Remedi Medical Aid cheme vvµo' v oD vPîìíî · PDF fileRemedi Medical Aid cheme Administered by Discovery Health Remedi Medical Aid cheme vvµo' v oD vPîìíî 13:00 19 June 2012

Rem

edi M

edic

al A

id S

chem

e

Administered by Discovery Health

Remedi Medical Aid SchemeAnnual General Meeting 2012

13:0019 June 2012Auditorium, Oude LibertasCorner Adam Tas and Libertas StreetsStellenbosch

3


Annual General Meeting Notice

Notice is hereby given that the annual general meeting of the Remedi Medical Aid Scheme will be held on Tuesday, 19 June 2012, at 13:00 in the Auditorium, Oude Libertas, c/o Adam Tas and Libertas Streets, Stellenbosch.

Agenda1. To read the Notice convening the meeting

2. To note apologies received

3. To note and approve the Minutes of the Annual General Meeting held on Thursday, 23 June 2011

4. To receive and adopt the Chairman’s Report for the year ended 31 December 2011

5. To receive, consider and note the Summarised Annual Financial Statements, including the Auditor’s Report and the Annual Report of the Board of Trustees, for the year ended 31 December 2011

6. To appoint the Auditors for the ensuing year

7. To announce the BAT Member Elected Trustee with effect from 1 November 2012

8. Consideration: Notices of Motion for reference to the Board of Trustees for final decision (Note Rule 26.1.6: Every notice of motion to be placed before the Annual General Meeting for referral to the Board for final decision must reach the Principal Officer not later than seven (7) days prior to the date of the meeting. Please email Pippa Escreet, Remedi’s Fund Manager at [email protected]

By order of the Board

Kobus Du PlessisPrincipal Officer

Invitation To Members To Attend Light Luncheon Please be advised that the Annual General Meeting will be preceded by tea, coffee and fruit juice, and followed by light snacks.

This is a useful opportunity to meet with the Trustees and representatives of Discovery Health, the Scheme’s Administrator.

To facilitate catering arrangements, please RSVP by 13 June 2012 by calling Ms Nadia Momple on 021 527 1344.

Please note that you are only required to RSVP if you will be attending the luncheon.

4

Minutes of the Annual General Meeting of Remedi Medical Aid Scheme held on Thursday, 23 June 2011 at 13:30 in the Auditorium, House of JC Le Roux, Devon Valley Road, Devon Valley, Stellenbosch

Present:Dr CA van der Merwe (Chairman) Mediclinic

Mr K du Plessis (Vice-Chairman) British American Tobacco

Mr LS Botes (Trustee) Mediclinic

Mr A Crafford (Trustee) Remgro Management Services

Ms EM Joubert (Trustee) Distell

Dr MS Smuts (Trustee) Mediclinic

Mr W Stapelberg (Trustee) British American Tobacco

Mr CV Truter (Trustee) Distell

Mr J Bush (Principal Officer)

32 members as per the attendance register and 13 proxies

Representatives of the Administrator (Discovery Health (Pty) Ltd)Ms D du Toit (Divisional Manager)

Ms P Escreet (Fund Manager)

Mr P Grobler (Deputy General Manager, Actuary)

Mr M Jacobs (Finance Manager)

Ms L Lawson (Fund Co-Ordinator)

PwC Cape Town Audit TeamMs Nicolette Jacobs (Director) PwC

Apologies: Mr P Louw (Trustee) Mediclinic

Mr C van As (Trustee) Mediclinic

Mr S Johnston (General Manager) Discovery Health

Minutes of the 2011 Annual General Meeting

5


1. Opening and WelcomeThe Chairman opened the meeting and welcomed all present.

The meeting was declared properly constituted with a quorum of at least 15 members present.

After the Chairman established the preferred language for the meeting, English translation services were made available to the members who required such service.

The meeting was conducted in Afrikaans thereafter.

2. Notice Convening the MeetingThe notice convening the Annual General Meeting, circulated timeously to all members, and was taken as READ.

PROPOSER: Mr A Crafford

SECONDER: Mr K du Plessis

3. Approval of the 2010 AGM Minutes The Chairman called for the approval of the minutes of the previous Annual General Meeting held on the Thursday 24 June 2010. These minutes were CONFIRMED.

PROPOSER: Mr A Crafford


4. Chairman’s Report for the year ended 31 December 2010The contents of the report was accepted and ADOPTED as correct.

PROPOSER: Mr WH du Preez


The Chairman thereafter highlighted the following issues, inter alia, by way of a presentation and invited Ms du Toit and Mr Grobler to provide additional feedback to the meeting:

4.1. Industry trends and Remedi’s performance

4.2. An overview of the Regulatory environment

• National Health Insurance (NHI) Update

• Pharmacy Dispensing Fees

• Regulation 8 and Direct Payment Arrangements

4.3. Discovery Health Administration and opportunities for Members

4.4. Benefit of introducing the Chronic Disease Amount (CDA)

6

5. Audited Annual Financial Statements, including the Auditor’s Report and the Annual Report of the Board of Trustees for the year ended 31 December 2010Mr R Buys congratulated the Board of Trustees on the turnaround on the performance of the Comprehensive Option, but voiced concern that this was due to excess cross-subsidisation by the Classic and Standard Options. The Chairman responded that the Board of Trustees had sought actuarial advice on this issue, and noted that cross subsidisation for high risk members on comprehensive type benefit options occured in most schemes in the industry. Remedi was however taking steps to enhance the differentiation between the different Options and also to maintain the cross subsidisation at optimum levels for all members in the Scheme.

The meeting NOTED the Summarised Audited Annual Financial Statements, including the Annual Report of the Board of Trustees for the year ended 31 December 2010.

PROPOSER: Mr R Buys


6. Appointment of AuditorsPricewaterhouseCoopers was RE-APPOINTED as the external auditor of Remedi for the ensuing year.

PROPOSER: Dr CA van der Merwe


7. Other BusinessThe Chairman informed the meeting that he had received letters from the following members, both present at the meeting, with requests that they be read out before the Annual General Meeting:

7.1. Letter: Mr W Laubscher Member Number 321002400

7.2. Letter: Ms J Botha Member Number 321052560

The Chairman thanked the members for their letters and confirmed that their queries had been referred to the administrator for investigation and written feedback.

8. Vote of Thanks and Appreciation The Chairman expressed thanks and appreciation to the following stakeholders:

8.1. Members of Remedi’s Board of Trustees for their support and input;

8.2. Mr John Bush, for his dedication to Remedi and commitment to assist members throughout his ten years of service as Principal Officer. The meeting was informed that Mr Bush had given notice of his intention to retire at the end of the year;

Minutes of the 2011 Annual General Meeting

7


8.3. Remedi members for their continued support;

8.4. The participating Employer Groups and their respective HR departments;

8.5. The members of the Audit Committee; the Executive Committee, Benefit Review Committee, Investment Sub-Committee and the Medical Advisory Committee;

8.6. The Management and staff at Discovery Health;

8.7. The Auditor, PricewaterhouseCoopers;

8.8. Remedi`s External Medical Advisor, Dr Johan Dippenaar;

8.9. All service providers, and

8.10. Those present.

There being no further business to discuss, the meeting ended at 16h00.

