Medical aid shows Covid symptoms

Namfisa expects the Covid-19 pandemic to impact the medical aid fund industry on various fronts.

24 November 2020 | Business

The average claims per medical aid fund beneficiary in Namibia in the first three months of this year was nearly 28% more than in the last quarter of 2019, while the average contribution income per beneficiary received by funds rose by only 5.5%.

The country's medical aid fund industry ended the first quarter of 2020 with a net loss of about N$104.7 million, the latest figures of the Namibia Financial Institutions Supervisory Authority (Namfisa) show. In the last quarter of 2019, the industry's net surplus was N$142.4 million and in the first quarter of 2019 it amounted to nearly N$36.8 million.

Compared to the last quarter of 2019, total membership shrunk by 0.2% to 201 595 beneficiaries. Namfisa attributes the decrease to the impact of the Covid-19 state of emergency declared in Namibia and neighbouring countries.

“While Namibia and South Africa entered severe stages of lockdown during the latter part of the quarter under review, many other countries had entered similar lockdown stages earlier in the year. Economic sectors, such as mining and tourism, were impacted early on due to weakened trade relations with the global trading community,” Namfisa says.

The regulator continues: “The impact of lockdowns and restricted movements is expected to continue to adversely impact businesses in Namibia, which would consequently result in further membership decreases during the year, as a result of job losses and salary cuts.”



Claims

Namfisa also expects retrenchments and salary cuts to lower the average beneficiary contributions, while higher claims during the winter months are expected to increase average claims per beneficiary.

The average contribution income per beneficiary in the first quarter was N$5 581, while the average claims per beneficiary was N$5 412.

In total, medical aid funds settled claims of more than N$1.09 billion compared to nearly N$854.5 million and N$971.7 million in the last and first quarters of 2019 respectively.

Namfisa says healthcare expenditure tends to increase during the first quarter of every year as new benefits become available to members. Nearly N$364.9 million in hospital claims were paid out during the three months under review, up 20.4% on a quarterly basis and 10.9% year-on-year (y/y).

Pharmacy and medicine claims of nearly N$174.3 million were settled, about 28% more quarter-on-quarter (q/q) and 24% y/y.

Claims for specialists amounted to some N$129.9 million, an increase of 18.7% q/q and 20.5% y/y.

Namfisa says the impact of the Covid-19 pandemic beyond the first quarter of 2020 may further increase claims expenditure, a trend that is expected for the remainder of the year.

Reserves, liquidity

As a result of the net deficit recorded in the first quarter, the industry's reserves level decreased by 8.4% q/q and by 5% y/y to N$1.5 billion.

“However, the industry remained well capitalised, as it held sufficient reserves above the minimum prudential reserves level requirement of 25% and is thus deemed to be financially sound,” Namfisa says.

However, it warns that the pandemic could potentially stress the industry's free assets due to higher claims.

At the end of March 2020, the industry held total assets of N$2 billion, down 3.2% q/q, but up 0.9% y/y.

Higher claims and negative investment returns hurt assets on a quarterly basis. The latter was caused by declining stock markets as a result of the pandemic, Namfisa says.

Current assets exceeded current liabilities by N$1.4 billion at the end of March.

The industry reported a decrease in liquidity from 4.6% to 3.8% during the first quarter of 2020.

Jo-Maré Duddy –

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