Hospital cash plans and the cost to medical schemes

1. Hospital cash plans and the cost to medical schemes Presenter logo to come here

2. Agenda Discovery’s Insights – Discovery Holdings #2 Background and Market Enviroment - ASISA #1 Presenter logo to come here #3 Way Forward - ASISA

3. Background Presenter logo to come here * Source: FinMark Trust 2012 Review How the policy works: • A hospital cash plan (HCP) is a policy that pays a daily cash amount for every day spent in hospital • The benefit usually becomes payable after day two or three depending on your policy contract • Policyholder is admitted to hospital first and then makes the claim once discharged • Policyholders can purchase policies from various providers Market-share: • Between 1 million and 1.5 million hospital cash plans in effect, providing cover to 2.4 million people* • The market is growing rapidly with an estimated 50 000 new policies sold every month* Reasons for purchasing Cash Plan Policies: • Easy to understand products designed to help consumers cope with unexpected expenses as a result of being admitted to hospital. • Alleviates the financial burden of hospitalisation especially for self employed individuals or policy holders with items not covered by their medical scheme

4. Stakeholder Overview Presenter logo to come here

5. Current Market Environment Presenter logo to come here • Increase in potential fraudulent claims where collusion is helping dishonest policyholders make claims they are not entitled to and patients being treated for minor conditions which can be treated out of hospital. Over and above they are being kept in hospital for much longer than needed. Thus enabling a claim from their hospital cash plan • If abuse of HCP continues to escalate, insurers may be forced to implement tough measures to ensure the financial viability of these products: raising premiums, introducing standard cancellation clauses and even stopping HCP • ASISA Fraud Statistics shows that hospital cash plan fraud is a problem in South Africa. In 2011 ASISA members detected 549 cases worth R4 million In 2010 some 649 cases were detected worth R12.6 million • Judge Brian Galgut, the previous Long-term Insurance Ombudsman, comments in his Annual Report for 2012 that “many of the excessive hospital cash plan claims appear to be part of an organised scam. He notes that steps must be takenby insurers to stop this trend as soon as possible as the impact of these excessive claims will no doubt lead to an increase in premiums for this type of policy.“

6. Agenda Discovery’s Insights – Discovery Holdings #2 Background and Market Enviroment - ASISA #1 Presenter logo to come here #3 Way Forward - ASISA

7. Concerns over significant differences in hospital claims for medical schemes and hospital cash plans Average length of stay for Hospital Cash Plan admissions exceed DHMS admissions by between 40% and 60% Average admission rate for Hospital Cash Plans up to 5 times greater than for DHMS X5.4 61% 42% 39% X4.8 X2.5 • Note: • DHMS = Discovery Health Medical Scheme

8. 12-year old admitted with haematemesis Length of stay = 6 days Six admissions over two years Day of admission ate pie and coke, toasted cheese sandwich, nuggets and pizza Seen by psychologist daily Discharged with no investigations 43-year old admitted with left-hand pain Length of stay = 3 days 17 admissions over two years On pain medicine Discharged with no investigations Examples of cases of potential fraud – Onsite audit 1 2 • 46-year old admitted with UTI • Length of stay = 4 days • 18 admissions over two years • On pain medicine and antibiotics • Family had over 30 admissions in two years 3

9. Members feedback to Discovery “Hospital A forever has no beds and when one does get admitted we hear all stories from patients that they here for a Hospital Cash Back , therefore I was so glad that there is now a form to be completed on Admission questioning if a patient has a cash back plan. “

10. High Level Trends • Predominantly medical admissions with vague diagnoses E.g. Simple Pneumonia & Whooping Cough; Oesophagitis; Gastroenteritis and Miscellaneous Digestive Disorders; Respiratory System Signs, Symptoms & Other Diagnoses • Greater Length of Stay for members with a hospital cash plan policy • Higher admission rate for members with a hospital cash plan policy • Hospitals were compared to the national experience/benchmark and outliers identified • Outlier hospitals were mainly in KZN province

11. Agenda Discovery’s Insights – Discovery Holdings #2 Background and Market Enviroment - ASISA #1 Presenter logo to come here #3 Way Forward - ASISA

12. Way Forward Presenter logo to come here • Some insurers have started including cancellation clauses in their hospital cash plan contracts thus protecting honest policy holders from premium increases • Insurers report practitioners to the Health Professions Council of SA • Review and Implement a protocol around multiple claimers • identification of multiple claims from a single policyholder and the reasons for admission and treatment done • creation of “flagging system” • look at claims history of policyholder • Industry Collaboration

13. "Alone we can do so little… together we can do so much." Helen Keller THANK YOU Presenter logo to come here