31 August 2011 Dr CA van der Merwe Date

Remedi Chairman

8

IntroductionDuring 2011, the Board of Trustees and Principal Officer continued working on issues pertaining to the transition of Remedi’s administration to Discovery Health. Although we did not experience the same levels of member dissatisfaction as in 2010, some matters required ongoing attention. It was unfortunate that the change to the Discovery Health Medicine Formulary in July 2011 inconvenienced some members. Discovery Health has put in a tremendous effort to resolve administrative problems, and to truly understand the culture and ethos of Remedi in order to improve their service to members.

The Trustees do not anticipate further major changes for members as a result of the change in administrator. Future changes will either be driven by legislative requirements or initiatives by the Board of Trustees to ensure the long term sustainability of the Scheme.

PerformanceRemedi’s membership grew by 3.9% to just over 38 800 beneficiaries. On a per member per month basis, the contribution income net of savings increased by 7.8%, and healthcare expenditure by 4.1%. A net healthcare result of R 67.9 million was achieved in 2011, which was higher in comparison with the R51 million achieved in 2010. Similarly, the reserve ratio was higher at 66.6 % in 2011 than the 56.1% ratio achieved in 2010.

Remedi had to complete its budget and determine contribution premiums at the end of August 2010 in order to comply with the rules of the Council for Medical Schemes. Taking this into consideration, the three main reasons for Remedi’s strong financial position are as follows:

• The new administrator had budgeted using only a portion of the 2010 claims data (due to the unavailability of previous years’ data).

• When the budget was prepared many of the key provider negotiations were not yet concluded and better rates were agreed than what was assumed in the budget.

• The actual experience for seasonality was much better than budgeted.

The Board of Trustees remains committed to achieving an operational break-even going forward. This goal, together with the very good financial performance in 2011, afforded Remedi the opportunity to implement of the lowest premium increases in the industry for 2012.

Despite the very good financial performance, any changes in benefits and or premiums must be carefully managed, as any sudden or aggressive changes could lead to significant premium increases or benefit reduction in the future.

Chairman’s Report

9


Regulatory Environment The Trustees had to contend with a number of regulatory issues during 2011, the majority of which will continue into 2012 and beyond. Below is a summary of the more topical issues.

National Health Insurance (NHI) will remain a primary consideration in the medical scheme environment for the foreseeable future. Our government’s intentions were confirmed with the publication of a Green Paper for comment in August 2011 and the allocation of R121.9bn towards healthcare expenditure in the 2012 budget. The Green Paper outlined the key principles of a NHI fund, namely, universal coverage for all South Africans, a comprehensive benefit package including all levels of care, and the provision of services on a referral basis. The proposed funding options include an increase in general taxes and VAT, mandatory payroll taxes and the elimination of tax rebates on medical aid contributions. There is a phased 14 year approach towards the implementation of NHI, commencing in 2012. The extent to which National Health Insurance will affect medical schemes and Remedi in particular remains unclear.

Personal Medical Savings Accounts (PMSA) received a lot of attention from the Council of Medical Schemes (CMS). According to Circular 38 of 2011, schemes are required to treat member savings accounts as trust funds with effect from 1 January 2011. The implications are that schemes would have to administer trust accounts for each member and add daily interest to these accounts. This circular had numerous legal, technical, accounting and financial implications. After numerous representations from industry, the CMS issued a clarification circular, Circular 5, in early 2012 to address some of these concerns. As Remedi already allocates interest on savings account balances to its members, the financial impact on Remedi would be small. The technical and accounting implications for Remedi would, however, be onerous.

A dispute has arisen in the medical scheme industry with regards to the payment for Prescribed Minimum Benefits (PMB’s). The CMS enforces its view that “payment in full” in terms of its Regulation 8 means payment to healthcare service providers at cost and not at scheme rates. The Board of Healthcare funders of Southern Africa (BHF) took this dispute to the North Gauteng High Court, which issued a ruling on 7 November 2011. The judgement found that the BHF did not have sufficient legal standing or interest in the outcome of the case to entitle it to be a party to the court action. The judge did not discuss the merits of the arguments and effectively dismissed the case based on a technical legal point. The Council for Medical Schemes has claimed a victory.

The only way to protect the Scheme from an open-ended liability and the member from co-payments is for the Scheme to enter into contracts with doctors in the same way as with hospital groups. As it would be impractical for a scheme of Remedi’s size to contract with doctors individually, Remedi entered into Discovery Health’s Direct Payment Arrangement with doctors. This arrangement covers 88% of all specialist and 80% of general practitioners’ visits for Remedi members.

Further to the above it is expected that Protection of Personal Information Bill, the King III requirements and the Consumer Protection Act will have far reaching implications for the future management of medical schemes.

10

Current initiativesThe Trustees are aware that Remedi’s sustainability requires continuous assessment and planning, and are focusing on a number of important initiatives:

1. Extracting the most value from Remedi’s relationship with Discovery Health. This includes:

a. improved tariff structures, as was demonstrated by the seamless adoption of the Discovery Heath Tariff following the High Court decision to scrap the National Health Reference Price List published by the Department of Health,

b. comprehensive provider network arrangements with general practitioners, specialists and pharmacies,

c. significant clinical risk management expertise that limits unnecessary expenses in accordance with recognised national treatment protocols,

d. wellness and other preventive health benefits available to actively engaged members by the Vitality and HealthyFoods programmes.

2. The on-going review of the value proposition of Remedi options when compared to similar options in the open scheme market. This includes the number of options to be offered to members, the benefit structures of the different options, as well as the level of contributions per member category.

3. Increased efforts to improve the member experience. This includes improved administration and more effective communication to members.

4. Continued focus on development of current and future Trustees to ensure that the Board of Trustees are enabled to fulfil their fiduciary duties in this ever-changing environment.

SummaryThe Trustees are confident that Remedi is sustainable, and that it offers significantly more value to its members than comparable open schemes. The Board’s strategic focus will ensure that Remedi continues to provide “peace of mind” to its members for major medical expenses.

We feel confident that the Scheme remains true to its vision statement:

To provide cost effective healthcare benefits

which meet members’ needs,

supported by efficient administrative processes,

ensuring that our members have peace of mind regarding major medical expenses.

Chairman’s Report

11


Thanks and appreciationLastly but not least I would like to express my sincere thanks and appreciation to the following stakeholders for their efforts and contributions:

The Remedi Trustees

John Bush, our Principal Officer

Our administrator, Discovery Health

External advisor, Dr Johan Dippenaar

Our employer groups, their representatives and HR teams

Preferred hospital provider, Mediclinic

Preferred providers, ER 24 and CareCross

Audit Committee members and auditors, PwC

Dr CA van der MerweChairman 20 April 2012

12

The reports and statements set out below comprise the summarised annual financial statements presented to the members:

Contents Page

Report of the Board of Trustees 13 - 24

Statement of responsibility by the Board of Trustees 25

Statement of corporate governance by the Board of Trustees 26

Independent auditor’s report 27

Statement of financial position 28

Statement of comprehensive income 29

Statement of changes in members’ funds and reserves 30

Statement of cash flows 31

Notes to the summarised annual financial statements 32 - 41

Summarised Annual Financial Statements for the year ended 31 December 2011

13

Report of the Board of Trustees

The Board of Trustees hereby presents its report for the year ended 31 December 2011.

