Rate increases, benefit erosion and medical inflation are all interlinked and have to be considered when trying to understand why some medical schemes are talking about premium increases that seem to be fair and reasonable.
"All in all however the increases should be seen for what they are," says Jeremy Yatt, CEO of one of the few truly independent medical schemes left in the country, who announced an average 6.6% premium increase.
Some schemes have announced single digit premium increases, others have launched loyalty programmes and credit cards linked to banking institutions, while others have reduced benefits to ensure that increases are lower than expected.
"Essentially there is a need for the scheme to maintain profitability and ensure that the shareholders and holding companies receive the prerequisite profit margins. This profit demand has been offset by the introduction of more effective regulation, and it is no longer as straightforward for administrators to siphon excessive fees out of schemes.
“The strategy has now changed. Financial service organisations in this industry now mine the rich databases that exist in schemes and link the scheme's benefits to life policies and other offerings.”
Yatt says that members and employers have to ensure that they know exactly where they stand in these schemes, in terms of benefit coverage and that they are not buying something that is simply a mechanism to sell them something else.
“At the moment the member of the scheme comes in a distant third or fourth place on the food chain.
“Members thinking of changing or re-evaluating their medical schemes should do their homework and understand exactly where their contributions are going to,” says Yatt.
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