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Medical Aid prices are greater than the sum of their increases

01 December 2020 Profmed

Profmed CEO, Craig Comrie announces the latest price increases at Profmed and shares his insight into how the medical aid industry plans with price and benefit in mind.

As the healthcare industry prepares for 2021 on the back of an unpredictable 2020, medical schemes have announced their price increases and this is bound to place additional pressure on limited budgets.

Medical Scheme Profmed has announced an average 5.9% increase in contribution prices for members in 2021. While this is more conservative than some other medical aids, Comrie says the added benefits, as well as a reduction in contributions for lower-income bands on what is the most affordable comprehensive hospital plan on the market more than make-up for the price increases. This allows those who have completed their qualifications to get access to medical scheme benefits.

For Profmed CEO, Craig Comrie urges South Africans not to focus on the contribution increases alone, but to weigh up the benefits and remain on more comprehensive cover when considering the long-term impact of COVID-19 on individuals, families, and businesses.

Taking the long-term view and seeing the bigger picture

Although it is easy to see price increases as an affront to the conscious consumer, Comrie explains that medical aids always have to take a longer-term view. “2020 was unique, and 2021 will continue to be different from the past. For us, we have to take a 5-year view and that includes trying to pin down the effects of COVID-19 with new treatments like impending vaccines. Knowledge about the pandemic is changing and is removing the anxieties we felt a few months ago. ”

For Comrie, it is all a matter of sustainability. He points out that many schemes out there have taken a short-term approach by implementing lower than expected price increases. “If they avoid the immediate pain now and sport lower increases, this will only lead to long-term pain in the future. If your scheme is promising you relief now, be aware that the financial stress that may accompany the cost of a vaccine or treatment for a potential second wave may result in mid-year increases for those schemes who do not have sufficient reserves.”

At Profmed, Comrie has noticed the pressure that its members are under, particularly when it comes to paying contributions. Appreciating the economic insecurity experienced by members, Comrie says more people are scared of not having a medical cover. “We have seen more members remain covered within the medical scheme space than in previous years. In fact, Profmed shows a 10% improvement in member retention when compared to prior years.”

There’s more to price increases than meets the eye

Although a price increase may lead South Africans to believe that medical schemes like Profmed are simply milking profits on top of significant claims reductions in 2020, Comrie says this is not the case.

“We have noted a 60% drop in hospital claims through the peak periods of lock-down. This has amounted to an R160m reduction in claims paid. To set this off is an additional R90m worth of COVID-19 claims for treatment and PPE costs incurred by the Scheme. At the end of this year, we expect to end better than budget but we are concerned that in the coming years we will require this to cover ongoing treatment and costs of the vaccine.”

Comrie has no doubt that despite many indicating that the vaccine costs will small this liability could cost anywhere from R400 to R1 000 per dose. Gradually the experience is that these costs will then decrease over time. “The Profmed reserves provide some insurance to fund the rollout of the vaccine for our members and has been planned for in 2020 and 2021.”

An informed opinion transcends price increases

“There are two ways medical schemes balance the value equation,” says Comrie. “They increase contributions and/or their lower benefits. The problem is, your average member may not find out about the lowered benefit until they try to access it and it’s too late. Many make the mistake of only buying medical schemes based on price/cost and not value. This trend will become more prominent in 2021 where we anticipate members will continue to downgrade their cover because of the insecurity of income experienced in 2020.”

Comrie stresses the importance of speaking to a broker and reading the fine print when it comes to medical aids. “If you tap into the right information you can see how prices and benefits change from one year to the next. It’s a mistake to always seek out the most affordable option because that is generally where the print is at its finest and most exclusionary.”

Quick Polls

QUESTION

How to give affordable and appropriate financial advice to the low income market segment. There is little room on a R50 pm policy for advisers to be remunerated for the time it would it would take to educate & fulfil admin function. What is the solution?

ANSWER

[a] Eliminate non-advice sales / telesales
[b] Implement industry standards for non-advice information
[c] Introduce an insurer-funded pro-bono advice network to low income earners
[d] Reinforce the Policyholder Protection Rules
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