Exposition Document Amalgamation of Sisonke Health Medical Scheme (registration no 1568) and Lonmin Medical Scheme (registration no 1599) ...
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Exposition Document Amalgamation of Sisonke Health Medical Scheme (registration no 1568) and Lonmin Medical Scheme (registration no 1599) 12th May 2021
Table of Contents
1 Introduction .........................................................................................................................................................................4
1.1 Amalgamation rationale ..........................................................................................................................................4
1.2 Actuarial analyses .....................................................................................................................................................4
2 Scheme information ........................................................................................................................................................5
2.1 SHMS background and history............................................................................................................................5
2.2 LMS background and history ...............................................................................................................................5
2.3 Scheme details ...........................................................................................................................................................6
2.4 Scheme relationships ..............................................................................................................................................7
2.5 Third party providers ................................................................................................................................................7
2.6 Reserves of the scheme ........................................................................................................................................7
2.7 Membership profile per option .............................................................................................................................8
2.7.1 Demographic profile of SHMS ........................................................................................................................................ 8
2.7.2 Demographic profile of LMS..........................................................................................................................................10
3 Amalgamated Scheme ................................................................................................................................................ 11
3.1 Operational information ....................................................................................................................................... 11
3.2 Demographic information .................................................................................................................................... 12
3.3 Scheme Rules ......................................................................................................................................................... 12
3.4 Default options ........................................................................................................................................................ 12
3.5 Solvency ratio impacts ......................................................................................................................................... 13
4 SWOT analysis ............................................................................................................................................................... 14
4.1 Strengths.................................................................................................................................................................... 14
4.2 Weaknesses ............................................................................................................................................................. 14
4.3 Opportunities ............................................................................................................................................................ 14
4.4 Threats........................................................................................................................................................................ 15
5 Contribution and benefits ........................................................................................................................................... 16
5.1 Contribution comparison ..................................................................................................................................... 16
5.2 Benefit comparison ................................................................................................................................................ 17
6 Communication .............................................................................................................................................................. 20
7 Governance ..................................................................................................................................................................... 21
8 Financial projections .................................................................................................................................................... 228.1 Combined 2021 financial projections of SHMS and LMS ..................................................................... 22
9 Results of voting ............................................................................................................................................................ 24
9.1 Voting results and independent review ......................................................................................................... 24
10 Appendix A ....................................................................................................................................................................... 25
Tables
Table 1 Scheme information .................................................................................................................................................... 7
Table 2 Third party service providers ................................................................................................................................... 7
Table 3 2020 Year-end results of the reserves and resulting solvency ................................................................ 7
Table 4 Demographic profile of SHMS and LMS – January 2021 ........................................................................... 8
Table 5 Demographic profile of SHMS by option– January 2021 ............................................................................ 8
Table 6 Demographic profile of the Pride option by salary band – January 2021 ............................................ 9
Table 7 Demographic details of the Diversity option by salary band – January 2021 .................................... 9
Table 8 Demographic details of the Heritage option by– January 2021 ............................................................... 9
Table 9 Demographic profile for LMS by income band – January 2021 ............................................................. 10
Table 10 Board of Trustees .................................................................................................................................................... 11
Table 11 Operational Information of Amalgamated Scheme ................................................................................... 11
Table 12 Demographic information as at January 2021 ............................................................................................ 12
Table 13 Solvency as at 31 December 2020 .................................................................................................................. 13
Table 14 2021 Contributions for LMS and SHMS ........................................................................................................ 16
Table 15 Benefit comparison for Pride SHMS and LMS............................................................................................ 17
Table 16 Time frames for the amalgamation process ................................................................................................ 20
Table 17 Budgeted 2021 Financial projection ................................................................................................................ 22
Table 18 Current 2021 Financial projection .................................................................................................................... 23
Table 19 Voting results ............................................................................................................................................................ 24Private and confidential
1 Introduction
The aim of this exposition document is to describe the nature and features of an intended amalgamation
between Sisonke Health Medical Scheme (“SHMS”) and Lonmin Medical Scheme (“LMS”) as required
in terms of Section 63 of the Medical Schemes Act 131 of 1998.
The proposed effective date of the amalgamation is 1 October 2021.
The amalgamation is subject to regulatory approval in terms of the Medical Schemes Act.
1.1 Amalgamation rationale
This amalgamation was prompted by the corporate transaction in which Sibanye-Stillwater acquired
Lonmin Plc. Notwithstanding this, the amalgamation has only been approved after both Boards of
Trustees separately and independently satisfied themselves that the amalgamation is in the best interest
of both schemes’ members.
The two schemes are suitable as partners for an amalgamation due to operating in the same industry.
Both schemes are familiar with healthcare needs of members in the mining industry. Both schemes
have a symbiotic relationship with the same employer. Each scheme would like to ensure that their
membership base remains healthy such that claims expenditure is managed. Similarly, the employer
has an incentive to ensure their employees’ health benefit arrangements are optimised and coordinated
to ensure optimal productivity.
