Claims analysis Monthly Applications Received Claims Volumes

18 19

Claims analysis

INBOUND OUTBOUND ACTIVITY

2006 Calls E-mailsApplications

registeredSMS

(Call backs Rec.) Outbound

Calls

January 10,183 547 1,054 - -

February 11,225 762 1,609 46 8,792

March 12,628 748 2,060 730 13,823

April 13,838 603 1,471 813 18,206

May 18,846 912 2,424 316 14,749

June 19,352 1,080 2,009 1,038 755

July 26,138 2,145 3,685 1,160 7,564

August 35,685 1,959 5,715 2,856 10,602

September 47,414 2,026 9,472 2,146 2,169

October 68,139 2,769 12,831 2,313 4,548

November 84,355 4,059 16,904 9,996 13,637

December 64,139 2,637 14,003 5,054 11,585

Totals 411,942 20,247 73,237 26,468 106,430

Report of The Board of Trustees Report of The Board of Trustees

Movement in Registered Members

0

10000

20000

30000

40000

50000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Monthly Applications Received


020004000

600080001000012000

140001600018000

General Practitioner 8%

Specialists 22%

Acute Medication 10%

Optical 3%

Chronic Medication 6%

Hospitals 45%

Health Services 4%

Dentists 2%

Claims Volumes


0

50000

100000

150000

200000

250000

300000

20 21

4.2 Results of operationsThe results of the scheme are set out in the fi nancial statements and the trustees believe that no further clarifi cation is required.

4.3 Solvency ratio

2006 R

Total members’ funds per the balance sheet 81,934,438

Gross contributions 223,576,200

Solvency ratio 36,65%

4.4 Reserve accountsMovements in the reserves are set out in the Statement of Changes in Funds and Reserves. There have been no unusual movements that the trustees believe should be brought to the attention of the members of the medical scheme.

4.5 Outstanding claimsThe basis of calculations and the movements on the outstanding claims provision are set out in Note 7 to the annual fi nancial statements. There have been no unusual movements that the trustees believe should be brought to the attention of the members of the medical scheme.

5. ACTUARIAL SERVICES

The scheme’s actuaries have been consulted in the determination of the contribution and benefi t levels of the scheme.

6. POST BALANCE SHEET EVENTS

The annualised gross contribution income in 2007 is already in excess of R1,4 billion compared to R223 million in 2006. The impact of this signifi cant increase in membership and contribution income has diluted the reserve ratio to a level of 5% before taking into account results from operations. To this end, the Scheme is in a position of non-compliance with Regulation 29 in 2007.

As the scheme continues to grow, it is expected that the reserve ratio may continue to fall below levels prescribed by the Act.

7. INVESTMENTS IN PARTICIPATING EMPLOYERS OF MEMBERS OF THE MEDICAL SCHEME

The medical scheme holds no investments in participating employers of the scheme.

8. AUDIT COMMITTEE

An audit committee was established in accordance with the provisions of the Act. The committee is mandated by the Board of Trustees by means of written terms of reference as to its membership, authority and duties. The committee consists of fi ve members of which two are members of the Board of Trustees. The majority of the members, including the chairperson are not offi cers of the medical scheme or of its third party administrator.

1 – 56 – 1314 – 2627 – 3839 – 52

1 – 1112 – 3031 – 5960 – 159160 – 292

GEMS members and Primecure providers – January 2007

1 – 56 – 1314 – 2627 – 3839 – 52

1 – 1112 – 3031 – 5960 – 159160 – 292

PROVIDERS

1 – 56 – 1314 – 2627 – 3839 – 52

1 – 1112 – 3031 – 5960 – 159160 – 292

MEMBERS


22 23

The committee met on five occasions during the course of the year as follows: 26 April 2006 14 June 2006 18 July 2006 18 September 2006 17 November 2006

The principal officer, the financial manager of the administrator, internal auditors and the external auditors attend all committee meetings and have unrestricted access to the chairman of the committee.

