Merger between Resolution Health and NIMAS

With the recent announcement of a medical aid mergers between Resolution Health and NIMAS (National Independent Medical Aid Scheme) ‘I ask myself, is it a good thing for the industry to have schemes merging?

Medical Aid Mergers – Some History

In 1992 there were approximately 7 million lives covered by medical aid schemes, mostly traditional in their design and offering very little incentive for members to control their medical expenses. Then along came Momentum Life with their “new generation” medical aid scheme Discovery, which actually benefited the lower claiming, healthier members.

At the same time came the emergence of the Fedsure Health Medical Scheme from the old Reef Medical Scheme, medical aid mergers/take overs that at the time was very promising, and soon began a slow exodus from traditional medical schemes to new generation medical schemes.

Other large insurers with their own medical aid divisions began to realize that this was a lucrative industry to be in, and in the mid 1990’s schemes like Tafelberg (Administrered by Davidson & Ewing, an administrator owned by Norwich Life) and Caremed (Administered by Old Mutual Health Services) began to change their product designs.

Administration Companies

Many of these administrators were simply that, administration companies, with no real focus on the healthcare industry and one by one these have fallen to either corporate buy-outs in the case of D & E, and in the case of many others, to absolutely dismal marketing and corporate direction.

All the while, the likes of Fedsure Health and Discovery Health were growing, the former by organic growth and incorporation’s, while Discovery Health purely by organic growth. Fedsure Health was left in the lurch by the then Fedsure Group that imploded leaving them rudderless and financially strapped.

Many other schemes also failed to market themselves aggressively and the likes of Discovery Health were able to “cherry pick” healthy and younger medical aid members. Various changes in Legislation attempted to stop the meteoric growth of Discovery.

However because of their advanced systems and historic attraction to healthy and younger medical aid members, the scheme was easily able to turn the Legislative changes in their favour.

Medical Aid Mergers – Bad Administration

The result of all the bad administration and short term planning by many of the schemes (knee jerk reactions spring to mind), many of the once dominant schemes found themselves losing member’s to the likes of Discovery Health and the few other well run medical aid administrators.

Today we have two major administration companies (Momentum and Discovery) doing the administration of more than 60% of the now 8,3 million lives covered by schemes. Medscheme Medical Aid, who were the major administration company in the 1990’s now only has a 14,5% of the pie.

It is clear that today the administration of schemes has to be creative and the health and leisure benefits that the medical aid schemes offer such as Vitality and Multiply attract the lives that underpin the schemes’ healthier and younger demographics crucial for survival in the ageing member profile of this country.

Medical Aid Mergers – Strategic Failures

My belief is that medical aid mergers and acquisitions in the past have been strategic failures, resulting in unhappy members simply moving to the likes of Discovery Health. However in more recent times, mergers such as Momentum Health with firstly NMP (National Medical Plan) and then later with Ingwe have been more strategically planned and the schemes have complemented each other and provided a broader option base to satisfy member needs.

I hope that a similar result will emerge from the medical aid mergers of Resolution Health and NIMAS, because even though the schemes have suffered steady membership losses over recent years, the combined principal membership of about 42 000 will be make them approximately the 10th largest scheme and with their Zurreal health and leisure benefit programme, they are an attractive alternative to the likes of Discovery, Bonitas or Momentum.

Council for Medical Schemes (CMS) annual report 2010-11 – Medical Aid Mergers Statistics to note:

• Discovery Health – started in 1992 has grown organically to more than 1 019 419 principal members
• Bonitas Medical Fund – started in 1982, with solid growth to a current membership of 268 359 at the end of 2010, and will be merging with Pro-Sano who currently have a principal membership of 27 362.
• Momentum Health – started in 2004 and with mergers has grown to 88 861 principal members
• Fedhealth – Reef Medical Scheme became Fedsure Health in 1995 and membership grew up to nearly 100 000 and dropped dramatically to about 25 000 principal members with the demise of Fedsure Life in the late 1990’s. However, they have managed to maintain a principal membership of about 77 000 for the past 5 years.
• Liberty Medical Scheme has over the years hiccuped through the healthcare industry, preferring to actively market their Lifestyle medical insurance products, until legislation stopped the marketing of these life products. Since then the scheme has grown with a few medical aid mergers, the latest being with Medicover. Their combined membership at the end of 2009 was 82 753; however the LMS 2011 annual report shows membership down to 61 885.

An recent article: https://mg.co.za/news/2020-06-26-row-over-medical-scheme-merger/

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