CHANGES TO THE POST-RETIREMENT SUBSIDY
FOR SATS PENSIONERS
March 5 2009
CONTEXT and BACKGROUND
• SATS pensioners worked for South African Transport Services
- retired before 1 April 1990
• Currently 26 000 former employees and dependants
•
Average age of 76 - risk pool is projected to extend to 2040 (dependants)
•
60% are female
•
70% are single and have no dependants registered on Transmed
• Ring-fenced on Guardian Plan in Transmed
•
Like most schemes benefits have reduced with escalating costs
•
Guardian plan benefits - similar to the Prescribed Minimum Benefits (“PMBs”),
include state hospital care enhanced with access to specialist care and some
additional chronic care.
CONTEXT and BACKGROUND (cont)
•
Transnet currently pays a subsidy directly to Transmed –
subsidy collectively applied (R800pm per SATS family,
calculated and paid at beginning of year-R200 mil pa)
•
Current ring-fenced subsidy structure is not sustainable –
Transmed’s viability would be affected if no solution found
before 2010
•
After much investigation and consultation, Transnet is
proposing the New SATS Subsidy
SOLUTIONS INVESTIGATED
The Risk Equalisation Fund (REF)
•
The government announced the concept of REF in 2006 to help stabilise
the medical industry and to provide a platform for expanding cover to
more South Africans.
•
Schemes with healthy membership bases and low claim patterns
(typically younger age profiles) would cross subsidise schemes with
high claim patterns and clinical medical costs (usually older age
profiles) through the use of an equalisation reserve.
•
As a result of the continued delay in implementation and the lack of
clarity around eventual implementation, the REF has not been
considered as part of the SATS solution.
•
The financial risk to Transnet of waiting for the REF and underpinning
the losses in Transmed until REF is implemented are too significant.
SOLUTIONS INVESTIGATED (cont)
Possible solutions within Transmed
•
•
•
•
Status quo remains - unsustainable
Fund Guardian Plan benefits – expensive and not cost effective
Fund reduced benefits (slightly more than PMBs) – not attractive
Fund a benefit option that offers less than PMBs (i.e. no hospital cover), subject
to Registrar approval – not attractive
Possible solutions outside Transmed
•
•
•
•
•
Transfer SATS pensioner “group” to Government Employees Medical Scheme
(“GEMS”) - declined
Transfer SATS pensioner “group” to an open scheme - declined
Transfer Transnet employees and pensioner “group” to GEMS - declined
Transfer Transnet employees and pensioner “group” to an open scheme declined
Pay an independent cash subsidy
CONSULTATIVE PROCESS
•
In accordance with PAJA and to ensure that the interests of all
parties have been properly understood and taken into account
in determining a final solution for the SATS subsidy, a number
of consultative processes have been followed:
•
Workshops have been held with Transmed and their advisors
•
Meetings have been held with GEMS
•
Meetings have been held with largest open schemes
•
Meetings have been held with the Registrar of Medical Schemes
•
SATS consultations include – communications, booklets and
ongoing road shows
NEW SATS SUBSIDY - Structure
•
Proposed start is 1 July 2009
•
Transnet will pay cash into bank account of principal member
• R730 pm for principal member; and
• R590 pm for a spouse; and
• R250 pm for a child under the age of 21 years; and
• R250 pm for disabled children over 21 years.
• Increases from 1 January each year will try to ensure
subsidy keeps up with inflation but will not be more than
6.25%
NEW SATS SUBSIDY
•
MORE MONEY
•
•
•
An additional R500 ml allocated to actuarial value of R1.2 bn
CHOICE
•
can choose to stay with Guardian Plan
•
can choose to move to an open scheme – which meets their needs
•
can choose not to join a medical scheme – not recommended
SUPPORT
•
Mandated Aon to advice, assist and support SATS pensioners at Transnet
cost
•
Correspondence, booklets, call centres and country-wide road shows
ADVANCE TO ARREARS CONTRIBUTIONS
•
Open scheme contributions are usually paid in advance
(beginning of month)
•
Guardian Plan contributions are paid in arrears (end of month)
•
Transnet will fund an extra month of contributions and subsidy
to Transmed to assist the change to advance contributions –
SATS pensioners will not have to carry this cost (R20 million)
•
Easier transition to open schemes
SATS CONCERNS – open schemes
• Principle of open enrolment - anyone can join the open
schemes, no matter how old, ill or frail
• At the most a 3 month waiting period will be applied
•
If break in medical scheme membership is not more than 90 days –
schemes have to cover PMB’s for this 3 month period (similar to
Guardian benefits)
Aon’s ROLE
•
SATS pensioners have generally only ever been on one medical
scheme
•
Huge mind-set change for them
•
Moving schemes may be frightening and confusing for them
•
Transnet has appointed Aon to provide independent broker
advice, assistance and support to the SATS pensioners -
Transnet will fund Aon’s SATS related costs for a two year
period
NEXT STEPS
• Hope to finalise the consultations by mid-April 2009
• Targeting an implementation date of 1 July 2009
CONCLUSION
•
MORE MONEY
•
•
CHOICE
•
•
•
•
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An additional R500 ml allocated to actuarial value of R1.2 bn
can choose to stay with Guardian Plan
can choose to move to an open scheme – which meets their needs
open schemes likely to be better value for money
can choose not to join a medical scheme – not recommended
SUPPORT
•
•
Mandated Aon to advice, assist and support SATS pensioners at
Transnet cost
Correspondence, booklets, call centres and country-wide road
shows
Transnet has done much to improve the SATS pensioners’ ability to access
appropriate medical care
STABILITY, EXTRA FUNDING, CHOICE, SUPPORT