The committee presently comprises: Mr DP van der Nest (Chairperson) Mr C Senoamadi (Trustee) Dr T Geldenhuys (Trustee) Ms G Spelman Ms S Hari

In accordance with the provisions of the Act, the primary responsibility of the audit committee is to assist the Board of Trustees in carrying out its duties relating to the medical scheme’s accounting policies, internal control systems and financial reporting practices. The external auditors formally report to the committee on critical findings arising from audit activities.

9. OTHER SUB-COMMITTEES OF THE BOARD OF TRUSTEES

The following sub-committees are mandated by the Board of Trustees by means of written terms of reference as to their membership, authority and duties. These committees meet if and when the need arises. Sub-committee meetings are, from time to time, attended by trustees, scheme management and other experts, who are not members of those committees, in an advisory capacity. The table on page 25 indicates the meeting attendance of the various sub-committees.

9.1 Operations committeeThe primary responsibility of the committee is to assist the Board of Trustees in ensuring the efficient operation of the Scheme by providing oversight, assessment and review of all aspects of the business and operations of the Scheme. To this end, the committee assists the Board of Trustees in ensuring that seamless interaction takes place between the various service providers in order to meet the operational objectives of the Scheme. The Committee also assists the Board in ensuring growth in scheme membership and excellent member affairs by overseeing communication and marketing activities.

The committee met on 19 April 2006, 6 June 2006, 5 July 2006, 25 August 2006, 5 October 2006 and 6 November 2006.

9.2 Ex gratia committeeThe primary responsibility of the committee is to assess, decide and report on the approval of ex gratia payments to members of the Scheme. The Committee is mandated to approve ex gratia payments only where the condition and the withholding of therapy is life threatening; the treatment will result in the improved quality of life of the applicant; the treatment is clinically appropriate and based on internationally accepted evidence-based treatment guidelines and protocols; or the applicant has proven an inability to afford the treatment by any other means.

The committee met on 13 April 2006, 23 August 2006, 21 September 2006, 1 December 2006 and 14 December 2006.

9.3 Governance, risk and stakeholder committeeThe committee has been mandated by the Board of Trustees to ensure sound corporate governance by providing oversight, assessment and review of all strategic and operational aspects of the business of the Scheme. The committee’s responsibilities include ensuring compliance with the Medical Schemes Act and its Regulations; patent and trademark legislation; and any other legislative framework relevant to the business of the scheme. The committee has also been mandated to ensure effective risk management and stakeholder management.

The committee met on 21 April 2006, 14 July 2006, 29 August 2006 and 13 November 2006.

9.4 Disputes committeeThe primary responsibility of the committee is to independently consider and preside over any dispute referred by the Principal Officer to the Disputes Committee for adjudication and to advise the Board of Trustees on the handling of disputes in general.

The dispute committee met on 11 October 2006.

10. NON-COMPLIANCE MATTERS

The following areas of non-compliance with the Act were identified during the course of the financial year: Contravention of Section 35(3) - A medical scheme shall have assets, the aggregate

value of which, on any one day, is not less than the aggregate value of its liabilities.


Regulation 29 of the Medical Schemes Act – Minimum accumulated funds to be maintained by a medical scheme in the first year of operation should not be less 10%.

Section 33(2) – A benefit option shall be financially sound and not jeopardise the financial soundness of any existing benefit option.

The areas of non-compliance were duly communicated to the Registrar of Medical Schemes in writing, noting information relating to the nature and causes of the failure, and course of action to ensure compliance. A Government grant of R70 million was received in two equal instalments, during August and September 2006 to assist the Scheme. The grant facilitated compliance with Section 35 and Regulation 29 of the Medical Schemes Act in that the Scheme’s net asset position and reserve ratio improved to R58 million and 40% respectively.

The Onyx and Emerald options recorded operating losses and the Council for Medical Schemes was informed throughout the year of the financial performance of the Scheme and of these options specifically.