In addition to the symbiotic relationship described above, the amalgamated scheme will have increased
bargaining power due to the larger membership base. This bargaining power is not to be under-
estimated, as both schemes have already utilised their geographic concentration of members as a
bargaining tool. This has assisted each scheme in negotiating cost-effective contracts with specific
service providers.
The amalgamated scheme will have a stronger balance sheet as a result of aggregating the reserves
of the two schemes. This can assist with managing the risk of high cost cases, since the combined
reserves can be utilised to absorb such cases.
The Pride option on SHMS has broadly similar benefits and contributions to the LMS benefits and
contributions, thus there is a good option match if these two medical schemes amalgamate.
1.2 Actuarial analyses
This exposition document derives its financial and actuarial considerations from a more detailed
actuarial report prepared by Insight Actuaries and Consultants (Pty) Ltd and peer reviewed by the
Technical and Actuarial Consulting Solutions (TACS) division of Alexander Forbes Health Ltd.
Exposition document 4Private and confidential
2 Scheme information
A brief background to both schemes is provided below.
2.1 SHMS background and history
SHMS experienced significant growth at the beginning of 2019, this was as a result of the main employer
group on the scheme, Sibanye-Stillwater, having acquiring platinum mines in Rustenburg. SHMS was
able to attract a significant number of new members to the scheme as a result of this corporate activity
together with a market strategy adopted by SHMS which involved a change in contribution and benefit
design to attract new members.
SHMS’ financial position as at the end of 2019 is the result of an employer drive, sanctioned by SHMS’s
Board of Trustees, to attract employees of businesses recently acquired by Sibanye-Stillwater. In
particular, the scheme endeavoured to attract employees from Platinum Health after an acquisition of
Anglo Platinum during 2018. A deliberate decision was made to use reserves to increase the scheme’s
affordability, on a temporary basis, to provide affected employees a compelling reason to join SHMS.
This process proved successful in that SHMS managed to attract the employees it intended to.
However, SHMS is compelled to address its resultant loss-making position, and has embarked on a
number of benefit changes and managed care initiatives to do so. The employer has also committed
itself to ensuring that SHMS remains sustainable and has provided a grant towards SHMS’s reserves
during 2020 the smooth the contribution increases.
SHMS submitted a business plan to CMS on restoring the scheme’s solvency to the required level of
25% on 2 July 2020. In this business plan the Board of Trustees resolved that the lowest income bracket
of the Heritage option must be eliminated in 2021 such that all members who choose to remain on
Heritage will pay contributions at the rate of the higher income bracket. Subsequent to the business plan
being submitted, the scheme investigated various ways to assist the scheme in improving its financial
trajectory whilst creating a competitive benefit offering for members. The scheme resolved that creating
a new benefit option, called Diversity, was the best solution to achieve these goals and assist the
employer to provide cover to presently uncovered employees at a competitive contribution rate in the
future.
2.2 LMS background and history
The employer group of LMS is Lonmin Plc, which was purchased by Sibanye-Stillwater in May 2019.
The scheme experienced a significant reduction in membership at the beginning of 2019. This is mostly
due to members moving to another medical scheme. The scheme lost approximately 5 000 members
at the beginning of January 2019, which is equivalent to 30% of the membership at the end of
December 2018. In general, the members who left LMS at the start of 2019 have been healthier than
the members who remained on the scheme.
The loss in membership has contributed to a deterioration in the scheme’s claims experience. In
addition, the scheme experienced a higher number of high cost hospital admissions in 2019 compared
to 2018.
Exposition document 5Private and confidential
Corrective actions subsequently implemented by LMS proved successful. The scheme’s solvency ratio
as at 31 December 2018 was 24.7%. As at the end of 2019, the scheme’s reported solvency ratio was
31.4%, which is above the statutory minimum requirement.
In January 2020, LMS gained 580 members, while the scheme lost a further 964 members during the
year. As at 1 January 2021, 492 members joined the scheme, resulting in a total of 11 764 members
and 15 288 beneficiaries currently registered with the scheme.
Previously the capitation fees paid to Marikana Medical Services included some secondary and tertiary
healthcare services. In particular, patients admitted to Andrew Saffy Memorial Hospital (ASMH) have
been covered as part of the capitation arrangement. The hospital has been closed down with effect from
the end January 2020. This means that from that point all hospital admissions are at private hospitals,
where claims are paid on a fee-for-service basis.
As a result of the above, the capitation fee payable by the Scheme has been adjusted for the reduction
in services covered under the agreement.
2.3 Scheme details
SHMS is a restricted scheme that was registered in 1997 (registration number 1568). The principal
officer of the scheme is Dr Nontuthuzelo Thomas and the scheme is administered by Momentum Thebe
Ya Bophelo (Pty) Ltd (“Momentum TYB”).
