Governance Committee
The Governance Committee ensures that the best interests of members, and their fair treatment, are observed at all times and that the Board, individually and as a body, carries out its fiduciary and other responsibilities defined in legislation and by the Council for Medical Schemes that regulates the medical aid industry.

During the year under review, all committees re-visited their Charters that specify the terms of reference mandated by the Board to each committee and an additional committee namely the Risk Management Committee, has been established. The Remuneration Committee was expanded into the Remuneration and Nomination Committee with a mandate from the Board to streamline the procedures for the election of the chairpersons of the Board and its sub-committees as well as the election of Trustees at the AGM and of additional Trustees with specific skills that can contribute to the efficient running of the Scheme.

Other actions taken in accordance with the Board's commitment to good governance practice included two strategy sessions where the status of present policies and programmes were reviewed and adjustments and improvements adopted that changing circumstances in the medical industry demand.

Good governance practice was further entrenched with a review of the Board Code of Conduct which sets out the ethical standards all Trustees are expected to follow in their capacity as Board members of Fedhealth. Two items, Conflict of Interest and the Gift Register, continue to head the Agenda of every Board meeting. The latter was re-visited and amended where appropriate.

As in past years, Members Forums were held in accordance with the Board's policy of achieving maximum communication between the Trustees and members. Three meetings were held, in Cape Town, Bloemfontein and Johannesburg. Direct access to the Board continues to be provided to members via a designated Trustee whose contact details are published in HouseCall!

During the year under review, the Board adopted a document outlining Fedhealth's Vision, Mission and Values.

Risk Management Committee
The recently formed Risk Management Committee is mandated to ensure Scheme compliance with the changes in the Governance and Risk Management environment. A number of new codes like King III and legislative changes encourage organisations to establish a Risk Management Committee at Board level to monitor the organisation's strategic and operational risks. The Risk Management Committee established best practice procedures during the period in review; identifying, rating and establishing risk monitoring mechanisms. The Risk Management Committee will continue to monitor the identified risk and refine the mechanisms.

Finance and Investment Committees
Fedhealth's Finance Committee is tasked with the oversight of the Scheme's financial performance. The Scheme achieved a net surplus for 2009 of R38m but solvency declined, due to robust premium growth. Cash coverage ratios fell notably in 2009 due to large cash outflows, mainly from claims rising by a massive 25%, which we believe was partly as a result of market sensitivity to the poor economic climate giving rise to more elective medical procedures being performed. Even though the claims experience exceeded projections, the net surplus at year end was achieved supported by investment income. Premium inflows were in line with expectations with principal membership rising from 84,873 in 2008 to 86,120 in 2009. We are pleased to advise that we have maintained our GCR (Global Credit Rating) of AA-. We continue to hold a fairly large and healthy investment portfolio which has increased by 5% in 2009 to R473m. This committee continues to carefully monitor delivery costs and advises that the overall delivery cost ratio reduced from 15% in 2008 to 14% in 2009. Going forward in 2010, we have tightened up on various financial controls and we expect a resulting contraction in both the claims ratio - down to 86% - and delivery costs - down to 13%. Statutory solvency is expected to remain stable at 26%.

Remuneration and Nomination Committee
The scope of this committee was extended to include nominations and hence the change of the name from Remuneration Committee to Remuneration and Nomination Committee. The committee accordingly amended its terms of reference.

The objective of the committee is to ensure that the critical skills of the Scheme and Board are retained and to remunerate accordingly. In 2009 the committee recommended the appointment of the current Principal Officer after an extensive search and interview process.