11. TRUSTEE MEETING ATTENDANCE AND REMUNERATION

The following schedule sets out Board of Trustees meeting attendances. Trustee remuneration is disclosed in note 12 to the annual financial statements.

Board meetings

Audit committee meetings

Operations committee meetings

Ex gratia committee meetings

Governance, risk and

stakeholder committee meetings

Trustee A B A B A B A B A B

R Levin 10 7

C Senoamadi 10 8 5 4 6 4

B Rankin 6 3

A Schoeman 10 8 4 4

S Moodley 10 8 6 3 5 3

V Vumendlini 10 9

K Govender 10 7 4 3

T Geldenhuys 10 8 5 4 6 6

D Madyo 6 1

V Mbethe 10 9 4 4

B Khunoane 2 0

A – Total possible number of meetings that could have been attendedB – Actual number of meetings attended

12. SUB-COMMITTEE MEETING ATTENDANCE

The following schedule sets out meeting attendances by members of Board sub-committees.

Audit committee meetings

Operations committee meetings

Ex gratia committee meetings

Governance, risk and

stakeholder committee meetings

Disputes committee meetings

Sub-committee members

A B A B A B A B A B

DP van der Nest

5 5

S Hari 5 5

G Spelman 5 5

E Watson 6 6 5 5 4 4

P Mokwatlo 5 4

S Moloabi 5 5

B Khunoane 1 1

N Matshiliza 1 1

F Dingiswayo 1 1

A – Total possible number of meetings that could have been attendedB – Actual number of meetings attended

24 25


26 27

The trustees are responsible for the preparation, integrity, and fair presentation of the financial statements of Government Employees Medical Scheme. The financial statements presented on pages 30 to 38 have been prepared in accordance with International Financial Reporting Standards (IFRS) and include amounts based on judgements and estimates by management.

The trustees consider that in preparing the annual financial statements they have used the most appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates.

The trustees are satisfied that the information contained in the annual financial statements fairly presents the results of operations for the year and the financial position of the Scheme at year-end. The trustees also prepared the other information included in the annual report and are responsible for both its accuracy and its consistency with the financial statements.

The trustees are responsible for ensuring that accounting records are kept. The accounting records disclose with reasonable accuracy the financial position of the Scheme which enables the

trustees to ensure that the annual financial statements comply with the relevant legislation.

The Government Employees Medical Scheme operated in a well-established con-trol environment, which is well documented and regularly reviewed. This incorporates risk management and internal control proce-dures, which are designed to provide rea-sonable, but not absolute, assurance that assets are safeguarded and the risks facing the business are being controlled.

The going concern basis has been adopted in preparing the annual financial statements. The trustees have no reason to believe that the Scheme will not be a going concern in the foreseeable future, based on forecasts and available cash resources. These annual financial statements support the viability of the Scheme.

The Scheme’s external auditors, Sizwe Ntsaluba VSP are responsible for auditing the financial statements in terms of International Standards on Auditing and their report is presented on page 28.

The financial statements were approved by the Board of Trustees on 17 April 2007 and signed on its behalf:

Statement of responsibility by the Board of Trustees

The Government Employees Medical Scheme is committed to the principles and practice of fairness, openness, integrity and accountability in all dealings with its stakeholders. The Trustees in office during 2006 were appointed by the Minister for Public Service and Administration.

BOARD OF TRUSTEES

The trustees meet regularly and monitor the performance of the Administrators. They address a range of key issues and ensure that discussion of items of policy; strategy and performance are critical, informed and constructive.

All trustees have access to the advice and services of the Principal Officer and, where appropriate, may seek independent professional advice at the expense of the Scheme.

INTERNAL CONTROLS

The administrators of the Scheme maintain internal controls and systems designed to provide reasonable assurance as to the integrity and reliability of the financial statements and to safeguard, verify and maintain accountability for its assets. Such controls are based on established policies and procedures and are implemented by trained personnel with the appropriate segregation of duties.

