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Business can gain from the falling price of treatment - part 6 of 8

• There is no incentive to find more patients, and thus savings through treatment are not maximised for the company, as we saw in a previous article;


• There are no incentives to offer high-quality treatment, and thus treatment can easily turn out to be an expense without benefit to the company and;


• The benefits of decreased drug pricing are not passed across to the employer. More likely, premiums will escalate annually, usually accompanied by an explanation of the HIV "claims experience" attributed to your company.


There is not an employee-benefits manager in South Africa with whom these words will not ring true. Insurance products are an immediate example of such flawed models. Employers mistakenly believe that they can "fix" their risk by paying monthly premiums for products that pay out a lump sum benefit upon the identification of a positive employee. There are several flaws in this model:

• The definition of HIV/AIDS - and thus payment - does not facilitate early treatment, so employees will already have cost the company in lost productivity by the time they are treated. The company thus loses the benefit of treatment and thus the opportunity to make the programme economically viable;


• Premiums are usually front loaded in expectation of high claims rates. These do not materialise for all sorts of reasons, including the way HIV/AIDS is stigmatised in South Africa, which means that companies overpay for the benefit and;


• As claims rates escalate, there is no assurance that the insurance product will stick around. Policies are annually renewable and insurance companies can escalate premiums the moment the situation becomes uncomfortable for them, that is, exactly when the company needs the product.


An even more prevalent example of the flawed model is that of medical aids. One of the difficulties South African service providers face in managing HIV/AIDS is guiding companies away from medical aid models. They battle to understand how they can pay for medical aid out of one pocket and pay for HIV/AIDS out of the other. This is termed double funding. It is important to decouple HIV/AIDS management from the medical aid. The medical aid simply cannot have the same financial interests as the company - productivity through treatment - and has a fiduciary responsibility to act in its shareholders' interests.

Decoupling is easily achieved by having an HIV/AIDS management company take care of HIV/AIDS in the workplace and pass claims on to the medical aid where the patient is covered. Existing benefits do not change, yet every worker gets the same HIV/AIDS management.

There are benefits to this:

• The employee's HIV/AIDS management is external to the company;


• Employee confidentiality is maintained by the Chinese wall of the service provider;


• A single policy is applicable to the entire workforce - whether on medical aid or not. This presents substantial savings to employers who are currently trying to compel all workers to be on medical aid, and the classless consistency is good for union buy-in and;


• The medical aid still pays for benefits where the (white collar) employee is covered through a refund of treatment costs, thus averting the risk of "double funding".


The HIV/AIDS programme is independently economically viable, as we have shown in this series. Most importantly, all the issues discussed throughout this series are overcome by the independent HIV/AIDS management solution, with incentives aligned to the firm's requirements (timing, volume, termination, value appropriation and high-quality treatment).

The funding mechanism required is one of self-insurance. Most large companies in South Africa already have "cell captives" to manage similar risks.

Two issues immediately arise, but are surmountable:

First, the employer carries risk. The company has to project its costs and ensure that these are sufficiently funded (budgeted for). Any credible HIV/AIDS management provider will provide these projections free, and sensitivity analyses will show that a wide error will not change budgets much. Second, HIV/AIDS treatment is funded by the employer rather than the afflicted employee. The alternative is medical aid premiums distributed across the insured workforce. That erodes salary packages and is ultimately a company cost. In this model, the company pays only for its own risk, which is an attractive proposition.

It is worth noting that calculation of risk exposure is a very simple exercise. There are two key variables: HIV prevalence, and programme uptake. All other costs and benefits are well established. Programme uptake can be estimated and regulated, thus HIV prevalence remains the single issue that companies feel uncertain about. Recent reporting requirements have elevated the need to determine this factor.

The classical method for determining prevalence is to take sputum samples across the workforce. This requires difficult union buy-in, possible clearance with labour courts, and great expense. At the end of the day, the results are inaccurate at best, useless at worst. If in a workforce of 100 people, 10 out of 80 employees' samples are found to be HIV positive, then what is the status of the remaining 20 who were not tested? Is prevalence 10 out of 80, which is 12.5 percent? Or 30 out of 100, which is 30 percent?

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