The Marketing Committee
In the last couple of years Fedhealth implemented a brand strategy that has successfully established the brand as a key player in the industry with the differentiator being Real Medical Aid. Also important was to establish the brand as one that will appeal to the young uncovered market. This was done through a specific communication style of bright vibrant colours and young imagery. It will always be important for any medical scheme to ensure membership growth of the correct profile in order to ensure sustainability for the future. In 2009 the Scheme embarked on a very targeted campaign to attract the young and healthy members we require. These campaigns were successful and despite the difficult economic climate the Scheme continued to grow from 84,873 in December 2008 to 86,120 in December 2009. Membership goes hand-in-hand with brand image and maintaining and growing brand perception of the Scheme as a provider of Real Medical Aid within the correct target market is a priority. The main mandate of the committee is to ensure maximum results within a limited budget. Communicating with our existing member base also remains a high priority for the Scheme through the compilation of our monthly newsletters to members, brokers and employer groups.

Managed Care Committee
The Managed Care Committee restructured its composition in terms of a revised charter and now consists of three Board members, the CEO and management representatives of Medscheme Health Risk Solutions (MHRS). The committee is functioning effectively due to this invaluable expertise and symbiotic approach in overseeing the key strategic and operational issues pertaining to managed healthcare. The monthly meetings critically evaluated and assessed healthcare issues in order to devise best practice interventions. New treatment regimens were evaluated with respect to efficacy and cost-effectiveness. The Managed Care Committee also dealt with clinical governance matters and is ever mindful of evidence-based medicine and value for money.

The Managed Care Committee regularly monitored the effectiveness of the various programmes that it had established, inter alia, cardiovascular rehabilitation, diabetes (via CDE), baby/infant care (Fedhealth Baby) and HIV/AIDS care (via Aid for AIDS). The committee regularly evaluated reports pertaining to hospital admissions, surgical procedures, medicine usage (chronic and acute) and disease patterns and had made several recommendations to the Board with respect to quality of care and how to cope with the changing healthcare environment.

Operations Committee
The Operations Committee oversees the day-to-day functions performed by the administrator. The performance of the call centre in terms of general efficiency and query resolution; claims processing and payments; authorisations, member communication and IT functionality and development are evaluated on a monthly basis. The committee has also implemented a quarterly tracker study which evaluates service; ease of understanding of benefits and monthly statements and member communication from the perspective of the member. Any negative trends are attended to in detail.

Our CEO will provide a more comprehensive summary on our financial year end review in her report. All the information is available for your perusal and can be obtained on request from the Scheme, from any of the Medscheme branches around the country or accessed on the Scheme's website www.fedhealth.co.za

Finally, on behalf of the Board, I would like to thank our members for their continued support, our administrator Medscheme, for consistently providing the high service levels that our members have come to expect; our managed care organisation, Medscheme Health Risk Solutions, for ensuring our members receive the best quality care available and our brokers who play an important role in ensuring the continued growth of the Scheme.

Also a special word of thanks to my colleagues on the Board who, inspite most of them having other full time jobs, spend a considerable amount of their time attending to matters pertaining to the Scheme. A thank you also to our former CEO, Jeremy Yatt, who left us in July 2009 and to our new CEO, Katy Caldis, for their commitment and energy in ensuring a successful 2009.



Johann Van Vuuren
Chairman: Fedhealth Board of Trustees

Benefit Changes and Contribution Increases for 2010
The high increase in claims experience was partly driven by new members joining the Scheme specifically to access hospital benefits. Under the current legislative environment a scheme may not deny anyone membership. In order to mitigate this risk we have significantly tightened our underwriting policy, applying waiting periods to new members up to the maximum allowable under the Medical Schemes Act. In addition, it was found that Fedhealth was out of line with the market by offering reimbursement for specialists in hospital at 300% NHRPL on all options. This made us vulnerable to specialists recommending members join Fedhealth specifically for a required hospital procedure. Therefore this rate has been reduced to 200% NHRPL on some of our lower cost options.

Thus although the 2010 contribution increases and benefit changes were not welcome from a member perspective, please be assured that they were a necessary measure and more importantly that they have had the desired effect and your Scheme is indeed in a sound financial position. Thanks to this corrective action, the Scheme's solid credit rating of AA- was re-affirmed by Global Credit Rating.