1. MANAGEMENT

1.1 BOARD OF TRUSTEES The following people served on the Board of Trustees during the year under review:

Employer appointed Trustees Mr A Crafford Mr K du Plessis Vice-Chairman (Resigned 31/3/2012) Dr S Smuts Mr CV Truter Mr C van As Member elected Trustees Mr L Botes Ms R Joubert Mr P Louw Mr W Stapelberg Dr CA van der Merwe Chairman

1.2 PRINCIPAL OFFICER Mr K du Plessis (Appointed 1/4/2012) 523 Boschenmeer Estate Wemmershoek Paarl 7646 Mr J Bush (Resigned 31/3/2012) 29 Rover Road Rondebosch 7780


Remedi Medical Aid Scheme(Registration number 1430)

14

1. MANAGEMENT (continued)

1.3 REGISTERED OFFICE ADDRESS AND POSTAL ADDRESS Remedi Medical Aid Scheme 16 Fredman Drive P O Box 652509 Sandton Benmore 2146 2010

1.4 MEDICAL SCHEME ADMINISTRATOR Discovery Health (Pty) Ltd 155 West Street P O Box 652509 Sandton Benmore 2146 2010

1.5 INVESTMENTS

1.5.1 Remgro Management Services Ltd

Group Treasury Services P O Box 456 Carpe Diem Office Park Stellenbosch Quantum Street 7599 Techno Park Stellenbosch 7600

Financial Services Provider number: 30549 Remgro Management Services Ltd manages the cash and cash equivalents and held-to-maturity

investments portfolio within the framework of the mandate from the Board of Trustees, to the extent of R 382.9 million (2010: R209.1 million) at year-end.

1.5.2 Investment Solutions Limited

Building 1 P O Box 786055 Inanda Greens Office Park Sandton 54 Wierda Road West 2146 Sandton 2146 Financial Services Provider number: 711 The investment portfolio was managed to the extent of R 47.7 million at year-end.

Report of the Board of Trustees (continued)

15

1.5.3 Stanlib

17 Melrose Boulevard P O Box 202 Melrose Arch Melrose Arch Johannesburg Johannesburg 2196 2076 Financial Services Provider number: 2409 The investment portfolio was managed to the extent of R 72.3 million (2010: R73.7 million)

before it was disposed of during March 2011. 1.5.4 Rand Merchant Bank Asset Management

4 Merchant Place P O Box 783414 1 Fredman Drive Sandton Sandton 2146 2199 Financial Services Provider number: 623 The investment portfolio was managed to the extent of R 71.2 million (2010: R71.4 million)

before it was disposed of during March 2011.

1.6 AUDITOR PricewaterhouseCoopers Inc 1 Waterhouse Place P O Box 2799 Century City Cape Town Cape Town 8000 7441

2. DESCRIPTION OF THE MEDICAL SCHEME The Scheme is a not for profit restricted medical scheme, registered in terms of the Medical Schemes Act

131 of 1998 (the Act), as amended.

2.1 BENEFIT OPTIONS WITHIN THE SCHEME The Scheme offers three Benefit Options to its members. These are: • Comprehensive • Classic • Standard


16

2. DESCRIPTION OF THE MEDICAL SCHEME (continued)

2.2 SAVINGS PLAN To provide a facility for medical scheme members to set funds aside to meet future healthcare costs

not covered in the benefit options, the trustees have made the savings plan option available to meet this objective.

Members who belong to the Comprehensive option pay 10% of their total contributions, into a savings account to pay healthcare cost not covered in the option, and to provide for future healthcare expenses.

Unexpended savings amounts are accumulated for the long-term benefit of the member and interest accrues at a rate of 5,95%.

The liability to the members in respect of the savings plan is reflected as a current liability in the annual financial statements, repayable in terms of Regulation 10 of the Act.

In terms of the rules of the medical scheme, the medical scheme carries the risk.

2.3 RISK TRANSFER ARRANGEMENTS The Scheme has entered into capitation agreements with CareCross, Centre for Diabetes and

Endocrinology (CDE) and ER 24 Emergency Medical Care (ER 24). The agreement with CareCross is for the provision of primary care benefits on the Standard option. The agreement with ER 24 is for the provision of emergency transport on all the benefit options. The agreement with CDE is for the provision of diabetes care to registered members on the Comprehensive option only.

The Scheme is paying a fixed fee per member per month in exchange for services from these providers, except for CDE for which payment is made for all members registered on the programme. The trustees monitor the performance of the service providers regularly and evaluate the economic benefit for the Scheme. The results of these agreements are disclosed in note 4 of the summarised financial statements.

3. INVESTMENT STRATEGY The Scheme’s investment objectives are to maximise the return on its investments on a long term basis

at minimal risk. The investment strategy takes into consideration both constraints imposed by legislation and those imposed by the Board of Trustees.

The Board of Trustees are responsible for all the investment decisions, and part of their strategy is to ensure that:

• the Scheme remains liquid; • investments are placed at minimum risk and at the best possible rate of return; • investments made are in compliance with the regulations of the Act; and • a risk assessment is performed with feedback to the Board of Trustees with recommendations on the

risks identified. The Scheme invested in one managed portfolio consisting of investments which include cash, short term

fixed deposits, listed shares, bonds, listed properties and money market instruments. The investment management policy of the Scheme is reviewed at least annually, taking into consideration compliance with the Act, the risk returns of the various investment instruments and the surplus of funds available.

The Board of Trustees appointed an investment committee to provide guidance on strategy, asset allocation and other investment related matters. The committee meets regularly and also monitors the performance of the asset managers.