The participating employer groups to the scheme are Sibanye-Stillwater and Gold Fields.
SHMS is a restricted medical scheme with three benefit options, namely the Heritage, Diversity and
Pride options. The Heritage option provides a range of comprehensive benefits, while the Pride option
operates through a network of providers and the cover is mostly limited to primary healthcare benefits.
The Diversity option was introduced in 2021, and provides benefit levels between those of the Heritage
and Pride options, through a network of providers. Both, Diversity and Pride options have an income-
rated contribution table, while the same contributions apply to all members of the Heritage option.
LMS is a restricted scheme that was registered in 2006 under the registration number 1599. The current
principal officer of the scheme is Ms Leani Stassen and the scheme is administrated by Discovery Health
(Pty) Ltd (“Discovery”).
There is only one benefit option, with an income-rated contribution table. A portion of the scheme’s
claims is paid in the form of capitation fees to Marikana Medical Services which renders primary
healthcare services to the scheme’s beneficiaries. The remainder of the claims are paid on a fee-for-
service basis and have historically exhibited high volatility
Exposition document 6Private and confidential
2.4 Scheme relationships
The SHMS and LMS board members do not have any financial interest in the administrators’ businesses
or the business of any of the other third-party service providers. A summary of the relationships are
shown below.
Table 1 Scheme information
SHMS LMS
Registration number 1568 1599
Registration date 1997/01/15 2006/01/01
Principal Officer Dr Nontuthuzelo Thomas Ms Leani Stassen
Physical address 7 Lutman street MiddelKraal farm
Port Elizabeth Marikana
6001 0284
Postal address P O BOX 1672 PRIVATE BAG X508
Port Elizabeth Marikana
6000 0284
2.5 Third party providers
Table 2 Third party service providers
SHMS LMS
Principal officer Dr Nontuthuzelo Thomas Ms Leani Stassen
Administrator* Momentum Thebe Ya Bophelo (Pty) Ltd Discovery Health (Pty) Ltd
Managed Care Provider* Momentum Thebe Ya Bophelo (Pty) Ltd Discovery Health (Pty) Ltd
Actuaries Insight Actuaries & Consultants (Pty) Insight Actuaries & Consultants (Pty)
Ltd Ltd
Auditors PWC KPMG
Investment Consultants Old Mutual Not applicable
Risk transfer Netcare 911, PPN, Lancet, Momentum Marikana Medical Services
arrangements Thebe Ya Bophelo (Pty) Ltd
*The organogram is attached in appendix A
2.6 Reserves of the scheme
Table 3 2020 Year-end results of the reserves and resulting solvency
SHMS LMS
Gross contribution income 591 988 095 201 334 741
Accumulated funds (for solvency 174 171 507 102 580 425
calculation)
Solvency margin 29.4% 51.0%
Average members 15 806 11 567
Reserves per member R11 020 R8 869
Exposition document 7Private and confidential
2.7 Membership profile per option
The current membership profile of each scheme as at the end of January 2021 is shown below.
Table 4 Demographic profile of SHMS and LMS – January 2021
Scheme SHMS LMS Amalgamated scheme
Principal members 14 974 11 764 26 738
Average age 47.1 45.9 46.6
% Male 80% 92% 85%
% Chronic users* 45% Unavailable* Unavailable*
% Over age 65 5.4% 0.0% 3.0%
Beneficiaries 27 893 15 288 43 181
Beneficiary ratio 1.9 1.3 1.6
Average age 35.6 39.0 36.8
% Adult beneficiaries 71% 82% 76%
% Chronic users 33% Unavailable* Unavailable*
% Over age 65 4.1% 0.1% 2.7%
*the chronic medication of LMS members is administered through capitation and information pertaining to the
chronic status of members under said capitation arrangement was not readily available at the time of preparing this
exposition document
SHMS has a higher principal member average age and pensioner ratio compared to LMS. LMS has a
low beneficiary ratio when compared to SHMS, this is as a result of principal members registering fewer
child and spouse dependants.
The tables below illustrate the demographic profile of both schemes by option and income band.
