering healthcare, over the long term, to such a risk pool, PROVIDENCE will design the structure and price of the contribution table for a risk pool to best meet the various terms of reference.

- Re-Insurance

This is an important element of most risk pools. The reinsurance required for each risk pool needs to be structured according to the demographics of the risk pool, its size, the benefits and the financial position of the fund. PROVIDENCE gathers the appropriate data to assess these risks and makes recommendations for the structure of the reinsurance and thereafter attends to the negotiation of reinsurance quotations and contracts.

Disease (HIV/AIDS) Management

HIV/AIDS represents one of the biggest, if not the biggest, challenges to employers in South Africa. All employers will have a need to quantify the impact that HIV/AIDS will have on their organisation and to manage it.
Like many other aspects of healthcare a multi discipline approach is required in both quantifying and managing the impact of this disease.

PROVIDENCE provides the following services in connection with HIV/AIDS:

- Risk Profiling

The risk to employer groups manifests in their medical schemes and their businesses. Medical scheme costs will escalate dramatically as the spread of the disease manifests. In addition, employers will be affected in all areas of their business including :

• absenteeism,
• loss of productivity,
• training,
• life and disability cover, and
• reduction in population in certain markets.

PROVIDENCE's actuarial and clinical team will gather appropriate data for the purpose of profiling the impact that this disease will have on medical schemes as well as in all aspects of an employer’s business.

- Strategy Development and Management

With HIV/AIDS there is no standard protocol for its management. Each medical scheme and/or employer requires a customised strategy for its unique circumstances. The range of interventions can be diverse, including communication and education, condom distribution, medication, vitamin supplements, treatment of STDs (to lower transmission rates) amongst members and sex workers in the communities, improving diets etc.

Secretarial (Principal Officer) Services

Each medical scheme requires the services of a principal officer to attend to the mandates of the trustees, attend to the management processes, liaise with the Registrar's office and ensure statutory compliance. These are also specialised services which PROVIDENCE provides in the following areas:

Convening

• Trustee Meetings
• AGM's
• Co-ordinate audited financials
• Liase with Registrar
• Ensure Statutory Compliance

Legal Services

The management of healthcare risk has many legal dimensions to it and in this regard PROVIDENCE provides the following legal services:

- Rules

The drafting of scheme rules and amendments thereto as required by legislation and/or the board of trustees. The submitting of proposed amendments to the board of trustees for approval before submission to the Registrar.

- Contracts

The preparation of and/or perusal of agreements with contracted third party contractors for submission to the board of trustees together with recommendations.
Providing recommendations to employers regarding appropriate wording in connection with subsidy policies.

- Legislation & Statutory Compliance

Ensuring that schemes comply with all legal requirements of the Act or any other legislation that may affect the scheme including, inter alia, governance, financial and reporting requirements.

Financial Services

The provision of useful, user friendly, timely (real time) and accessible financial data as well as sound investment strategies are key to the management of healthcare risk. In this regard PROVIDENCE provides the following services:

- Financials

The preparation of regular and complete financial statements for stakeholders. Alternatively, ensuring that the administrator prepares financial statements which meet ‘Best Practice Standards’.
Making recommendations to the board of trustees with regard to the appropriate management of the scheme's monies, including the allocation of monies between cash required for the payment of claims and cash that can be held for the longer term, and the appropriate investment of the scheme monies.

- Investments

Ensuring that the scheme monies are invested according to the mandate of the board of trustees.

Commercial Medical Scheme Assessment

Given the minimum membership requirements of open schemes most employers are forced to join a commercial medical scheme. This industry is inherently unstable on account of the new entrant medical schemes attracting the good risk from the traditional medical schemes.
It is therefore important that members are placed on medical schemes which best meet their diverse requirements
and are sustainable in the long term.

- Benefits - Rates Analysis

We assist our clients in assessing the various aspects of medical schemes by providing an analysis of benefits
and rates of schemes that we have accredited, and then match them to the members' needs.