No event or item has come to the attention of the Board of Trustees that indicates any material breakdown in the functioning of the key internal controls and systems during the year under review.

Statement of corporate governance by the Board of Trustees

Prof. R Levin Mr C Senoamadi Dr E A WatsonChairman Trustee Principal Officer

17 April 2007

Prof. R Levin Mr C Senoamadi Dr E A WatsonChairman Trustee Principal Officer

17 April 2007

8th Floor, No 1 Thibault Square, Long Street, Cape Town, 8000 P O Box 15565, Vlaeberg, 8018

Tel. +27 21 419 9396, Fax. +27 21 419 9476 www.sizwentsaluba.co.za

A member firm of SizweNtsaluba VSP Africa and Morison International

Partners: Aaron Mthimunye, Andrew Maralack, Andrew Mashifane, Anoosh Rooplal, Dirk Steyn, Hale Qangule, Johann Strauss, Luthando Saunders, Luyanda Dudumashe, Rakesh Bhika, Sipho Sono, Tapiwa Njikizana, Theodore Josias, Victor Sekese (CEO),

Zaheeda Bashir

8th Floor, No 1 Thibault Square, Long Street, Cape Town, 8000 P O Box 15565, Vlaeberg, 8018

Tel. +27 21 419 9396, Fax. +27 21 419 9476 www.sizwentsaluba.co.za

A member firm of SizweNtsaluba VSP Africa and Morison International

Partners: Aaron Mthimunye, Andrew Maralack, Andrew Mashifane, Anoosh Rooplal, Dirk Steyn, Hale Qangule, Johann Strauss, Luthando Saunders, Luyanda Dudumashe, Rakesh Bhika, Sipho Sono, Tapiwa Njikizana, Theodore Josias, Victor Sekese (CEO),

Zaheeda Bashir

To the members of the Government Employees Medical Scheme

We have audited the financial statements of the Government Employees Medical Scheme for the year ended 31 December 2006 from which the summarised financial statements were derived, in accordance with International Standards on Auditing.

In our report dated 13 April 2006, we expressed an unqualified opinion on the financial statements from which the summarised financial statements were derived.

In our opinion, the accompanying summarised financial statements are consistent, in all material respects, with the financial statements from which they were derived.

For a better understanding of the scheme’s financial position and the results of its operations for the year ended 31 December 2006 and of the scope of our audit, the summarised financial statements should be read in conjunction with the financial statements from which the summarised financial statements were derived and our audit report on those financial statements.

SizweNtsaluba VSP Partner: Johann Strauss Chartered Accountant (SA) Registered Auditor 16 April 2007

Report of the independent auditors

29

Summarised Annual Financial Statements

FOR THE YEAR ENDED 31 DECEMBER 2006

28

30 31


Summarised Income StatementFOR THE YEAR ENDED 31 DECEMBER 2006

2006

R

Net contribution income 216,191,233

Less: Net claims incurred (187,788,716)

Net expense on risk transfer arrangements (3,303,101)

Gross underwriting profit 25,099,416

Less: Managed care: management services (5,017,372)

Administration expenses (19,080,353)

Net underwriting profit 1,001,691

Less: Net impairment losses on trade and other receivables (952,370)

Profit from operations 49,321

Add: Investment income 1,687,886

Grants received 80,197,231

Surplus for the year 81,934,438

Summarised Balance SheetAS AT 31 DECEMBER 2006

2006

R

ASSETSNon-current assets

Property, plant and equipment 595,987

Current assets 134,534,358

Trade and other receivables 14,392,907

Cash and cash equivalents 120,141,451

Total assets 135,130,345

FUNDS AND LIABILITIESMembers’ funds

Accumulated funds 81,934,438

Current liabilities 53,195,907

Savings plan liability 2,401,545

Trade and other payables 25,044,531

Lease escalation reserve 160,990

Outstanding claims provision 25,588,841

Total funds and liabilities 135,130,345

AS AT 31 DECEMBER 2006

32


33


Summarised Cash Flow StatementFOR THE YEAR ENDED 31 DECEMBER 2006

2006

R

Cash flows from operating activities

Cash flows from operations before working capital changes 25,627,595

Working capital changes

- Increase in trade and other receivables (14,392,907)