2.7.1 Demographic profile of SHMS
Table 5 Demographic profile of SHMS by option– January 2021
Scheme Heritage Diversity Pride SHMS
Principal members 7 056 2 500 5 418 14 974
Average age 48.5 46.9 45.5 47.1
% Male 78% 72% 85% 80%
% Chronic users 48% 50% 39% 45%
% Over age 65 7.0% 6.4% 2.9% 5.4%
Beneficiaries 16 175 4 297 7 421 27 893
Beneficiary ratio 2.3 1.7 1.4 1.9
Average age 34.5 35.2 38.2 35.6
% Adult 66% 70% 81% 71%
beneficiaries
% Chronic users 33% 35% 32% 33%
% Over age 65 4.5% 5.3% 2.6% 4.1%
Exposition document 8Private and confidential
Table 6 Demographic profile of the Pride option by salary band – January 2021
Scheme R0 - R17 660 R17 661 - R22 020 R22 021+ Pride
Principal members 5 254 110 54 5 418
Average age 45.5 47.0 45.4 45.5
% Male 85% 88% 94% 85%
% Chronic users 40% 34% 26% 39%
% Over age 65 2.9% 4.5% 0.0% 2.9%
Beneficiaries 7 166 175 80 7 421
Beneficiary ratio 1.4 1.6 1.5 1.4
Average age 38.2 37.7 36.6 38.2
% Adult 81% 76% 76% 81%
beneficiaries
% Chronic users 32% 27% 20% 32%
% Over age 65 2.6% 3.4% 0.0% 2.6%
Table 7 Demographic details of the Diversity option by salary band – January 2021
Scheme R0 - R17 660 R17 661 + Diversity
Number of principal members 2 432 68 2 500
Average age 46.9 48.1 46.9
% Male 71% 88% 72%
% Chronic users 50% 53% 50%
% Over age 65 6.5% 0.0% 6.4%
Number of beneficiaries 4 164 133 4 297
Beneficiary ratio 1.7 2.0 1.7
Average age 35.3 32.5 35.2
% Adult beneficiaries 70% 59% 70%
% Chronic users 36% 31% 35%
% Over age 65 5.4% 0.8% 5.3%
Table 8 Demographic details of the Heritage option by– January 2021
Scheme Heritage All Income
Number of principal members 7 056
Average age 48.5
% Male 78%
% Chronic users 48%
% Over age 65 7.0%
Number of beneficiaries 16 175
Beneficiary ratio 2.3
Average age 34.5
% Adult beneficiaries 66%
% Chronic users 33%
% Over age 65 4.5%
Exposition document 9Private and confidential
2.7.2 Demographic profile of LMS
LMS has a single option with two income bands.
Table 9 Demographic profile for LMS by income band – January 2021
Scheme R0 - R23 050 R23 051+ LMS
Number of principal members 11 625 139 11 764
Average age 45.9 46.9 45.9
% Male 92% 87% 92%
% Chronic users Unavailable* Unavailable* Unavailable*
% Over age 65 0.03% 0.00% 0.14%
Number of beneficiaries 15 085 203 15 288
Beneficiary ratio 1.3 1.5 1.3
Average age 39.0 37.4 39.0
% Adult beneficiaries 82.1% 75.9% 82.0%
% Chronic users Unavailable* Unavailable* Unavailable*
% Over age 65 0.11% 0.00% 0.10%
Exposition document 10Private and confidential
3 Amalgamated Scheme
The Steering committee for Amalgamation (SCA) recommended that the Principal Officer of the
amalgamated scheme will be SHMS Principal Officer. The Board of Trustees will be combined and all
the trustees of SHMS and two trustees of LMS will be members of the Board of Trustees for the
amalgamated scheme.
Table 10 Board of Trustees of Amalgamated scheme
Name Surname Previous scheme
Reg Naidoo SHMS
Andy Ellis-Cole SHMS
Andre Kuhn SHMS
Angela Smith SHMS
Sihle Maphanga SHMS
Linda Johnson SHMS
Paul Molale SHMS
Vuyi Rodolo SHMS
Mpho Segaole SHMS
Richard Masethe SHMS
Chrisna Laubscher LMS
Vongani Mashaba LMS
The steering committee resolved that the third-party service providers of SHMS will provide services to
the amalgamated scheme. The detailed plan on the resource strategy after the amalgamation will be
found in Appendix C.
The proposed amalgamation date is 1 October 2021.
3.1 Operational information
Table 11 Operational Information of Amalgamated Scheme
Amalgamated scheme
Name of scheme Sisonke Health Medical Scheme
Registration number 1568
Registration date 1997/01/15
Principal Officer Dr Nontuthuzelo Thomas
Physical address 7 Lutman street
Port Elizabeth
6001
Postal address P O BOX 1672
Port Elizabeth
6000
Accredited managed healthcare service providers Momentum Thebe Ya Bophelo (Pty) Ltd
Risk transfer arrangements with non-managed Momentum Thebe Ya Bophelo (Pty) Ltd
healthcare organisations
Actuaries Insight Actuaries & Consultants (Pty) Ltd
Investment managers Old Mutual
Auditors PwC
Exposition document 11Private and confidential
Other third parties Netcare 911, PPN, Lancet
3.2 Demographic information
The table below shows the membership details as at January 2021.