17

4. REVIEW OF OPERATIONS4.1 Operational Activities

Operational Activities – 2011 2011Comprehensive

2011Classic

2011Standard

2011Total

Number of members at year-end 6,579 6,858 3,395 16,832

Average number of members for the accounting period 6,707 6,632 3,142 16,481

Number of beneficiaries at year-end 16,280 14,495 8,036 38,811

Average number of beneficiaries for the accounting period 16,630 13,971 7,553 38,154

Average age of beneficiaries for the accounting period 34.3 26.5 25.8 29.6

Pensioner ratio 7% 3% 1% 5%

Dependant ratio 60% 53% 58% 57%

Average contributions net of savings per member per month R3,332 R2,625 R1,710 R2,738

Average contributions net of savings per beneficiary per month R1,344 R1,246 R712 R1,183

Average claims net of savings incurred per member per month R3,077 R1,701 R1,297 R2,184

Average claims net of savings incurred per beneficiary per month R1,241 R808 R539 R944

Average administration costs per member per month R150 R150 R150 R150

Average administration cost per beneficiary per month R61 R71 R62 R65

Average managed care: Managed services per member per month R53 R53 R53 R53

Average managed care: Managed services per beneficiary per month R21 R25 R22 R23

Average accumulated funds per member at 31 December N/A N/A N/A R22,674

Beneficiaries per member at 31 December 2.5 2.1 2.4 2.3

Net claims as a percentage of net contributions 92.4% 64.8% 75.8% 79.8%

Managed care: Management services as a percentage of gross contributions 1.4% 2.0% 3.1% 1.8%

Amount paid to administrator R27,046,760

Relevant healthcare expenditure per beneficiary per month R1,241 R808 R539 R944

Non-healthcare expenditure per beneficiary per month R82 R96 R84 R88

Non-health expenses as a percentage of gross contributions 5.5% 9.5% 14.5% 7.0%

Return on investments as percentage of investments at 31 December N/A N/A N/A 6.4%


18

4.1 REVIEW OF OPERATIONS (continued)

Operational Activities - 2010 2010Comprehensive

2010Classic

2010Standard

2010Total

Number of members at year-end 6,963 6,158 2,998 16,119

Average number of members for the accounting period 7,157 5,915 2,798 15,870

Number of beneficiaries at year-end 17,239 12,907 7,225 37,371

Average number of beneficiaries for the accounting period 17,675 12,315 6,718 36,708

Average age of beneficiaries for the accounting period 33.5 27.0 26.0 29.8

Pensioner ratio 7% 3% 1% 5%

Dependant ratio 60% 52% 59% 57%

Average contributions net of savings per member per month R3,033 R2,398 R1,574 R2,539

Average contributions net of savings per beneficiary per month R1,228 R1,152 R655 R1,098

Average claims net of savings incurred per member per month R2,925 R1,548 R1,192 R2,106

Average claims net of savings incurred per beneficiary per month R1,184 R743 R497 R911

Average administration costs per member per month R134 R134 R134 R134

Average administration cost per beneficiary per month R54 R64 R56 R58

Average managed care: Managed services per member per month R31 R31 R31 R31

Average managed care: Managed services per beneficiary per month R13 R15 R13 R13

Average accumulated funds per member at 31 December N/A N/A N/A R18,507

Beneficiaries per member at 31 December 2.5 2.1 2.4 2.3

Net claims as a percentage of net contributions 96.4% 64.5% 75.8% 82.9%

Managed care: Management services as a percentage of gross contributions

0.9% 1.3% 2.0% 1.2%

Amount paid to administrator R12,519,130

Amount paid to previous administrator R9,605,218

Relevant healthcare expenditure per beneficiary per month R1,184 R743 R497 R911

Non-healthcare expenditure per beneficiary per month R67 R79 R69 R71

Non-health expenses as a percentage of gross contributions 4.9% 8.6% 13.5% 6.1%

Return on investments as percentage of investments at 31 December N/A N/A N/A 5.1%


4. REVIEW OF OPERATIONS (continued)

19

4.2 RESULTS OF OPERATIONSThe results of the Scheme’s operations for the year under review and financial position at 31 December 2011 are set out in the summarised annual financial statements, and the trustees believe that no further clarification is required.

4.3 ACCUMULATED FUNDS RATIO 2011 2010

The accumulated funds ratio is calculated on the following basis:

Total members’ funds per statement of financial position 381,645,863 298,318,626

Less: Unrealised net gains - (10,958,718)

Accumulated funds per Regulation 29 of the Act 381,645,863 287,359,908

Gross annual contributions 571,168,690 512,570,848

Accumulated funds ratio:

Accumulated funds/Gross annual contributions X 100 66.82% 56.06%

4.4 REVALUATION RESERVEThe revaluation reserve in the statement of financial position reflects the unrealised loss on the Scheme’s investment portfolio with Investment Solutions (2010: Unrealised profit with Stanlib and RMB).

4.5 OUTSTANDING CLAIMSMovements on the outstanding claims provision are set out in note 2 of the summarised annual financial statements. There have been no unusual movements that the trustees believe should be brought to the attention of the members of the Scheme.

5. MANAGEMENT OF INSURANCE RISKThe primary insurance activity carried out by the Scheme assumes the risk of loss from members and their dependants that are directly subject to the risk. These risks relate to the health of the Scheme members. As such the Scheme is exposed to the uncertainty surrounding the timing and severity of claims under the contract. The scheme also has exposure to market risk through its investment activities.

The scheme uses several methods to assess and monitor insurance risk exposures both for individual types of risks insured and overall risks. The theory of probability is applied to the pricing and provisioning for a portfolio of insurance contracts. The principal risk is that the frequency and severity of claims is greater than expected.

Insurance events are, by their nature, random, and the actual number and size of events during any one year may vary from those estimated using established statistical techniques.

The Board of Trustees frequently assess the necessity to enter into risk transfer arrangements in order to manage the Scheme’s insurance risk.


20

6. EVENTS SUBSEQUENT TO YEAR-ENDIn January 2007 the High Court of South Africa, in terms of the OmniHealth judgement, ruled that savings plan accounts constitute trust property as defined in Section 1 of the Financial Institutions (Protection of Funds) Act 28 of 2001. Section 4(2) of this Act allows for trust property to be invested in the name of a medical scheme in its capacity as trustee. It also ordered that interest accrued on these balances must be paid to the member. If the member cannot be located, the balances of such accounts should be paid over to the Guardian Fund.

Subsequent to the above court case the Council issued Circular 38 of 2011 in terms of which it will be mandatory, from 1 January 2012, for medical schemes to retain medical savings in a separate bank account.

An extension was granted until 31 December 2012 to implement the full requirements for Circular 38 with regards to Medical Savings Accounts. General extension is granted on condition that the interest earned on Medical Savings Accounts from January 2012 must be allocated to Medical Savings Accounts until such time as medical schemes have developed systems that enable appropriate allocation of such interest. The Scheme will comply with the requirements of Circular 38.

7. INVESTMENTS IN AND LOANS TO EMPLOYERS OR MEMBERS OF THE MEDICAL SCHEME AND TO OTHER RELATED PARTIESThe Scheme holds no direct investments in and granted no loans to the participating employers of the Scheme or other related parties. Refer to note 7 of the summarised annual financial statements for related party transactions.

8. FIDELITY COVERThe Scheme has cover under an Alexander Forbes Risk Services (Pty) Ltd policy underwritten by Camarge Underwriting Managers (Pty) Ltd. On 31 December 2011 the value of the fidelity cover was R25,000,000 (2010: R 25,000,000).

9. ACTUARIAL SERVICESThe Administrator’s actuaries have been consulted in the determination of the contributions and benefit levels.


21

10. AUDIT COMMITTEE An audit committee was established in accordance with 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 five members of whom three are independant members.

The committee met on three occasions during the course of the year as follows:

• 7 April 2011

• 16 August 2011

• 10 November 2011

The Committee also held two informal workshops on 3 June 2011 and 19 August 2011 for the purpose of developing a Remedi Risk Management Policy that was aligned with King III requirements.