- Increase in trade and other payables 25,044,531

- Increase in savings plan liability 2,401,545

Net cash from operating activities 38,680,764

Cash flows from investing activities

Purchase of plant and equipment (424,430)

Interest received 1,687,886

Net cash from investing activities 1,263,456

Cash flows from financing activities

Grants received 80,197,231

Net cash from financing activities 80,197,231

Net increase in cash and cash equivalents 120,141,451

Cash and cash equivalents at beginning of the year -

Cash and cash equivalents at the end of the year 120,141,451

Summarised Statement of Changes in Funds and ReservesFOR THE YEAR ENDED 31 DECEMBER 2006

2006

R

Accumulated

Funds

Balance at 1 January 2006 -

Net surplus for the year 81,934,438

Balance at 31 December 2006 81,934,438

34


35


1. ACCOUNTING POLICIESThe accounting policies applied were consistent throughout the

year under review.

2. RELATED PARTIES

Parties with significant influence over the scheme

The Minister for Public Service and Administration and the

Department of Public Service and Administration (DPSA) have

significant influence over the Scheme, as they participated in

the scheme’s financial and operating policy decisions, but do

not control the scheme. The DPSA granted funds and donated

fixed assets to the Scheme during the year under review. In

addition they funded the establishment of the scheme, including

the provision of R5m guarantee as per the requirement of the

Council for Medical Schemes.

The Minister also appointed the Interim Board of Trustees that

was in office during the 2006 year.

Metropolitan Health Corporate (Pty) (MHG) Ltd has significant

influence over the Scheme, as MHG provides financial and

operational information on which policy decisions are based,

but does not control the Scheme. MHG provides administration

services.

Managed care organization, Solutio Health Risk Management,

has significant influence over the Scheme as managed care

provider, but does not control the Scheme.

Notes to the Summarised Annual Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2006

Capitation providers, Netcare and Primecure have significant

influence of the Scheme through risk transfer arrangements, but

do not control the Scheme.

Key management personnel and their close family members

Key management personnel are those persons having authority

and responsibility for planning, directing and controlling the

activities of the scheme. Key management personnel include

the Board of Trustees, the Principal Officer and members of

the Chairman’s Committee. This disclosure deals with full time

personnel that are compensated on a salary basis (Principal

Officer and Chairman’s Committee) and part time personnel

that are compensated on a fee basis (Board of Trustees).

Close family members includes family members of the Board

of Trustees, Principal Officer and members of the Chairman’s

Committee.

Transactions with related parties

The following tables provide the total amount of transactions,

which have been entered into with related parties for the relevant

financial year.

2006

Key management personnel R

Compensation

Short-term employee benefits 2,461,549

Contributions and claims

Income statement

Gross contributions received 177,786

Claims incurred 86,352

36


37


Terms and conditions of the administration agreement

The administration agreement is in terms of the Rules of the

Scheme and in accordance with instructions given by the

Trustees of the Scheme. The duration of the agreement is

three years and will be up for renewal at the end of 2008. The

outstanding balance bears no interest and is due within 7 days.

Terms and conditions of the managed care agreement

The managed care agreement is in accordance with instructions

given by the Trustees of the scheme. The agreement expires at

the end of 2008. The outstanding balance bears no interest and

is due within 7 days.

Terms and conditions of the capitation contracts

The capitation contracts are in accordance with instructions

given by the Trustees of the Scheme. The agreement is

automatically renewed each year unless notification of

termination is received. The agreement expires at the end of

2008. The Scheme has the right to terminate the agreement

on 90 days notice. The fees are calculated on an arm’s length

basis on market related terms and any outstanding balances are

payable within 7 days.