Table 12 Demographic information as at January 2021
SHMS LMS Combined
Number of principal members 14 974 11 764 26 738
Average age 47.1 45.9 46.6
% Male 80% 92% 85%
% Chronic users 45% Unavailable* Unavailable*
% Over age 65 5.4% 0.0% 3.0%
Number of beneficiaries 27 893 15 288 43 181
Beneficiary ratio 1.9 1.3 1.6
Average age 35.6 39.0 36.8
% Adult beneficiaries 71% 82% 76%
% Chronic users 33% Unavailable* Unavailable*
% Over age 65 4.1% 0.1% 2.7%
3.3 Scheme Rules
The amalgamated medical scheme will adopt the approved scheme rules of Sisonke Health Medical
Scheme and any requisite amendments to the scheme Rules will be submitted to the CMS together with
the exposition document.
There are no scheme rule changes required beyond the incorporation of the 4th option on Sisonke Health
Medical Scheme, which will be incorporated in keeping with CMS guidance on this amalgamation.
3.4 Default options
In section 5 below it is illustrated that the SHMS Pride option offers similar benefits and is a suitable
match for the LMS option. It could thus be feasible for LMS members to join the Pride option, however
in order to allow for the least disruption to LMS members, the LMS option will be maintained alongside
the SHMS options. In future, the amalgamated medical scheme will consider the feasibility of merging
the LMS option and the Pride option.
Thus, LMS members will be defaulted to the LMS option within the amalgamated scheme.
Exposition document 12Private and confidential
3.5 Solvency ratio impacts
The year-end results for 2020 for both schemes is shown below.
Table 13 Solvency as at 31 December 2020
SHMS LMS Combined
Gross contribution income 591 988 095 201 334 741 793 322 836
Accumulated funds (for solvency calculation) 174 171 507 102 580 425 276 751 932
Solvency margin 29.4% 51.0% 34.9%
Average members 15 806 11 567 27 373
Reserves per member R11 020 R8 869 R10 111
The reserves per member of the LMS members would increase if the two schemes were amalgamated,
whist the reserves per member of SHMS members would reduce.
Exposition document 13Private and confidential
4 SWOT analysis
This section provides an analysis of the strengths, weaknesses, opportunities and threats if the schemes
amalgamate.
4.1 Strengths
The combined scheme will have a larger risk pool which will improve financial stability.
The combined scheme will benefit from economies of scale, for example fixed costs such as
running the scheme office will be spread over a larger membership base.
Alignment of cost-effective tariffs and service provider contracts.
While Pride is a good match for the LMS members, the steering committee will need to
deliberate on aligning Pride and LMS where possible and ultimately decide which parts of the
Pride structure and the LMS structure can be combined to form one option in the long run. LMS
members will have an opportunity to buy-up to the Heritage option and the Diversity Option.
Given that the employer transaction of the purchase of Lonmin Plc by Sibanye-Stillwater has
already been completed, some of the trustees, as employees of Sibanye-Stillwater, will interact
with issues related to both schemes. This may assist in smoothing the transition to the
amalgamated scheme as employees already become familiar with each scheme and can
potentially solve issues relating to each scheme through the amalgamation.
Reducing the number of schemes available to employees of Sibanye-Stillwater during the
freedom of choice period will help to reduce anti-selection, which will in turn allow schemes to
budget and plan with higher levels of certainty.
4.2 Weaknesses
Members of at least one scheme will experience a change in administration. This can create
disruption for members given that the method of submitting and processing their claims or
changes to their membership will follow a different process compared to the past.
Other service providers to the scheme may also change which can create disruption to
members if they are accustomed to utilising certain providers.
The employer restructuring may lead to some membership losses on LMS and SHMS as the
employer consolidates various roles within the organisation. Changes in the demographic
profile may lead to a deterioration in claims experience.
4.3 Opportunities
The amalgamated scheme will have stronger bargaining power which will enable it to
negotiate discounts or lower increases with service providers.
The amalgamated scheme will have a stronger geographic concentration which enables the
amalgamated scheme to negotiate discounts or more cost-effective contracts than would
otherwise be the case.
The brand of the amalgamated scheme might improve since the amalgamated scheme can
align the brand to the main employer. This may allow the amalgamated scheme to attract more
members during the freedom of choice period and possibly assist in attracting younger and
healthier employees who value their employer’s brand.
Exposition document 14Private and confidential
The employer restructuring may lead to some membership losses on LMS and SHMS as the
employer consolidates various roles within the organisation. This may improve the solvency
outlook of the amalgamated scheme if the membership losses do not result in a significant
deterioration in the demographic profile.
4.4 Threats
There is a risk of member dissatisfaction due to the disruptions caused by the amalgamation
and this could result in selective withdrawals.
There is a risk that the amalgamation might be opposed by trade unions.
Both schemes had budgeted for losses in 2020, before investment income, and thus there is a
risk that members could be faced with high contribution increases in the future in order to
achieve a more sustainable financial result. Both schemes experienced generated surpluses in
the 2020 benefit year due to the impact of the COVID 19 pandemic. However, given both
schemes were expected making losses, the individual schemes would face similar risks in
future. High contribution increases can lead to selective withdrawals where younger and
healthier members choose to join other schemes during freedom of choice.