Membership Growth
If is of paramount importance that the Scheme continues to effectively market itself to new members, as a stagnant membership pool would lead to an aging population with a strong knock on effect on claims experience. The Scheme continues to create a strong market presence and brand despite a relatively small marketing budget. Our advertising campaigns appear to be delivering the desired return with the scheme attracting over 20 825 new members in 2009. The growth did, however, slow considerably from mid-2009 with the tightening of the underwriting policy and there were a significant number of resignations in early 2010 due to the high contribution increase implemented. However, it is more important that we grow with the appropriate profile of new members and thus the modest annual growth of 1.5% is more sustainable than high membership growth in 2008 that was accompanied by high claiming patterns in 2009.

The Scheme ended the year with membership of 86 120 principal members, covering 186 446 beneficiaries in total.

Service
Fedhealth has an excellent reputation for service in the market and whilst it is not possible to ensure perfect service 100% of the time we continuously strive to improve our service. The Board monitors the service levels achieved by our administrator and manage care provider continuously. 511 693 calls were placed in 2009 and 3 122 937 claims were processed successfully.

Conclusion
The industry in which we operate continues to serve up significant challenges. I look forward to facing these challenges head on and to pursue my passion of a sustainable healthcare industry for all. I would also like to move away from the perception of the medical aid industry being only a supplier of emergency medical interventions to one of a partnership between members and the Scheme in ensuring a healthier lifestyle for the benefit of all.

Katy Caldis
Principal Officer: Fedhealth Medical Scheme

MINUTES OF THE SEVENTY THIRD ANNUAL GENERAL MEETING OF MEMBERS OF FEDHEALTH MEDICAL SCHEME HELD ON WEDNESDAY 24 JUNE 2009 AT 10:00 IN THE MAPLE AND ELM ROOMS, COUNTRY CLUB JOHANNESBURG, 1 NAPIER ROAD, AUCKLAND PARK, JOHANNESBURG

NOTICE OF MEETING
The Chairman advised that due notice had been given and as a quorum was present the meeting was declared open.

There were no apologies recorded by any of the Trustees.

1. CONFIRMATION OF THE MINUTES OF THE SEVENTY SECOND ANNUAL GENERAL MEETING

The minutes of the Seventy Second Annual General Meeting held on 26 June 2008 were confirmed and signed as being a true record of the proceedings.

The Chairman called for the adoption of the minutes which were proposed by Mr Tom Borrill and seconded by Mr Red Metrowich.

2. REPORT OF THE BOARD OF TRUSTEES FOR THE YEAR ENDED 31 DECEMBER 2008

The Chairman highlighted the activities of the Scheme over the previous twelve months.

Solvency Ratio
The Chairman reported that the Medical Schemes Act requires that schemes have a solvency ratio of at least 25%, and in 2008 the Scheme reached a solvency ratio of 28% and the investment returns reached 8.6%. The Scheme's credit rating was maintained at AA-.

Membership Growth
The Chairman reported that the Scheme's membership in April 2009 had increased to 85 000 with two thirds coming from the private sector. There was little change in the average membership age.

Investment Returns - Year to date April 2009
The Chairman reported that the Board monitors the investments of the Scheme daily, monthly and quarterly.

Unique Benefits
• All hospitalisation costs covered on all options up to 300% of medical aid rates.
• Immediate optional member upgrade on diagnosis of serious ailment.
• Free contraceptives.
• No co-payment on pharmacy claims.
• Excellent post-hospitalisation risk benefits.
• Cardiac rehabilitation program.
• Free International travel medical cover (provided by Europ Assistance).
• Africa evacuation benefits.
• Elective surgery interest free loans.
• Child dependant status up to 27 years.
• Chronic disease benefit covers 56 conditions (31 more than the 25 Prescribed Minimum Benefits stipulated by law).
• Trauma counselling service.

Executive Control
The Chairman reported that the Trustees take responsibility for the portfolios of the various committees with clearly defined mandates and terms of reference. The following are the committees: Finance, Operations, Managed Healthcare, Marketing, Investment, Governance, Audit, Ex-gratia, Remuneration and Risk Management.

