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SUB CATEGORIES General  |  HIV |  Medical Schemes | 

Companies urged to review medical schemes during renewal period

17 October 2012 Andre Jacobs, Business Unit Head ? Healthcare National Operations at Aon Hewitt
Andre Jacobs, Business Unit Head ? Healthcare National Operations at Aon Hewitt

Andre Jacobs, Business Unit Head ? Healthcare National Operations at Aon Hewitt

The final quarter of the year marks the annual renewal season for medical schemes, as they review the claims and contributions of the previous 12 months to determine any price increases and benefit changes for the following year. This is a crucial opportu

Andre Jacobs, Business Unit Head – Healthcare National Operations at Aon Hewitt, says a number of factors contribute to schemes enforcing price increases. “Typically, schemes take into account consumer price inflation, medicine prices and other health goods, as well as claiming patterns among their own members and the financial performance of the scheme for that year. It is important to try and get a balance between the members’ needs and concerns, and the sustainability of the medical scheme.

“Schemes that have not achieved the statutory solvency level of 25% will need to implement a ‘reserve build-up’ – the industry term for loading member’s contributions in order to increase the level of capital reserves. Some schemes may also reduce benefits as part of an attempt to keep price increases at a minimum in order to remain in line with their competitors.”

He says it is also advisable for companies to speak to their healthcare intermediary to ascertain what the demographic of their current medical scheme is. “If a scheme has a higher proportion of older members then their reserves are likely to be used more rapidly, as individual healthcare costs typically increase as members age. If this happens, the scheme will need to load members’ policies with a higher premium increase to mitigate the higher healthcare costs.”

Jacobs notes that according to the recently released annual report of the Registrar of Medical Schemes, the average overall age of medical scheme members has aged only one year since 2004. “We would expect that in the absence of new members, the average age of medical scheme members would grow annually by one year. However, the fact that that it has increased by only one year in the last eight, means younger members are joining medical scheme, which is very positive news.”

Jacobs says ideally corporates should review their strategy a few months before the renewal stage. “A qualified healthcare intermediary should have produced an industry report detailing any concerns regarding the performance of the current medical scheme/s and the employee/member usage patterns by around July or August each year.”

It is at this time that qualified intermediaries would have advised their clients of what is known as ‘ideal options’ of cover for employees.

“This is the time at which any material concerns, such as a scheme’s financial performance, solvency and reserves should be addressed. If there are serious concerns then the intermediary must use this time to begin a strategy with the client to evaluate what alternative schemes are available.”

Jacobs says according to research by Aon Hewitt, eight lifestyle behaviours drive15 chronic conditions that are responsible for 80% of chronic healthcare costs. “This research is supported by similar findings by the World Health Organisation and is consistent with the burden of disease experienced by private medical schemes. More routine or day-to-day benefits are provided in the form of medical savings accounts. This clearly indicates that a larger portion of the day-to-day risks are shifted from the medical schemes risk component onto members.”

He says the Registrar of Medical Schemes’ report also indicates the value of medical schemes in strengthening the entire health system in South Africa. “Healthcare was identified in the National Planning Commission as being a key indicator and driver of success in South Africa going forward, as a healthier nation contributes towards a healthier workforce and thus a healthier overall economy. On a cautionary note, I believe that employers and members of medical schemes need to be less reliant on the curative medical scheme benefits and should actively design and engage in plans to change our collective lifestyles in order to become a healthier nation. This should also assist in managing chronic condition medical scheme costs and ultimately help to keep our medical schemes solvent,” he concludes.

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