Exposition document 15Private and confidential
5 Contribution and benefits
5.1 Contribution comparison
Table 14 2021 Contributions for LMS and SHMS
Scheme Option Income band Principal Adult Child
R0 – R17 660 1 204 1 204 664
Pride R17 660 – R22 020 2 392 2 392 731
R22 021 + 3 043 3 043 747
SHMS
R0 – R17 660 1 989 1 989 675
Diversity
R17 661 + 3 043 3 043 747
Heritage All income 3 043 3 043 747
R0 – R23 050 1 290 1 290 645
LMS LMS
R23 051 + 2 580 2 580 1 295
The contribution table for the amalgamated scheme would be the similar to the current 2021
contributions for SHMS and LMS as shown above, given that the LMS option will be maintained
alongside the SHMS options. LMS members would be defaulted to the LMS option within the
amalgamated scheme.
Nevertheless, we discuss some of the implications of LMS members opting to join SHMS options within
the amalgamated scheme, should LMS members choose to do so.
If low to middle-income LMS members were to choose to join the Pride option, members would
experience a decrease in contributions, at an average of 5.7% per family.
If the middle income LMS members were to join the Pride option, they would experience an increase in
contributions of 67.5% on average (this applies to around 166 families). These LMS members could
choose to join the Diversity option, in order for the increase in contribution rates to be met by an increase
in benefits. However, in the event that these LMS members join Diversity, the average contribution
would increase by 106%.
If higher income LMS members choose to join an SHMS option, these members would be best suited
to join Heritage since contributions for high-income earners are the same on Heritage, Diversity and
Pride. These members would incur an increase in contributions but would also have access to more
comprehensive benefits. This applies to around 139 members, if they choose to join Heritage, these
members would experience an average increase in contributions of 8.7%.
Exposition document 16Private and confidential
5.2 Benefit comparison
The table below compares the proposed benefits offered by LMS and the three options of SHMS, Pride,
Heritage and the new option on SHMS, Diversity. The LMS option offers similar benefits compared to
Pride. Heritage and Diversity offer more comprehensive cover and high-income LMS members may
consider joining these options. LMS members will be defaulted to the LMS option within the
amalgamated scheme, however in future the amalgamated scheme will consider the feasibility of
merging the LMS option and Pride option given the similarity in benefits.
Table 15 Benefit comparison for Pride SHMS and LMS
Benefit
LMS Pride Diversity Heritage
category
Unlimited at
Medical Centre.
Unlimited at Unlimited at
GP not at
Scheme Medical Scheme Medical
medical centre
Centre for members Centre for members
will be limited at
in area; members in area; members
R2 960 PB.
Network: Unlimited living out of area – living out of area –
10% co-pay for
GP Visits Non-Network: 4 at GP within GP at GP within GP
GPs within a
visits, with R50 co- Network . Limited to Network . Limited to
radius of 10km
payment. 1 visit PB to max of 1 visit PB to max of
of Medical
2 visits per PMF 2 visits per PMF
centre. Medical
max R750 per event max R1000 per
Centre GP visit
event
accumulate to
the Limit of
R2 960.
Acute
Medication: Up
to R4 870 pb up
to R13 808 pf,
non-formulary
items with 25%
co-payment.
Network: Unlimited Unlimited subject to Unlimited subject to
Chronic:
Prescribed Non-Network: R 220 network formulary network formulary
Unlimited PMB.
Medication per visit up to 4 and registration onto and registration onto
Additional 43
visits. chronic program. chronic program.
conditions up to
R4 879 pb up to
R13 808 pf
subject to
formulary and
registration onto
chronic
program.
Over the
Counter Network: up to R280 R150 pf up to R80 R265 pf up to R95 R 827 pf up to
Medication pb. per script. per script. R169 per script.
Network: 100% of
scheme rate.
Unlimited at network Unlimited at network
Non-Network: 70%
Hospital hospitals, non hospitals, 20% co- Unlimited at any
of scheme rate up to
Admissions network hospitals pay for non-network private hospital.
R29 350 pb, blood
PMB only hospitals
tests and X-rays up
to R7 335.
Exposition document 17Private and confidential
Benefit
LMS Pride Diversity Heritage
category
Emergencies paid in
Prescribed full.
Minimum Non-Network: non- Unlimited. Unlimited. Unlimited.
Benefits emergencies up to
70% scheme rate.
Network:
Unlimited basic
Network: Unlimited Network: Unlimited dentistry.
Network: Unlimited
for conservative conservative Non-Network:
conservative
dentistry dentistry. 20% co-
dentistry.
Dentistry Non-Network: Up to payment.
R620 for single Specialised dentistry
Specialised
member, or R1 810 up to R3 400 pb up Specialised
dentistry: PMB only
pf. to R6 780 pf. dentistry up to
R6 964 pb up to
R13 930 pf.
