Bonitas outperformed all expectations in 2021, says CFO Luke Woodhouse

The medical fund has reported R7.4 billion in reserves for the 2021 financial year end.

Bonitas Medical Fund, which celebrates its 40th birthday this year, has announced R7.4 billion in reserves at the end of its 2021 financial year. According to CFO Luke Woodhouse, this was largely due to the “unexpectedly positive effect” Covid-19 had on the fiscal health of the fund.

“Bonitas outperformed all expectations in 2021 in terms of key indicators, including positive membership growth, a strong investment performance and boosted reserves, despite the pervasive uncertainty and loss caused by the pandemic,” Luke says.

He explains that one area that has seen particularly healthy growth is within the innovative Edge offering, BonStart, which was introduced in 2021 at an affordable price point, with virtual care as its base, and aimed at young, urban South Africans. It exceeded membership targets by 41.3 percent, with an average age profile of 33.9 years. With this in mind, Bonitas introduced a second option for 2022, called BonStart Plus.

Additionally, the fund’s principal memberships exceeded 340,000 with over 700,000 beneficiaries. “The value of quality healthcare became even more important during the pandemic and, as the world starts to recover, members are holding on to the security of private healthcare,” he adds.

Luke explains that Bonitas’s strategic focus on connecting with customers ensured that the fund successfully retained members during this period. “In fact, there was an exceptional start to the 2021 financial year when 28,500 members joined in January. Importantly, 60 percent of new members were younger than 35.”

Agility for the win
Luke says that Covid-19 still impacted the healthcare industry as a whole in 2021 and Bonitas had to be agile in its response to the dynamic changes within its operating landscape. “We had the advantage of learnings from the previous year to guide us when facing difficult decisions. The so-called ‘crystal ball’ now reflects a clearer claims landscape and, together with our organisational culture and management style that has evolved over the past two years, we were in a better position to make confident and swift decisions in the interest of members.”

Bonitas reported an 11.5 percent increase on average return on its investment portfolio to 16.2 percent, well above the target of 8.1 percent. “We continued to track performance closely to determine the best strategic assets,” Luke explains. “We remained committed to our long-term investment strategy and consistently outperformed the industry.”

Bonitas also used derivatives to hedge against high levels of volatility in equity markets.

There was a significant impact on savings following the collective hospital tariff negotiations in 2020. “Bonitas’s proactive approach to realigning Managed Care initiatives, with a particular focus on hospital negotiations, resulted in savings of R198 million,” he adds.

Luke explains that, given the significant build-up of reserves in 2020 and the challenging economic circumstances facing its members, Bonitas set historically low premium increases in 2021 without jeopardising the sustainability of the fund. “There was a competitive weighted average contribution increase of only 1.3 percent higher than consumer price index (CPI) whereas, under normal circumstances, these are set at a minimum of CPI +3.5 percent.”

Hospital costs dominated claims, reaching R6.45 billion, up 9.52 percent against 2020. This is in line with the moratorium on elective surgeries being lifted. “Our hospital negotiations including day hospitals and home-based care – in partnership with Quro Medical to offer members acute level care in their own homes – resulted in a saving of R9.5 million.”

Additionally, Active Disease Risk Management (ADRM), which focuses on outcomes-based frameworks to improve clinical outcomes, reduce admissions and readmissions and improve medicine adherence, achieved savings in excess of R14 million.

Results at a glance

  • R1.8 billion gross healthcare result (2020: R3 billion gross healthcare result)
  • Reserves reaching R7.4 billion (2020: R6.1 billion)
  • A net surplus of R1.4 billion (2020: R1.7 billion)
  • Solvency ratio of 36.5 percent (2020: 32.7 percent)
  • Projected negotiated hospital savings of R198 million (2020: R346 million)
  • An average return of 16.2 percent equating to investment income of R1.2 billion (2020: 4.16 percent equating to R316.6 million)
  • R8.32 billion total investment portfolio value, excluding cash (2020: R7.22 billion),
  • Net claims increased by 10.5 percent to R 15.8 billion (2020: 14.3 billion)
  • Healthcare cost savings initiatives realised savings of R487m (2020: R221m)
  • Claims loss ratio of 89.8 percent (2020: 83.0 percent)

“We expect the pandemic challenges to remain, whether in the new waves or new variants. The potential impact is unsure, but we remain committed to promoting vaccination as an effective countermeasure. We are confident that Bonitas will continue growing its membership, fostering retention, and retaining the momentum gained over the past two years. However, we are mindful of the macroeconomic factors that still stifle consumer spending,” Luke concludes.