Discovery the punchbag in health sell-off as shareholders jittery about NHI Bill

CAPE TOWN – Discovery took the brunt of the health stocks sell-off yesterday, falling more than 12 percent in early trade before recovering to close 8.44percent lower at R105.72 after shareholders flagged industry uncertainty about the National Health Insurance (NHI) Bill.

The jitters extended to other players in the sector. Aspen shaved off 10.2 percent to close at R75.91; Netcare declined 4.04 percent to close at R15.93; and Mediclinic fell 1.33 percent to close at R57.35.

Discovery is 34 percent down over a 52-week period.

A stock market analyst who chose to remain anonymous said Discovery was caught in a storm over the uncertainty about how the NHI Bill would affect the administration and product models of medical schemes.

The analyst said emerging-market concerns also saw mainly foreign investors offloading their exposure to Discovery. Locals held only a tiny shareholding in the company.

“Health insurance amounted to about half of the analyst’s valuation of the Discovery share price, as health insurance was the group’s principal generator of cash,” he said.

The NHI Bill, tabled last week in Parliament, aims to provide a package of services for free at private and public facilities to provide equitable access to quality healthcare.

Yesterday, portfolio committee on health chairperson Dr Sibongiseni Dhlomo confirmed that the committee would meet to discuss the bill and begin a public consultation process.

SA Private Practitioners’ Forum chief executive Dr Chris Archer said medical practitioners were concerned about the government’s attempts to implement NHI without providing clarity on what the initiative might cost and how it would be funded in the weak economic climate.

“The NHI Bill is still too vague and ambiguous on many aspects,” said Archer, adding that sections of the bill indicated that medical schemes would be allowed to provide only complementary cover for services not reimbursable by the NHI Fund.

Vestact Asset Management portfolio manager Byron Lotter said the weaker rand, political uncertainties in Argentina and uneasiness over the NHI had come together to drive Discovery’s share price lower.

Lotter said there were also concerns about risks to Discovery after it took financial services group Liberty to court for alleged trademark infringement and unlawful competition for using its Vitality incentive programme brand.

“NHI is likely to be implemented a long time in the future, but there are concerns in the market about the lack of detail around the plan,” Lotter said, “and there also were likely to be many other individuals who were concerned about being forced to fund public health services individually.”

Olwethu Notshe, a portfolio manager at Sentio Capital, said yesterday that the proposed wording of the bill suggested that health insurers such as Discovery would not be able to cover the same illnesses or procedures that the NHI covered, so this would infringe on their health business.

Discovery management could not be reached for further comment yesterday, but it indicated on its website that while it broadly supported the NHI Bill, it was concerned about the financing of the scheme.

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