Network: Up to 4 Up to R2 898 pb
visits pb with up to R11 172
network GP referral. pf.
Additional visits may Network: Up to 2 Network: Up to 4 Network: 100%
Specialists be approved on a visits pf. visits pf. of scheme rate.
case-by-case basis. Non-Network:
Non-Network: Up to Up to 80%
70% scheme rate up scheme rate
to R2 200 pb.
Network: Upon
referral to specialist
Up to R37 300 per Up to R265 000
Oncology Non-Network: Up to PMB only
family per beneficiary
Hospital Benefit
Limit.
Network: Unlimited
Pathology upon referral.
Unlimited through Unlimited through Unlimited
Non-Network: Up to
Lancet/Pathcare Lancet/Pathcare through
50% of scheme rate
labs upon referral labs upon referral Lancet/Pathcare
up to R1 250 pb
from network GP. from network GP. labs.
upon referral from
GP.
Network: Unlimited Subject to referral
Basic radiology up Basic radiology
upon referral. by network GP and
to R3 000 pb for in up to R6 964
Non-Network: Up to through approved
Radiology and out of hospital. pb.
50% of scheme rate list of codes.
Specialised Specialised
up to R1 250 pb Specialised
radiology limited radiology up to
upon referral from radiology limited to
PMB R26 447 pb.
GP. R15 100 pf.
Lenses Single
Network: One eye
Vision R610 PB
test and one pair of One eye test pb per One eye test pb per
Lenses High
glasses per year, one pair of year, one pair of
Power Single
beneficiary per 2 glasses or contact glasses or contact
Vision
years. lenses every 2 lenses every 2
Optometry R1 1540 PB
Non-Network: Up to years. Contact years. Contact
Lenses Bi-focal
50% scheme rate up lenses up to R735 lenses up to R735
R1 361 PB
to R1 250 per family pb. Network pb. Network
Lenses Multi-
for eye tests, no provider only. provider only.
focal R2
glasses benefit.
200 PB
Exposition document 18Private and confidential
Benefit
LMS Pride Diversity Heritage
category
Frames R990
PB
Contact Lenses
R1 870 PB
Up to R5 950 pb
up to R11 782
Network: Unlimited Up to R1 200 pb
per family,
Non-Network: 50% upon referral. Part of
Physiotherapy PMB only combined limit
of cost up to R2 570 Combined limit for
with out-of-
pf upon referral. all support services.
hospital
treatment.
Up to R6 640 pb
subject to sub-
limits:
Nebulizer: R720
Glucometer:
External
R720
medical
Up to R4 495 pf at Orthotics:
appliances and Up to R12 160 pb. PMB only
medical aid rates. R1 520
prostheses
Additional
hearing-aid
benefits up to
R3 520 pf per 3
years.
Internal
prostheses –
Up to R53 174
Hip, Knees, and Up to R32 900 pb. PMB only Up to R26 814 pf.
pb.
Shoulders
6 gynaecologist 6 gynaecologist
Network: 4 visits to
6 gynaecologist consultations, consultations,
midwife, GP,
consultations, monthly ante-natal monthly ante-
gynaecologist. Two
monthly ante-natal monitoring, ante- natal
2D scans upon
Antenatal monitoring, ante- natal vitamins, monitoring,
referral.
Benefit natal vitamins, maternity bag, ante-natal
Non-Network: Up to
maternity bag, paediatric vitamins,
out-of-network limit
paediatric vaccinations. maternity bag,
for GP’s or
vaccinations. paediatric
specialists.
vaccinations
Monthly health
assessment,
Monthly health Monthly health disease
assessment, assessment, management,
Overall limit of R474
disease disease emergency
Other Notes 300 pb and
management, management, medical
R964 800 pf.
emergency medical emergency medical transport, step
transport. transport. down facilities,
organ
transplants.
Exposition document 19Private and confidential
6 Communication
Communication will be distributed to members of both schemes and this will include details of the
amalgamation, default options and voting forms.
The trustees of both SHMS and LMS are procuring the services of Alexander Forbes an independent
third party provider with sound knowledge of these processes and understanding of the mining sector.
Alexander Forbes will assist with both the communication plan and member voting processes. The
respective scheme offices are geared for processing of any enquiries or objections from members.
The table below shows the proposed timeframes for the amalgamation, dates may be amended as the
process unfolds.
Table 16 Time frames for the amalgamation process
Amalgamation action item Time frames
Submission of final exposition document to CMS 6th August 2021
Submission to Competition Commission 28th June 2021
Effective amalgamation date 1 October 2021
Exposition document 20Private and confidential
7 Governance
The Board of Trustees for both schemes have jointly created a steering committee for the amalgamation
process. This committee has a rotating chairman between both schemes. Each of the two medical
schemes are represented by their respective trustees and their principal officers. This ensures that the
impact of the amalgamation will be considered for both groups of members.
