Meeting medical scheme challenges through innovation

Damian McHugh, Head of Health Marketing at Momentum.

The medical scheme industry has largely remained stagnant over the last few years, seeing hardly any growth in the number of members covered. In fact, we have seen a reduction in the number of schemes in the industry, through liquidation and mergers or amalgamations.

As a result, the remaining medical schemes tend to have an ageing profile, which negatively affects their long-term sustainability, solvency and claims profile. The challenge in the medical schemes industry is to find a way to encourage younger, healthier members to enter – and stay in – the market.

This is not an easy task when you consider the costs and increases put through by the medical schemes, together with the less than inflationary increase in medical scheme tax credits, thereby slowly making medical scheme cover less affordable. Innovation and products that offer value for money will encourage younger consumers into the medical scheme market.

We haven’t seen many innovations in the medical scheme industry since the introduction of the medical scheme savings account in the mid-1990s. This account offered an in-option savings facility that covered the member’s day-to-day medical expenses. This solution provided an alternative for younger, healthier members who didn’t require extensive medical scheme benefits, but didn’t really offer much flexibility and was rather prescriptive in terms of what the funds could be used for.

In addition to this, members who had built up large amounts of money in savings accounts, could not access these funds unless they left the medical scheme or changed their option for another scheme or option without a savings facility.

While this money carried over to the following year, the interest offered was low and members could not utilise it to lower their contributions. Basically, it was inflexible. This represented an opportunity to rethink benefit design, and find new ways in which to offer consumers more flexibility and choice with solutions tailored for them and not for the benefit of the scheme.

The solution came in the form of a health savings account that sits outside of the medical scheme, allowing consumers a lot more control in terms of how much money they contribute to this account and what they would like to use the funds for, like paying for claims not usually covered by the medical scheme.

This savings vehicle also allows for instant access to the funds in the account to pay providers at the point of service, rather than paying upfront and waiting to be reimbursed by the medical scheme from the in-scheme savings. It also allows consumers to supplement their retirement savings or even cover medical scheme contributions in retirement, a far more financially savvy solution when we compare it to the rigidity of the ‘older’ medical scheme savings offering.

This new way of thinking about benefit design has also challenged the industry to provide more relevant solutions to consumers, as well as to design solutions that offer value for money. What if your health or lifestyle could fund your healthcare needs? So, the healthier you are the more money you get in your health account. Then, when you need it for medical expenses your previous good health actually funds your claims.

This kind of flexible solution could be just what the industry needs to entice the younger, healthier consumers into the medical scheme market, as they are enabled to take charge of their overall financial wellness, not just their healthcare claims and expenses.