The administrator and the external auditors attend all committee meetings and have unrestricted access to the chairman of the committee.

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

The committee comprised:

Mr D Annandale (Chairman) Independent

Mr N Boonzaier Independent

Mr PD de Villiers Independent

Mr L Botes (alternate) Trustee

Mr P Louw Trustee

Dr CA van der Merwe Trustee

11. OTHER SUB-COMMITTEES OF THE BOARD OF TRUSTEESThe 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.

11.1 Executive committee

The principal object of the committee is to manage the day to day business of the Scheme and to act as a link between all stakeholders towards facilitating and speeding up the decision making processes and other issues affecting members and the Scheme.

The committee comprises: Dr C A van der Merwe (Chairman), Mr K du Plessis (Vice-Chairman), Mr P Louw, Mr C Truter, Dr S Smuts and Mr J Bush (Principal Officer - Ex Officio).


22

11.2 Medical Advisory Committee

The primary responsibility of the committee is to assist the Board of Trustees in carrying out its duties relating to managed healthcare issues.

The committee comprised: Dr S Smuts (Chairman), Dr J Dippenaar (Medical Adviser) and Mr J Bush (Principal Officer - Ex Officio).

11.3 Disputes Committee

The primary responsibility of the committee is to deal with disputes. It consists of three members.

The committee comprised: Mr T van Schoor, Mr W De Wet and Ms C Finlay. No meetings were held by this committee during the year as no disputes were declared.

11.4 Benefits Review Committee

The primary responsibility of the committee is to advise on new benefit and contribution structures.

The committee comprised: Mr C Truter (Chairman), Mr A Crafford, Mr K du Plessis, Ms R Joubert, Mr W Stapelberg, Mr C van As and Mr J Bush (Principal Officer - Ex Officio).

11.5 Investment Committee

The primary responsibility of the committee is to assist the Board of Trustees in carrying out its duties relating to the investment strategy of the Scheme.

The committee comprised: Mr P Louw (Chairman), Dr CA van der Merwe , Mr D Annandale, Mr L Botes, Mr W Stapelberg and Mr J Bush (Principal Officer - Ex Officio).

12. NON-COMPLIANCE MATTERS12.1 Outstanding contributions

Nature and impactIn terms of section 26(7) of the Act, contributions should be received in accordance with the rules of the Scheme which indicates that it should be received at the latest three days after it is due. There were instances where the Scheme received contributions after three days of becoming due, however, there are no contracts in place agreeing to any such arrangement. An amount of R2,359,619 (2010: R1,453,990) was still outstanding for December 2011 after it was due.

Causes for the failureAdministrative delays.

Corrective ActionThe trustees provided the Administrator with a debt mandate, stipulating the different actions to be taken against defaulting members and employer groups. December contributions were received by 10 January 2012.


11. OTHER SUB-COMMITTEES OF THE BOARD OF TRUSTEES (continued)

23

11.2 Medical Advisory Committee

The primary responsibility of the committee is to assist the Board of Trustees in carrying out its duties relating to managed healthcare issues.

The committee comprised: Dr S Smuts (Chairman), Dr J Dippenaar (Medical Adviser) and Mr J Bush (Principal Officer - Ex Officio).

11.3 Disputes Committee

The primary responsibility of the committee is to deal with disputes. It consists of three members.

The committee comprised: Mr T van Schoor, Mr W De Wet and Ms C Finlay. No meetings were held by this committee during the year as no disputes were declared.

11.4 Benefits Review Committee

The primary responsibility of the committee is to advise on new benefit and contribution structures.

The committee comprised: Mr C Truter (Chairman), Mr A Crafford, Mr K du Plessis, Ms R Joubert, Mr W Stapelberg, Mr C van As and Mr J Bush (Principal Officer - Ex Officio).

11.5 Investment Committee

The primary responsibility of the committee is to assist the Board of Trustees in carrying out its duties relating to the investment strategy of the Scheme.

The committee comprised: Mr P Louw (Chairman), Dr CA van der Merwe , Mr D Annandale, Mr L Botes, Mr W Stapelberg and Mr J Bush (Principal Officer - Ex Officio).


Nature and impactIn terms of section 26(7) of the Act, contributions should be received in accordance with the rules of the Scheme which indicates that it should be received at the latest three days after it is due. There were instances where the Scheme received contributions after three days of becoming due, however, there are no contracts in place agreeing to any such arrangement. An amount of R2,359,619 (2010: R1,453,990) was still outstanding for December 2011 after it was due.

Causes for the failureAdministrative delays.

Corrective ActionThe trustees provided the Administrator with a debt mandate, stipulating the different actions to be taken against defaulting members and employer groups. December contributions were received by 10 January 2012.

12.2 Investment in participating employer and medical administratorsNature and impactIn terms of Section 35(8) of the Act, a medical scheme is prohibited from investing any of its assets in an employer who participates in that scheme or any medical scheme administrators.

At 31 December 2011, the Scheme indirectly held shares in participating employers, Remgro Ltd (R616,258) and MediClinic International (R96,411), through a pooled investment with their investment manager.

The Scheme also indirectly held shares in MMI Holdings Ltd to the value of R294,275 through this same pooled investment.

Causes for the failureInvestment in pooled investment structure.

Corrective ActionFunds in this specific portfolio are structured at the sole discretion of the asset manager in a manner that maximises returns. Therefore the Scheme does not make inputs into the structuring of the portfolio. The Scheme will apply for exemption from this section of the Act.


24

13. MEETING ATTENDANCESThe following schedule sets out Board of Trustee meeting attendances and attendances by members of board sub-committees.

Trustee/Sub-committee member

Board Meetings

Audit Committee

Executive Committee

Medical Advisory

committee

Benefits Review

Committee

Investment Committee

A B A B A B A B A B A BMr M D Annandale 2 3 3 3 3

Mr N Boonzaier 3 3

Mr L Botes 5 5 3* 3 3

Mr J Bush

(Principal Officer - resigned)

5 5 3 3 5 5 6 2 4 3 3 3

Mr A Crafford 5 5 4 3

Mr P D de Villiers 3 2

Dr J Dippenaar

(Medical Adviser)

6 3

Mr K du Plessis

(Principal Officer)

5 5 5 4 4 3

Ms R Joubert 5 5 4 3

Mr P Louw 5 5 3 3 5 4 3 3

Dr S Smuts 5 2 5 4 6 3 4 1

Mr W Stapelberg 5 4 4 2 3 3

Mr C V Truter 5 5 5 5 4 3

Mr C van As 5 4 4 2

Dr C A van der Merwe 5 5 3 3 5 5 4** 1 3 2

A - Total number of meetings held during the year

B - Actual number of meetings attended

* - Attended as alternate

** - Attended on invitation

Dr C A van der Merwe Mr P Louw Mr K du Plessis

Chariman Trustee Principal Officer


25

The trustees are responsible for the preparation, integrity and fair presentation of the annual financial statements of Remedi Medical Aid Scheme. The summarised financial statements presented on pages 28 to 41 have been prepared in accordance with International Financial Reporting Standards (IFRS) and include amounts based on judgements and estimates made 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 are also responsible for the preparation of the other information included in the annual report, as well as its accuracy and consistency with the financial statements.