3. AUDITED ANNUAL FINANCIAL STATEMENTSThe audited Annual Financial Statements can be obtained from

the Scheme’s registered office and postal address as stated

below:

Hillcrest Office Park Private bag X1

c/o Lynnwood and Dyer Rd Hatfield

Hillcrest 0028

Pretoria

0028

The terms and conditions of the related party transactions were

as follows:

TransactionNature of transactions and terms and

conditions thereof

Contributions

received

This constitutes the contributions paid by the

related party as a member of the scheme,

in their individual capacity. All contributions

were at the same terms as applicable to

third parties.

Claims

incurred

This constitutes amounts claimed by the

related parties, in their individual capacity

as members of the scheme. All claims were

paid out in terms of the rules of the scheme,

as applicable to third parties.

Contribution

debt

This constitutes outstanding contributions

payable. The amounts are due immediately.

No provision for doubtful debts have been

raised on these amounts.

2006

R

Income statement

Administration fees 10,127,481

Risk transfer premiums 23,688,124

Managed care fees 5,017,372

Grant received 80,197,231

Balance sheet

Trade and other payables:

- Administration fees due 2,833,170

- Risk transfer premiums due 5,987,581

- Managed care fees due 1,442,837

38


4.

SU

RP

LU

S/(

DE

FIC

IT)

FR

OM

OP

ER

AT

ION

S P

ER

BE

NE

FIT

OP

TIO

N –

200

6

S

AP

PH

IRE

B

ER

YL

R

UB

Y

EM

ER

AL

D

ON

YX

T

OTA

L

Net

con

trib

utio

n in

com

e 7

,450

,083

2

2,83

9,35

7 2

2,14

8,27

7 1

23,1

72,3

38

40,

581,

178

216

,191

,233

Less

: N

et c

laim

s in

curr

ed

(1,3

85,8

70)

(16,

968,

732)

(1

3,40

9,85

7)

(109

,497

,150

) (4

6,52

7,10

7)

(18

7,78

8,71

6)

N

et (

inco

me)

/exp

ense

on

risk

tran

sfer

(

1,39

9,50

8)

(2,

006,

133)

4

6,54

7 6

4,22

2 (

8,22

8)

(3,

303,

101)

ar

rang

emen

ts

Gro

ss u

nd

erw

riti

ng

pro

fit/

(Lo

ss)

4,6

64,7

05

3,8

64,4

92

8,7

84,9

66

13,

739,

409

(5,

954,

157)

2

5,09

9,41

6

Less

: M

anag

ed c

are:

man

agem

ent s

ervi

ces

(14

1,17

2)

(33

4,95

2)

(72

3,34

3)

(2,

921,

945)

(

895,

959)

(

5,01

7,37

2)

A

dmin

istr

atio

n ex

pens

es

(1,

328,

269)

(

2,05

3,24

2)

(2,

388,

595)

(

10,8

01,2

48)

(2,

509,

000)

(

19,0

80,3

53)

Net

un

der

wri

tin

g p

rofi

t/(L

oss

) 3

,195

,264

1

,476

,298

5

,673

,028

1

6,21

7 (

9,35

9,11

6)

1,0

01,6

91

Less

: N

et im

pairm

ent l

osse

s tr

ade

and

ot

her

rece

ivab

les

(26

,785

) (

55,9

98)

(18

3,62

1)

(51

2,94

4)

(17

3,02

2)

(95

2,37

0)

Su

rplu

s/(D

efici

t) f

rom

op

erat

ion

s 3

,168

,480

1

,420

,299

5

,489

,407

(

496,

728)

(

9,53

2,13

7)

49,

321

Contact details:Call Centre: 0860 00 4367

Email: [email protected]: www.gems.gov.za

Documents

Claims analysis Monthly Applications Received Claims Volumes