Momentum Medical Scheme cushioning the Covid-19 blow for its members

There is no doubt that the Covid-19 pandemic has had a devastating economic impact on countries all over the world, with nations constituting the global south hit hardest. In South Africa, the pandemic has added even more strain to an already beleaguered labour market, which had been bleeding jobs for over a decade owing to sluggish economic growth, among other factors.

Research by the World Bank provides a clear picture of the seriousness of the impact of the Covid-19 pandemic on South Africa’s economy and employment. According to the report titled: South Africa’s Labor Market Can Benefit from Young Entrepreneurs-Self-Employment, South Africa entered the Covid-19 pandemic with low levels of employment, far below the standards of most upper middle-income countries. By the end of 2020, despite two quarters of employment growth, the number of employed people had fallen by nearly 1.5 million while the wages of workers who still had jobs had fallen by 10 – 15%. At the time of releasing the report in July 2021, only 40% of employment losses had been recovered.

Like most South Africans, members of medical schemes administered by Momentum Health Solutions have also been directly or indirectly impacted by the economic havoc that continues to be wreaked by the pandemic.

Although most sectors of the economy have been severely impacted by the introduction of lockdowns, which have brought businesses to their knees and forced scores of people to join the ranks of unemployment, medical schemes benefited from reduced claims costs. The medical scheme industry saw a decrease in overall benefit utilisation, as the demand for certain healthcare procedures has reduced. This positively impacted the solvency of medical schemes. In this regard, a review of the seven largest open medical schemes’ annual financial reports shows a 30% increase in solvency during 2020.

To help ease the financial pressure and to contribute towards helping embattled consumers regain their financial and wellness momentum, Momentum Medical Scheme has put more than R210m back in the pockets of its members by deferring their contribution increases until September 2022. The rationale behind the decision to defer the increase by eight months is two-fold. Firstly, to give the economy as much time as possible to recover to at least pre-Covid 19 levels and secondly, to give members a chance to increase their income and or recover from the pandemic setback in order to accommodate the increase in their medical scheme contributions.

In addition to delaying the increase, the Scheme has also decided to increase members’ contributions by only 6%, effectively only passing on a 2% increase over the full year. Considering the surpluses medical schemes have made over this period, we believe that to be truly socially relevant, the effective increase should not be higher than 3-4%, as salary inflation has not tracked higher than this over the Covid-19 period.

So, where did the surplus come from, you might ask?

Lockdown restrictions put in place during the first quarter of 2020 saw hospitals halt certain medical procedures. People visited hospitals and doctors less, while school closures also translated to less illnesses amongst children who often catch flu and infections at schools. This resulted in less utilisation and claims, which translated into a surplus for medical schemes. Since the funds held by medical schemes belong to members, Momentum Medical Scheme decided to use a portion of the surplus to cushion the Covid-19 blow to their already embattled members.

And what happens should the economy not recover to anticipated levels by September 2022?

The decision to implement or not implement the increase in 2022 will primarily be determined by the economic performance during the course of the year. Momentum Medical Scheme could further delay the increases to 2023, employing a similar deferment strategy. Although, numerous research studies conducted expect growth to rebound from last year’s deep contraction of 7%, the truth of the matter is that there is still a great degree of uncertainty, and nobody really knows what 2022 will look like.

What we do know for certain is, should the economy not have recovered by the time the increase is due, the Scheme will still be in a financial position to delay it further without devaluing the quality of benefits offered to members, while also ensuring the sustainability of the Scheme in the long run.

A critical element of the deferment strategy was to ensure that the Scheme’s members did not end up having to make up for the increase deferment in the form of exorbitant contribution hikes in the future.

After all, while Covid-19 has devasted economies globally, Momentum Medical Scheme’s response has been to craft the best strategies to cushion members against the worst outcomes of the pandemic and to continue making private healthcare accessible to as many people as possible through the provision of quality benefits at affordable contributions.

In addition to having the lowest average contribution, Momentum Medical Scheme has, over the last nine years, also managed to have one of the lowest average increases, without eroding member benefits in over nine years. This demonstrates the Scheme’s long-term commitment in ensuring that members enjoy the best and most affordable benefits.