The trustees have the responsibility for ensuring that accounting records are kept. The accounting records should 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.

Remedi Medical Aid Scheme’s administrator operated in a well-established control environment, which is well documented and regularly reviewed. This incorporates risk management and internal control procedures, which are designed to provide reasonable, but not absolute, assurance that the 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, PricewaterhouseCoopers Inc., audited the summarised financial statements in terms of International Standards on Auditing, and their report is presented on page 27.

The summarised annual financial statements were approved by the Board of Trustees on 26 April 2012 and are signed on its behalf by:



Statement of Responsibility by the Board of Trustees


26

Remedi Medical Aid Scheme is committed to the principles and practices of fairness, openness, integrity and accountability in all dealings with its stakeholders. Five of the trustees are appointed by the employers and the other five trustees are elected by the members of the Scheme.

BOARD OF TRUSTEESThe trustees meet regularly to address a range of key issues and ensure the sustainability of the Scheme. The Trustees ensure that discussion of items of policy, strategy and performance is critical, informed and constructive.

The Trustees monitor the performance of the administrator.

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 CONTROLSThe administrator of the scheme maintains 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 adequately. 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


27


Independent Auditor’s Report to the Members of Remedi Medical Aid Scheme

28

2011 2010ASSETS Notes R R

Non-current assets 134,040,392 231,178,308

Available-for-sale investments 47,740,392 145,078,308

Held-to-maturity investments 86,300,000 86,100,000

Current assets 340,145,374 161,409,833

Trade and other receivables 9,796,870 4,563,711

Cash and cash equivalents 330,348,504 156,846,122

Total assets 474,185,766 392,588,141

FUNDS AND LIABILITIES

Members’ funds 381,645,863 298,318,626

Accumulated funds 381,779,619 287,359,908

Available-for-sale revaluation reserve (133,756) 10,958,718

Current liabilities 92,539,903 94,269,515

Savings plan liability 68,481,528 74,740,435

Trade and other payables 14,958,375 10,502,379

Outstanding claims provision 2 9,100,000 9,026,701

Total funds and liabilities 474,185,766 392,588,141

Statement of Financial Positionas at 31 December 2011


29

2011 2010Notes R R

Net contribution income 3 541,575,101 483,561,338

Relevant healthcare expenditure (431,985,751) (401,084,321)

Net claims incurred (433,505,965) (402,148,465)

Claims incurred 4 (434,686,182) (402,434,786)

Third party claims recoveries 1,180,217 286,321

Net income on risk transfer arrangements 4 1,520,214 1,064,144

Premiums paid on risk transfer arrangements (18,404,037) (14,601,365)

Recoveries from risk transfer arrangements 19,924,251 15,665,509

Gross healthcare result 109,589,350 82,477,017

Managed care: management services (10,402,600) (5,909,687)

Administration expenditure (29,670,925) (25,449,991)

Net impairment loss on trade and other receivables (334,359) (41,962)

Net healthcare result 69,181,466 51,075,377

Other income 29,758,896 19,908,573

Investment income 5 29,643,994 19,795,641

Sundry income 114,902 112,932

Other expenditure (4,520,651) (5,320,798)

Asset management fees (214,664) (367,125)

Interest paid on savings balances (4,305,987) (4,953,673)

Net surplus for the year 94,419,711 65,663,152

Other comprehensive income

Fair value adjustment on available-for-sale investments (3,688,600) 7,186,197

Amount realised in disposal (7,403,874) -

Total comprehensive income for the year 83,327,237 72,849,349

Statement of Comprehensive Income for the year ended 31 December 2011


30

2011 2010R R

Accumulated funds

Balance at beginning of year 287,359,908 221,696,756

Net surplus for the year 94,419,711 65,663,152

Balance at end of the year 381,779,619 287,359,908

Available-for-sale revaluation reserve


Current year unrealised (losses)/gains (3,688,600) 7,186,197

Amount realised on disposal (7,403,874) -

Balance at end of the year (133,756) 10,958,718

Statement of Changes in Members’ Funds and Reserves for the year ended 31 December 2011


31

CASH FLOWS FROM OPERATING ACTIVITIES 2011 2010Notes R R

Cash flows from operating activities

Cash flows generated from operations after working capital changes 6 58,027,610 45,840,199

Interest received 19,230,472 13,261,391

Net cash generated from operations 77,258,082 59,101,590

Cash flows from investing activities

Purchase of held-to-maturity investments (200,000) (24,900,000)

Proceeds on sale of available-for-sale investments 143,444,300 -

Purchase of available-for-sale investments (47,000,000) -

Net increase in cash and cash equivalents 173,502,382 34,201,590

Cash and cash equivalents at the beginning of the year 156,846,122 122,644,532

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 330,348,504 156,846,122

Statement of Cash Flows for the year ended 31 December 2011


32

1. PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of the financial statements are set out in the full set of annual financial statements which were prepared in accordance with International Financial Reporting Standards (IFRS). The policies were consistently applied to the previous year, unless otherwise stated.

Basis of preparationThe financial statements are prepared in accordance with IFRS. IFRS comprise International Financial Reporting Standards, International Accounting Standards (IAS) and the interpretations originated by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC). The standards referred to are set by the International Accounting Standards Board (IASB). The financial statements are prepared on a going concern basis using the historical cost convention, except for available-for-sale investments, which are carried at fair value.

All monetary information and figures presented in these financial statements are stated in South African Rands.

Amendments and interpretations to published standards in 2011 that are effective and relevant to the Scheme’s operations:IFRS 7 - Financial /instruments: Disclosures (amendments) - The amendments add an explicit statement that qualitative disclosures should be made in the context of the quantitative disclosures to better enable users to evaluate the Scheme’s exposure to risks arising from financial instruments.

IAS 24 - Related Parties - The amended standard requires commitments, as well as the nature of the realtionship between related parties to be disclosed. The amended standard gives clarity to the related party definition and other terms in the standard.

Amendments and interpretations to published standards in 2011 that are not yet effective however relevant to the Scheme’s operations:IFRS 9 - Financial Instruments - IFRS 9 addresses the classification, measurement and derecognition of financial assets and liabilities. Changes relating to embedded derivatives, which are no longer separated from hybrid contracts that have a financial asset host, are not relevant to the Scheme, due to the fact that there are no embedded derivatives.

IFRS 13 - Fair Value Measurement - IFRS 13 introduces a single source of guidance on fair value measurement for both financial and non-financial assets and liabilities by defining fair value, establishing a framework for measuring fair value and setting out disclosures requirements for fair value measurements.

