A concern for brokers
According to Tony Singleton, CEO of Turnberry Management Risk Solutions, over the past few years, medical inflation has outstripped the inflation of medical scheme premiums, resulting in year on year increases in medical expenses shortfalls and co-payments.
“As medical schemes are under constant pressure to balance benefits with affordable contributions, they have had to resort to creative strategies to attempt to maximise coverage. This means that co-payments now exist where previously there were none, including on procedures at doctors’ offices and not just at hospitals for certain procedures,” added Singleton.
Medical expenses and pay outs
When asked if he believes the gap has grown between medical expenses and pay outs, Head of Technical Marketing at Discovery Health, Chris Jones said, “no, this is certainly not the case with Discovery Health Medical Scheme (DHMS). The scheme provides members with comprehensive levels of cover, as evidenced by the high in-hospital claims pay-out ratio. If the gap had grown between medical expenses and pay outs, DHMS’ claims pay-out ratio would have decreased.”
“In most instances the gap between medical expenses and pay outs has not grown significantly. Medical schemes have, over time, developed measures to contain the cost of medical services as close as possible to the defined benefits. This has been achieved through various combinations of agreements and defined networks of providers. Benefits or’ pay outs’ are a function of the richness of the option a member choose, and it is often the case that gaps occur when the level of care is above the defined benefit (pay out value) of the option,” said Madelein Barkhuizen, Executive Manager: Sales & Marketing at Bestmed.
“Gap cover payments remain marginal relative to payments made by medical schemes. Our gap cover experience highlights that in nearly all cases where a shortfall occurs on a claim relating to a hospital admission, the majority of the claim is covered by DHMS with the shortfall covered by Discovery Gap Cover. In less than 5% of the claims, Discovery Gap Cover paid out more than the medical scheme,” added Jones.
“Medical Schemes have placed measures in place to contain and manage ‘out of pocket’ expenses for members by ensuring extensive service provider contracting has been concluded. Thereby limiting the amount of Gap Cover claims. Having said that, Gap Cover providers still experience anesthetist accounts as the highest Gap Cover payments,” said Barkhuizen.
The sustainability of businesses
“In conversation with brokers, the major concern raised is regarding National Health Insurance (NHI) and the consequential ripple effect on the sustainability of their businesses. The anxiety is more so experienced by small to medium sized businesses. The consequence has been that brokers who were previously focused on healthcare are diversifying their businesses, in order to survive in an NHI environment. At the Annual Board of Healthcare Funders (BHF) of Southern Africa conference there was some assurance given that medical schemes will co-exist with NHI, however the medical scheme offering will look different,” said Barkhuizen.
“Another concern for brokers is the loss ratio of their book on a month to month basis. The brokers who are mainly exposed to the individual member market, are experiencing a decline in membership. These brokers were previously able to grow their business on a month to month basis. The primary reason for this loss is due to members indicating they can no longer afford their medical scheme contribution. It is also found that the affordability challenge can be due to unexpected expenses experienced by the member,” added Barkhuizen.
Jones voiced the same sentiments. “Given the current economic environment and rising medical inflation, medical scheme contributions are taking up an increasing share of an individual’s disposable income.”
Another concern, Barkhuizen pointed out, is that “During our broker engagement sessions, held over the last few months, brokers are persistent in their urgent request for a low-income medical scheme product. It seems to be clear that it is time for the much-anticipated Low Benefit Cost Option (LCBO). It is understood by brokers that medical schemes will not be able to offer a competitively priced benefit option, whilst having to adhere to the benefit richness required by legislation. The market is therefore becoming skewed as they have to compete against hospital plans, occupational health plans and other healthcare products, which are priced cheaper.”
Brokers can overcome these challenges
Barkhuizen emphasised that the World Health Organisation (WHO) released data stating at least half of the world’s population still do not have full coverage of essential health services. About 100 million people are still being pushed into extreme poverty (defined as living on 1.90 USD or less a day) because they have to pay for healthcare, over 800 million people (almost 12% of the world’s population) spent at least 10% of their household budgets to pay for healthcare, and all UN Member States have agreed to try to achieve Universal Health Coverage (UHC) by 2030, as part of the Sustainable Development Goals target.
“The Minister of Health has emphasized that medical schemes will co-exist with NHI, therefore brokers should be more relaxed in the knowledge that their business is secure. It would be good for brokers to collaborate with medical schemes in seeking how these medical scheme products will look like going forward. The healthcare brokers have extensive knowledge and expertise which would be of great value when having to understand the socio-economic dynamics in the country,” said Barkhuizen.
“It is a known fact that disposal income for the middle-class income earners is under threat and they are faced with the challenge of how to meet their financial obligations on a monthly basis. The consequences are cutting down on costs and medical schemes are often one of the first financial products to be cancelled. Evidently and due to affordability, the general public is looking at different offerings in the market, not necessarily medical scheme cover. These options are insurance related products and not regulated as strictly as medical schemes,” added Barkhuizen.
“It is required for brokers to be attentive and ensure members understand what they are purchasing. Medical scheme products are highly regulated and provide a level of protection for members in that core conditions and treatment will be covered, as regulated by the Medical Schemes Act of 1998, as amended. Leveraging off this secure environment adds credibility to brokers and provides schemes with the opportunity to illustrate the value of their products and service offering,” Barkhuizen concluded.
Jones concluded by saying, “Brokers play a key role in ensuring that their clients find a balance between meeting their budget and making sure that they have sufficient medical cover and are protected should they experience a major health event. Conducting a financial and medical needs analysis is the starting point to understanding which plan option will best suit an individual’s needs.”
Writer’s Thoughts:
Resorting to maximise coverage, as mentioned above, it would be good for brokers to collaborate with medical schemes in seeking how medical scheme products will look like going forward, and ensure that members understand what they are purchasing. If you have any questions please comment below, interact with us on Twitter at @fanews_online or email me – myra@fanews.co.za
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