In addition, the Board of Trustees of both schemes will review the decisions of the steering committee
separately in order to consider the interests of their members.
This exposition document was prepared by the steering committee and approved by both Boards of
Trustees.
Exposition document 21Private and confidential
8 Financial projections
8.1 Combined 2021 financial projections of SHMS and LMS
The table below shows the 2021 financial results of the amalgamated scheme assuming the
amalgamation happens as at 1 October 2021. The “amalgamated scheme” column is a simple
summation of both schemes’ for 2021. Each benefit option of both schemes will remain unchanged for
2021, and LMS members will be defaulted to the LMS option. It is assumed that LMS members would
not chose to join SHMS options given that the LMS option will be maintained alongside the SHMS
options within the amalgamated scheme. Members are thus expected to remain on their respective
options irrespective of the amalgamation. The projections are based on the same assumptions as the
schemes’ budgets for 2021, while making allowance for actual membership in January 2021.
Table 17 Budgeted 2021 Financial projection
Amalgamated
SHMS LMS
scheme
Average members 14 970 11 764 26 734
Contributions 617 107 507 218 092 920 835 200 427
Claims paid 486 652 934 166 768 143 653 421 077
Medical centre fees 35 415 406 0 35 415 406
Capitation fees 26 889 589 28 836 387 55 725 977
Managed care fees 9 410 634 10 295 382 19 706 016
Gross underwriting result 58 738 944 12 193 008 70 931 952
Management expenses 30 631 933 12 988 868 43 620 801
Surplus/(deficit) from operations 28 107 011 -795 860 27 311 151
Investment income 8 534 404 4 630 212 13 164 616
Net Surplus/(Deficit) 36 641 415 3 834 352 40 475 766
Accumulated funds 210 812 922 107 125 879 317 938 800
Solvency margin 34.2% 49.1% 38.1%
Reserves per member 14 082 9 106 11 893
Operational result as a % of contributions 4.6% -0.4% 3.3%
The amalgamated scheme is expected to report a solvency ratio of 38.1%, which is significantly above
the statutory minimum requirement of 25.0%. SHMS and LMS are projected to generate net surpluses
in the 2021 benefit year. The change in the financial position in the SHMS position from 2020 to 2021
is mainly due to changes made to the contribution table of the Heritage option and the launch of the
Diversity option.
Exposition document 22Private and confidential
The table below illustrates the impact of the amalgamation after taking into account each scheme’s most
recent financial projections for 2021. It is assumed that service provider fees for 2021, such as
administration fees, will only move into new rates from 2022 as contracts are consolidated within the
amalgamated scheme. There is also an allowance made for amalgamation expense of R1.364 million
in respect of any cost resulting from administration transfer as well as any other costs associated with
the amalgamation. This R1.364 million expense is allocated evenly across each scheme.
Table 18 Current 2021 Financial projection
Amalgamated
SHMS LMS
scheme
Average members 15 231 11 481 26 712
Contributions 621 175 067 212 898 830 834 073 897
Claims paid 497 867 547 140 267 833 638 135 380
Medical centre fees 35 415 406 0 35 415 406
Capitation fees 25 676 625 28 057 774 53 734 399
Managed care fees 10 063 607 10 048 421 20 112 029
Gross underwriting result 52 151 882 34 524 801 86 676 683
Management expenses 34 487 546 13 246 450 47 733 996
Surplus/(deficit) from operations 17 664 337 21 278 351 38 942 688
Investment income 6 962 974 3 759 152 10 722 126
Net Surplus/(Deficit) 24 627 310 25 037 503 49 664 813
Accumulated funds 198 850 773 129 827 220 328 677 993
Solvency margin 32.01% 60.98% 39.41%
Reserves per member 13 056 11 308 12 305
Operational result as a % of contributions 2.84% 9.99% 4.67%
The amalgamated scheme is expected to report a solvency ratio of 39.4%, which is significantly above
the statutory minimum requirement of 25.0%. SHMS and LMS are projected to generate a net surplus
in the 2021 benefit year.
Exposition document 23Private and confidential
9 Results of voting
9.1 Voting results and independent review
Table 19 Voting results
Sisonke Health Medical Scheme Lonmin Medical Scheme
Valid votes
Number Percentage Number Percentage
Votes for the Amalgamation 1,371 84% 307 43%
Votes against the Amalgamation 259 16% 414 57%
Total 1,630 100% 721 100%
Sisonke Health Medical Scheme Lonmin Medical Scheme
Invalid votes
Number Percentage Number Percentage
Votes for the Amalgamation 20 53% 27 45%
Votes against the Amalgamation 18 47% 33 55%
Total 38 100% 60 100%
The detailed report of the independent reviewer was submitted to the CMS.
Exposition document 24Private and confidential
10 Appendix A
Organogram of SHMS administrator
Exposition document 25Private and confidential
Organogram of LMS administrator
Exposition document 26You can also read