Notes to the Summarised Annual Financial Statements for the year ended 31 December 2011


33

2. OUTSTANDING CLAIMS PROVISION

2011 2010Not covered by risk transfer arrangements R RProvision for outstanding claims 9,100,000 9,026,701

9,100,000 9,026,701

Analysis of movements in outstanding claims


Payments in respect of prior year (9,083,444) (13,376,175)

(Under)/over provision in the prior year (56,743) 747,278

Current year movement in outstanding claims provision 9,156,743 8,279,423

Provision at end of year (note 4) 9,100,000 9,026,701

Analysis of outstanding claims provision

Estimated gross claims 9,907,258 10,109,658

Less: Estimated recoveries from savings plan accounts (807,258) (1,082,957)

Outstanding claims provision at the end of the year 9,100,000 9,026,701

The cost of outstanding claims is estimated using statistical methods. Such methods extrapolate the development of paid and incurred claims, average cost per claim and ultimate claim numbers for each benefit year based upon observed development of earlier years and expected loss ratios. Run off triangles are used in situations where it takes time after the treatment date until the full extent of the claims to be paid is known. It is assumed that payments will emerge in a similar way in each service month. The proportional increase in the known cumulative payments from one development month to the next can then be used to calculate payments for future development months.

The actual method used is consistent with prior years, categories of claims and observed historical claims development. To the extent that these methods use historical claims development information they assume that the historical claims development pattern will occur again in the future. There are reasons why this may not be the case, which, insofar as they can be identified, have been allowed for by modifying the methods. Such reasons include:

• changes in processes that affect the development / recording of claims paid and incurred (such as changes in claim reserving procedures);

• economic, legal, political and social trends (resulting in different than expected levels of inflation and/or minimum medical benefits to be provided);

• changes in composition of members and their dependents and

• random fluctuations, including the impact of large losses.


34

2. OUTSTANDING CLAIMS PROVISION (continued)AssumptionsThe assumptions that have the greatest effect on the measurement of the outstanding claims provision are the expected percentages of claims settled after each of the first four months of the claims run-off period, before the claims turn stale.

The percentages used as assumptions are listed in the table below. The table also outlines the sensitivity of these percentages, and the impact on the Scheme’s liabilities if an incorrect assumption is used.

Other assumptions:• The actual demographics of the Scheme were used including all membership movements

for the period.• The effect of ageing of the population on the utilisation of health services is

automatically incorporated.• Utilisation escalation has been provided for the impact of HIV and AIDS.

The assumed percentages of claims outstanding at the end of the period: 2011 2010Claims outstanding for services rendered in:• December 5.4% 3.2%

• November 1.8% 1.4%

• October 1.1% 0.8%

• September 0.6% 0.5%

• August and prior 0.5% 0.3%

The impact of the sensitivity of these percentages are illustrated: R REffect of a 1% change in assumptions 3,884,651 1,369,944

Effect of a 2% change in assumptions 6,562,559 3,133,395

Effect of a 3% change in assumptions 9,240,466 4,896,846

This analysis is prepared for a change in a specific variable, namely claims outstanding at the end of each month, with other assumptions remaining constant.

The Scheme believes that the liability for claims reported in the statement of financial position is adequate. However, it recognises that the process of estimation is based upon certain variables and assumptions which could differ when claims arise.

Notes to the Summarised Annual Financial Statements for the year ended 31 December 2011 (continued)


35

3. CONTRIBUTION INCOME2011 2010

R RGross contributions 571,168,690 512,570,848

Less: Savings plan contributions (29,593,589) (29,009,510)

Net contribution income 541,575,101

4. RELEVANT HEALTHCARE EXPENDITURE2011 2010

Claims incurred excluding claims incurred in respect of risk transfer arrangements R RCurrent year claims 435,851,837 413,494,952

Movement in outstanding claims provision 9,156,743 8,279,423

Under/(over) provision in prior year (note 2) 56,743 (747,278)

Adjustment for current year 9,100,000 9,026,701

Claims adjustment 445,008,580 421,774,375

Less:

Claims paid from savings accounts (30,246,649) (32,940,051)

Cash discounts received on claims - (2,065,047)

414,761,931 386,769,277

Claims incurred in respect of risk transfer arrangements

Current year claims 19,924,251 15,665,509

19,924,251 15,665,509

Claims incurred per the statement of comprehensive income 434,686,182 402,434,786

Net income on risk transfer arrangements

Premiums paid 18,404,037 14,601,365

Recoveries (19,924,251) (15,665,509)

Net income (1,520,214) (1,064,144)

The Scheme entered into risk transfer arrangements (capitation contracts) whereby the parties agreed that the service providers will render services to beneficiaries on certain options of the Scheme. A fixed fee was paid monthly to the service providers per member. The following services were rendered:

• Emergency medical transportation services

• Day-To-Day, acute and chronic medicine expenses for the Standard option.


36

5. INVESTMENT INCOME2011 2010

R RAvailable-for-sale investments 10,413,522 6,534,250

Interest 1,864,405 5,711,405

Dividends 922,178 729,876

Realised gain 7,626,939 92,969

Cash and held-to-maturity investments

Interest 19,230,472 13,261,391

29,643,994 19,795,641

6. CASH FLOWS FROM OPERATIONS AFTER WORKING CAPITAL CHANGES

Surplus for the year 94,419,711 65,663,152

Adjustments for:

- Net receivables written off 95 6,699

- Impairment losses 334,264 35,263

- Investment income (29,643,994) (19,795,641)

- Management fees 214,664 367,125

Working capital changes (7,297,130) (436,399)

- (Increase)/decrease in trade and other receivables (5,567,518) 1,740,557

- Increase in trade and other payables 4,455,996 7,888,896

- Increase/(decrease) in outstanding claims provision 73,299 (5,260,914)

- Decrease in savings plan liability (6,258,907) (4,804,938)

Cash flows from operations after working capital changes 58,027,610 45,840,199

7. RELATED PARTY TRANSACTIONS

Parties with significant influence over the SchemeDiscovery Health (Pty) Ltd has significant influence over the Scheme, as they provide financial and operational information on which policy decisions are based, but do not control the Scheme. Discovery provides administration and managed care services.



37

Investment management company Rand Merchant Bank and its parent company FirstRand Limited is an associated company of a participating employer group. During 2011, the Scheme disposed of its investment with Rand Merchant Bank.

Mediclinic International Limited is a participating employer and also the Scheme’s preferred hospital service provider.

There are two ER 24 directors on the Board of Trustees of the scheme. ER 24 is a service provider of the Scheme.

Remgro Management Services Ltd is a participating employer who manages the cash and cash equivalents and held-to-maturity investments portfolio within the framework of the mandate from the Board of Trustees, to the extent of R 382.9 million (2010: R209.1 million) at year-end.

Key management personnel and their close family membersKey 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 sub-committees. Close family members includes family members of the Board of Trustees, Principal Officer and members of the sub- committees.

The trustees are not remunerated by the Scheme for their services as trustees.

Transactions with related partiesThe following table provides the total amount of transactions, which have been entered into with related parties for the relevant financial year.

