Liberty Medical Scheme highlights key role of financial advisors - future-spotting
Intermediaries have a new role in the medical aid environment future-spotting. This facet of the adviser's role was spelled out this week (Sept 26-Oct 5) by Liberty Medical Scheme during the national roadshow to outline 2008 rates and benefits.
Liberty Medical Scheme, one of the first to set the rates benchmark for the coming year, announced a weighted average rise of 10.9% in contributions.
Rate sensitivity is ever-present, but the consumer demand for a shock-free future is also critical to new business growth, says Liberty Medical Scheme chairman Stephen Maasch.
He explains: "Given the current and future dynamics of the industry, financial advisers have to identify schemes that have the ability to offer consumers stability into the future. Much of our planning is designed to ensure that the Liberty Medical Scheme has the necessary attributes to achieve long-term stability.
"Members increasingly look to schemes and advisers for solutions that reduce future volatility. An unexpected rates surge affects consumer confidence in a schemes strategic planning and overall stability.
"Managing the future transition to the new risk equalisation era is crucial for the credibility of schemes and intermediaries. We are expected to anticipate potential cost fluctuations and cushion them."
Government's Risk Equalisation Fund is widely expected to be introduced in January 2009. The cost of providing for older people with high health risks will be shared across the sector via this cross-subsidisation mechanism.
The Liberty Medical Scheme rating model is adjusted to obviate the need for major catch-up rate increases when the fund becomes operational.
Maasch notes: "We continually test our profile against figures from the Council for Medical Schemes to maintain Risk Equalisation Fund neutrality and avoid rate volatility."
Liberty Medical Scheme rates reflect estimated medical sector inflation of just over 9% (general CPI of a little over 6% plus the traditional 3% medical inflation premium) with additional adjustments for alignment with the National Reference Price List (NHRPL).
The scheme offers eight benefit plans across its Silver, Gold and Platinum ranges, with rate increases varying from 9.8% to 12.4%. These highly competitive rates were achieved without pruning risk benefits.
Maasch adds: "Benefits such as our 120% payment of NHRPL rates on our Gold options and 300% of NHRPL for Platinum members remain in place.
"We retain features such as provision for MRI and CT scans, crime trauma and casualty benefits while increasing our threshold benefit levels with an inflationary adjustment they remain among the lowest in the industry."
The value proposition of rates against benefits is more vital than ever. Rating methodology is also a point of focus. Liberty advises 'total transparency' in these areas.
Maasch points out: "Fear of future volatility leads to scepticism when schemes announce highly competitive rate structures.
"A well-informed consumer appreciates that medical inflation is close to 10%. Providers are investing in new technology while sophisticated treatments add a multiplier to costs. Ageing membership pools also affect pricing. A 15% increase might therefore be indicated, yet our rates are up by just 10.9%.
"One of the reasons for this is that our members have built their medical savings to a level that enables us to reduce the portion of contributions going into a members own account. This reduces rating pressure."
Liberty Medical Scheme achieved 5% growth in main members in 2007 and forecasts similar growth in 2008.
Innovations include a partnership with network supplier Prime Cure, enabling the scheme to offer a Silver Corporate Network package covering GP visits, specialist referrals, chronic medication, basic dentistry and in-hospital care per family to a R500 000 annual cap, twice that of the old Silver Complete option (a plan that has now been folded into the Silver Focus plan).