Governance
The Chairman reported that the Board was very strong on disclosure of gifts, conflict of interest, transparency, skills development and assessment. Trustees continue to run the Scheme to the highest ethical and fiduciary standards and this ensures that every decision regarding every aspect of the Scheme's benefits, finances and strategy is taken with the best interests of the members foremost in mind. The Chairman was pleased to report that the Scheme conforms to the recommendations of the King III report.

Trustees Honoraria
The Chairman reported that the Trustees were expected to achieve certain objectives, and performances were reviewed each year according to strict review criteria. Trustees were also expected to keep up-to-date with Government legislation.

A trustee who had been a trustee for more than 3 years was paid a monthly retainer, but this payment was conditional on achieving at least 80% attendance at BoT meetings, as well as other criteria.

Future Challenges
The Chairman reported that there were future challenges for the Scheme and highlighted the following concerns:
• National Health Insurance (NHI)
• Prescribed Minimum Benefits (PMB)
• High members' claiming pattern in 2009.

Mr Yatt reflected on activities over the past year and the challenges that face the Scheme.

Mr Yatt reported that the claims for this year were higher than anticipated, which has been an industry trend. He further reported that, although investigations had taken place, there was no clear reason for this trend. Some of the factors that had been discussed were government members leaving to go onto a Government subsidised medical aid (GEMS), the age profile and the global recession.

Mr Yatt reported on the following:

Mr Jeremy Yatt, announcing his resignation after nine years as the Chief Executive Officer, Fedhealth, thanked the members for their continued support over the previous nine years, and wished the members, Board and the Scheme every success in the future.

3. AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2008

Adoption of the audited Financial Statements as at 31 December 2008 was proposed by Dr W Fraser and seconded by Mr Malcolm Kahn and unanimously carried.

4. APPOINTMENT OF AUDITORS

The Chairman PROPOSED that Messrs KPMG be re-appointed as the Scheme's auditors until the next Annual General Meeting. The proposal was SECONDED by Mrs L Marsh and carried.

5. BOARD OF TRUSTEES

Mr Yatt advised that nominations for the election of Trustees had been received in terms of Rule 18 from Mr Malcolm Kahn, Dr Natie Finkelstein, Mr Nazir Parker and Mr Red Metrowich from the existing Board. Mr Yatt reported that Mr Red Metrowich had subsequently withdrawn his nomination, and thanked him for his support and work he had done for the Scheme over the previous six years.

Mr Yatt reported that there had been three further nominations: from Mrs Marylla Govender, Mr Kevin Prinsloo and Mr Jacob Pretorius. Mr Yatt gave a brief overview of each of the three new nominees.

Mr Yatt reported that there would be an adjournment of the meeting where ballot papers, giving all nominees' names, would be handed to all members present, requesting members to mark up to four nominees, if they so wished.

At approximately 12:00 the meeting resumed and Mr Yatt confirmed that the ballot papers had been audited by KPMG, and the results were as follows:

Malcolm Kahn and Nazir Parker were re-elected to the Board. Marylla Govender and Kevin Prinsloo had been elected to the Board.

The Chairman congratulated Marylla Govender and Kevin Prinsloo on their election to the Fedhealth Board of Trustees.

6. TRUSTEE REMUNERATION

The Chairman reported on the Trustee Honoraria paid during 2008. NOTED AND RATIFIED.

7. OTHER BUSINESS

Members were invited to raise issues they wished to have dealt with.

What is the split between equity and cash? The Chairman reported that the Scheme had 25% in equity and 75% in cash.

Are hospital rates realistic? The Chairman reported that Fedhealth offer 300% of NHRPL and members should not have co-payments.

Abridged version of Annual Financial Statements. In terms of the new auditing rules the Scheme had not been allowed to provide an abbreviated version of the Annual Financial Statement, unless that version, at an additional expense to the Scheme, had also been fully audited. The Board could not justify this additional expense and therefore had informed members that full copies of the AFS would be available on the Scheme website, Medscheme offices across the country and on request from Medscheme.