2011 2010Statement of Comprehensive Income R RGross contributions received (key personnel) 533,342 437,853

Gross claims incurred (key personnel) 243,982 353,832

Claims incurred (preferred service provider) 114,725,952 99,920,226

Compensation (key personnel) 1,356,487 1,302,480

- Principal Officer 1,098,367 1,012,320

- Medical Advisers 258,120 290,160

Asset manager fees 141,121 367,125

Administration fees 27,046,760 22,124,348

Managed care 10,402,600 5,909,687

ER 24 capitation fees 2,223,816 2,117,930

Statement of Financial PositionAdministration and managed care fees due 4,664,610 2,844,571

Savings account balances payable (key personnel) 207,684 186,321

ER 24 capitation fee payable 189,316 347,282


38

7. RELATED PARTY TRANSACTIONS (continued)The terms and conditions of the related party transactions were as follows:

Contributions received (key personnel)This constitutes the contributions paid by the related party as a member of the Scheme, in their individual capacity. All contributions were on the same terms as applicable to other members.

Claims incurred (key personnel)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 other members.

Claims incurred (service provider)This constitutes amounts paid to the related party, as a service provider to the Scheme. All claims were paid out in terms of the rules of the Scheme, as applicable to third parties.

InvestmentThis constitutes the fees paid to the asset managers for managing the schemes investment portfolios. The asset managers manage the portfolio’s according to the mandate received from the Scheme. Fees paid to the asset managers are documented in a formal agreement with the asset managers and are market related.

AdministrationThe administration agreement is in terms of the rules of the Scheme and in accordance with instructions given by the Board of Trustees. The duration of the agreement is indefinite but subject to the right of either party to terminate the agreement by giving not less than three months notice. The outstanding balance bears no interest and is due within 30 days.

Managed careThe managed care agreement is in terms of the rules of the Scheme and in accordance with instructions given by the Board of Trustees. The duration of the agreement is indefinite but subject to the right of either party to terminate the agreement by giving not less than three months notice. The outstanding balance bears no interest and is due within 30 days.

Savings account balancesThe amounts owing to the related parties relate to medical savings balances to which the parties have a right. In line with the terms applied to third parties, the balances earn interest at the same rate as the Scheme receives on its cash investments. The amounts are all current and payable on demand should an appropriate claim be issued, or the member exit the Scheme.



39

8. SURPLUS/(DEFICIT) FROM OPERATIONS PER BENEFIT OPTION

2011 Comprehensive

R Classic

R Standard

R Total

R

Net contribution income 268,185,539 208,899,810 64,489,752 541,575,101

Relevant healthcare expenditure (247,687,007) (135,402,821) (48,895,923) (431,985,751)

Net claims incurred (247,796,123) (135,476,739) (50,233,103) (433,505,965)

Net income on risk transfer arrangements 109,116 73,918 1,337,180 1,520,214

Premiums paid (1,320,981) (894,870) (16,188,186) (18,404,037)

Recoveries 1,430,097 968,788 17,525,366 19,924,251

Gross healthcare result 20,498,532 73,496,989 15,593,829 109,589,350

Managed care: management services (4,233,374) (4,186,035) (1,983,191) (10,402,600)

Administration expenses (12,074,686) (11,939,662) (5,656,577) (29,670,925)

Net impairment gain on trade and other receivables (136,069) (134,547) (63,743) (334,359)

Net healthcare result 4,054,403 57,236,745 7,890,318 69,181,466

Other income 12,110,487 11,975,061 5,673,348 29,758,896

Investment income 12,063,726 11,928,825 5,651,443 29,643,994

Sundry income 46,761 46,236 21,905 114,902

Other expenditure (4,393,346) (86,381) (40,924) (4,520,651)

Asset management fees (87,359) (86,381) (40,924) (214,664)

Interest paid on savings balances (4,305,987) - - (4,305,987)

Net surplus for the year 11,771,544

69,125,425 13,522,742 94,419,711


40

2010 Comprehensive Classic Standard Total

R R R R

Net contribution income 260,474,030 170,244,118 52,843,190 483,561,338

Relevant healthcare expenditure (251,193,726) (109,860,320) (40,030,275)

(401,084,321)

Net claims incurred (251,263,336) (109,917,850) (40,967,279) (402,148,465)

Net income on risk transfer arrangements 69,610 57,530 937,004 1,064,144

Premiums paid (955,137) (789,386) (12,856,842) (14,601,365)

Recoveries 1,024,747 846,916 13,793,846 15,665,509

Gross healthcare result 9,280,304 60,383,798 12,812,915 82,477,017

Managed care: management services (2,665,131) (2,202,634) (1,041,922) (5,909,687)

Administration expenses (11,477,353) (9,485,614) (4,487,024) (25,449,991)

Net impairment gain on trade and other receivables (18,924) (15,640) (7,398) (41,962)

Net healthcare result (4,881,104) 48,679,910 7,276,571 51,075,377

Other income 8,978,303 7,420,239 3,510,031 19,908,573

Investment income 8,927,373 7,378,148 3,490,120 19,795,641

Sundry income 50,930 42,091 19,911 112,932

Other expenditure (5,119,238) (136,833) (64,727) (5,320,798)

Asset management fees (165,565) (136,833) (64,727) (367,125)

Interest paid on savings balances (4,953,673) - - (4,953,673)

Net (deficit)/surplus for the year (1,022,039)

55,963,316 10,721,875 65,663,152

Basis of allocationsExcept for contribution income, claims, and interest paid on savings all other income and expenses are allocated according to membership.



8. SURPLUS/(DEFICIT) FROM OPERATIONS PER BENEFIT OPTION (continued)

41


Nature and impact

In terms of section 26(7) of the Act, contributions should be received in accordance with the rules of the Scheme which indicates that it should be received at the latest three days after it is due. There were instances where the Scheme received contributions after three days of becoming due, however, there are no contracts in place agreeing to any such arrangement. An amount of R2 359 619 (2010: R1 453 990) was still outstanding for December 2011 after it was due.

Causes for the failure

Administrative delays.

Corrective Action

The trustees provided the Administrator with a debt mandate, stipulating the different actions to be taken against defaulting members and employer groups. December contributions were received by 10 January 2012.

9.2 Investment in participating employers and medical administrators

Nature and impact

In terms of Section 35(8) of the Act, a medical scheme is prohibited from investing any of its assets in an employer who participates in that Scheme or any medical scheme administrators.

At 31 December 2011 the Scheme indirectly held shares in participating employers, Remgro Ltd (R616,258) and MediClinic International (R96,411), through a pooled investment with their investment manager.

The Scheme also indirectly held shares in MMI Holdings Ltd to the value of R294,275 through this same pooled investment.

Causes for the failure

Investment in pooled investment structure.

Corrective ActionFunds in this specific portfolio are structured at the sole discretion of the asset manager in a manner that maximises returns. Therefore the Scheme does not make inputs into the structuring of the portfolio. The Scheme will apply for exemption from this section of the Act.


42

Notes

GM

_573

9DH

M_1

5/12

/09


Tel 0860 116 116

[email protected]

www.yourremedi.co.za

GM_14893DIH_11/05/12

Documents

Remedi Medical Aid cheme vvµo' v oD vPîìíî · PDF fileRemedi Medical Aid cheme Administered by Discovery Health Remedi Medical Aid cheme vvµo' v oD vPîìíî 13:00 19 June 2012