Resolution Health

Consumers Could Benefit from Consolidation in the Medical Schemes Industry

As South Africa’s medical scheme industry continues to consolidate, with smaller schemes either being liquidated or absorbed into bigger players, consumers could benefit from more competition and downward pressure on the cost of medical cover.


Johannesburg, South Africa -- (SBWIRE) -- 09/19/2013 -- The principal officer of Resolution Health Medical Scheme, Mark Arnold, comments: ‘We’ve seen the number of registered schemes drop from 120 in 2008 to 95 in 2012. This trend is likely to continue over the next few years.’ For Arnold, consolidation of small schemes into bigger ones is beneficial to the industry as larger schemes have more negotiating power with service providers such as hospitals and doctors.

‘Medical inflation has been running at about three per cent higher than general inflation (CPI) with factors such as technology and a shortage of skills driving up costs,’ he says. ‘However, smaller schemes don’t have much bargaining power in this set-up. Larger open schemes can use economies of scale to drive down costs across the board.’

Owing to the limited number of healthcare practitioners, combined with a lack of competition in the private hospital market, very few solutions exist for schemes to manage down these costs. Prescribed Minimum Benefits (PMBs) are a particular concern as schemes are legally obliged to cover these costs at whatever tariff the healthcare provider charges.

‘Larger schemes are in a much better position to set up Designated Service Provider (DSP) networks, through which they negotiate better pricing with a group of hospitals by offering them a higher volume of patients,’ Arnold says. The large uptake of benefit plans offering members services at a particular DSP indicate that consumers are ready for innovative products that bring down premiums.

However, according to Arnold, only when the medical scheme market is no longer dominated by two or three large players, will consumers benefit from competition amongst medical schemes. ‘The trend of consolidation is likely to continue until the market is left with only 10 to 14 large open medical schemes with 100 000 to one million members each,’ he says. Schemes of less than about 27 000 members find it difficult to compete.

‘Smaller schemes simply don’t have the budget to attract new members, which not only requires huge spending on marketing, but also investment in behind-the-scene processes such as developing managed care protocols, R&D and making claims processing more efficient,’ says Arnold. Furthermore, brokers are concerned about the long-term sustainability of smaller schemes and tend not to promote them to their clients.

For Arnold, however, liquidations of small schemes should be a last resort. ‘In a liquidation, the scheme’s reserves are paid out to members, who may not spend the money on healthcare and the funds are then effectively lost,’ he says. ‘A merger, on the other hand, ensures that the reserves are taken across to the new scheme, contributing towards the stability of the overall industry.’

About Resolution Health
Resolution Health is one of South Africa’s top 10 largest open medical schemes, and provides its members with affordable and comprehensive solutions through a range of innovative healthcare packages. The Scheme’s Embrace Life strategy ensures that its members are able to get the most out of life through healthcare and wellbeing initiatives linked to Environment, Education and Entertainment.

Ideal for both individuals and employer groups, Resolution health offers six medical benefit options that are designed to provide tailored cover to suit the unique needs of individuals and families at all life-stages. Scheme members can choose the option that suits them best, starting from elementary hospital cover to more comprehensive benefit structures.

Resolution Health’s dedication to the overall health and wellbeing of its members is further complemented by its partnership with Zurreal, a holistic and seamlessly integrated health, loyalty and lifestyle, financial services and wellbeing solution for individuals (Zurreal4me) and employer groups (Zurreal4employers).

The partnership includes an exceptional loyalty and lifestyle programme, Zurreal, available to all Resolution Health members and stakeholders at no additional charge. Members also have the option of upgrading to the intermediate Zurreal Gold or extended Zurreal Platinum programme to unlock an astounding variety of additional lifestyle benefits that further assists them to fully embrace life. For more information go to,