- Reserves/Sustainability

Aside from the regular Duff and Phelps risk assessments, we also conduct our own assessments based on various criteria including cost-containment, benefit design, risk pool trends and management.

- Service

With the increasing complexity of managing healthcare risk, administration has become a significant challenge.
Our assessment includes an evaluation of service levels of the various medical schemes according to defined benchmarks.

Delivery Model Design and Management

This is possibly where PROVIDENCE's highest level of application and expertise lies. Whether members are on a commercial or in-house scheme, PROVIDENCE can provide assistance from the following range of services:

- Benefit Design

Benefit design to keep with members' requirements, market trends and new innovations.
Corrective measures to discourage the over utilisation of benefits.

- Managed Care Protocols

Appropriate protocols for managed care initiatives including hospital pre-authorisation, chronic medicine definitions and ex-gratia policies.

- Delivery Model (FFS, HMO, etc) Design

Appropriate delivery models including fee-for-service, manage fee-for-service, staff model Health Maintenance Organisations (HMOs), Preferred Provider Organisations (PPOs), in-house clinics or a combination thereof.

- Provider Negotiations

Negotiations with providers or groups of providers for the provision of the various disciplines required to deliver healthcare in terms of scheme rules and in respect of discounts, payment procedures and delivery protocols.

- Preventative Care Programmes

Preventative care including wellness programmes and health checks

Communication and Education

A well-informed and educated member has a better prospect of optimising the balance of quality and cost-effectiveness in the delivery of healthcare. Communication and education is therefore paramount and in this regard PROVIDENCE provides the following services:

- Strategy

Develop and implement an overall communication strategy for the Scheme, incorporating all elements requiring communication to and education of the Members, the Management Board, Human Resource management of the Employer, providers and contractors, including inter alia:

• Explanation of benefits,
• Benefit changes,
• Contribution changes,
• Preferred provider arrangements,
• Administrative procedures,
• Use of Internet to communicate with the administrator,
• Advice on preventative care,
• Subsidy policies, including implications for retirement,
• Funding vehicles for post-retirement healthcare costs,
• Disease management,
• Emergency evacuation cover, and
• Overseas travel cover.

- Member Guides/Newsletters

Prepare communication material including members' guides, regular newsletters, covering letters, presentations etc.

- Benefit/Rate Changes

Produce notices and/or any other form of communication for members and the employer pertaining to contribution increases and benefit changes.

- Trustee Training

Educate the employer and/or trustees, where appropriate, on all aspects of medical scheme management including, inter alia, governance, fiduciary responsibilities and liabilities, compliance with the Act, financial management, interpretation of statistics, risk management and delivery models.

Monitoring and Measurement

The management of healthcare risk revolves around the setting of benchmarks for key indicators, setting up measurements against the benchmarks and implementing corrective actions where appropriate. In this area PROVIDENCE provides the following services:

- Data Management

The regular gathering of financial and claims data for the purpose of monitoring the financial and claiming patterns of the schemes and members with a view to making observations thereon and recommendations for corrective actions.

- Benchmarking and Measurements

Monitor and measure the service standards of third party contractors and to make recommendations to the Management Board when appropriate.

- Third Party Provider Management

Make recommendations to the board of trustees with regard to the provision of Appropriate information, reports and statistics from third party contractors.

- Preparation of Reports

Prepare annual budgets and projections.

Make recommendations to the stakeholders regarding the services provided on the fee charged, including annual escalations of the various contracted third parties.

Administration Services

- Interface between employer and administrator
- Claims queries
- Ex Gratia
- Evaluation of administration

Consulting and Advice

Managing healthcare risk is a dynamic process requiring consistent interventions. In this regard PROVIDENCE provides the following services to stakeholders:

- Market/Industry Developments & Key Players

The monitoring of the healthcare environment in terms of legislation, market trends and market players. Including:

• Administrators,
• Commercial schemes,
• Managed care groups,
• Reinsurers
• Consultants etc.

The provision of recommendations with regard to changes required to the strategy to move with changes in
the healthcare industry.