Donald Gordon option. Mr Yatt reported that the Registrar had instructed the Scheme to close the Donald Gordon option, due to the low numbers on this option.

PetSure. Mr Yatt reported that this was a marketing initiative and the nominal fee was paid out of the marketing budget.

International Travel Benefit. Mr Yatt reported that this benefit was made available to members directly through Europ Assistance. The insurer, Regent Insurance, had placed underwriting restrictions on members above the age of 70 and had excluded pre-existing conditions.

The Chairman thanked members for bringing their queries to the Trustees' attention and looked forward to their attendance next year.

The Chairman reported that Client Liaison Officers and management of Medscheme were also in attendance to answer members' queries.

8. CLOSURE

There being no further formal matters to discuss, the meeting concluded at 13:00.

Proactive self-help includes:
• Reading books/acquiring information. This helps to provide an understanding of the illness which can be important for both the sufferer and the family
• Eating an adequate diet so as to maintain blood sugar levels. Foods, which promote serotonin production, can be increased e.g. bananas, pumpkin pips and Horlicks. Stimulants which increase anxiety should be avoided e.g. coffee, colas and chocolate. Vitamin supplements/tonics may be useful if you are very run down or if life is normally lived in the "fast lane"
• Sleeping sufficiently - but not too much
• Set a realistic daily routine and stick to it as far as possible
• Exercise - begin gradually and slowly increase the intensity and amount of time spent exercising. Exercise promotes the release of the body's natural opiates (endorphins) that improve mood. Being out in the fresh air helps to put a different perspective on problems
• Relaxation - to decrease tension and anxiety and to improve sleep. For example meditation, yoga, aromatherapy and massage
• Hobbies/interests - which help to occupy the mind and decrease pre-occupation with negative thoughts
• Regular breaks/holidays
• Lifestyle changes - expecting less of oneself; maybe lowering standards a little; delegating; asking for assistance; set small, realistic goals
• Avoid alcohol/recreation drugs and cigarettes - these often worsen depression and anxiety
• Postpone making life-changing decisions such as resigning from your job until you are feeling better
• Do not try to cope on your own. Share your feelings with others. Joining a support group is an excellent way of doing this
• Don't feel discouraged if you don't feel better immediately. Treatment takes time and some antidepressants take a few weeks before you start to feel better.

Myth 2: Mental disorders are a figment of one's imagination.

Fact: Mental illnesses are real. Mental illnesses and brain disorders cause suffering, disability and can even shorten life (this is evident from episodes of depression after a heart attack, liver disease due to alcohol abuse and attempted suicide). Mental illness can be diagnosed and treated before it is too late. The symptoms are a sign of real illness.

Myth 3: Mental disorders are caused by a weakness in character.

Fact: Mental disorders are caused by biological, psychological and social factors. Research has shown genetic and biological factors are associated with schizophrenia, depression and alcoholism. Social influences such as loss of a job or loved one can contribute to various disorders.

Myth 4: Recovery from mental illness is not possible.

Fact: Long-term research has shown that the majority of people with mental illness show genuine improvement over time and lead stable lives. There are many treatments available to individuals who suffer from mental illness such as medications, therapy and rehabilitation.

Myth 5: Mental illness only affects people in rich countries.

Fact: Mental and brain disorders are a concern for people in developed countries as well as those in developing nations. In a study of 27 countries conducted by the WHO (World Health Organisation) no country was found to be free of schizophrenia. Alcohol abuse is another commonly found disorder.

Myth 6: Mentally ill and mentally retarded individuals are dangerous or violent.

Fact: The vast majority of these individuals are not dangerous or violent. This myth is reinforced by portrayals in the media of people with mental illness as frequently violent. It is important to eliminate discrimination and replace it with positive images and messages and a greater awareness of what mental health really is.