Medical scheme' average increases for 2015

03 November 2014 Myra Rego, FAnews

There are approximately 3.9 million people who are fortunate enough to belong to a medical scheme in South Africa. Very few of these people will likely deny that a medical scheme membership plays a significant role in ensuring some form of peace of mind when it comes to contemplating the worry of not having access to private healthcare facilities. The cost of membership of a medical scheme is rising faster than inflation and the picture for 2015 looks no different to that of previous years.

Members of medical schemes are constantly paying ever more in contributions for ever shrinking coverage. Although above inflation increases in healthcare costs are a world-wide trend, South Africa’s private healthcare system has some unique challenges and features that are dominant cost drivers.

Rising healthcare costs, the current credit crunch and concerns about Government’s drive to implement National Health Insurance (NHI) are creating a challenge for many medical schemes. One of the biggest challenges facing medical schemes is to keep the monthly contributions members pay within acceptable limits. Rising hospital costs are a particular concern for schemes, as is the high level of claims from members who consult specialists.

A grim picture

Over the past 13 years, Consumer Price Inflation (CPI) has averaged 5.9% per year. The four biggest open medical schemes in South Africa, namely Discovery, Bonitas, Momentum and Medihelp, represent approximately 75% of open medical scheme membership. The average increase for these four schemes, representing the majority of open membership, was 10% in 2013. In 2014, increases were slightly less at 9.2%, but they are increasing again in 2015 to a staggering 9.4%. Considering the fact that annual salary increases are once again expected to be in the region of 6%, the year-on-year above inflation increases for medical scheme memberships has simply become a luxury many can no longer afford.

According to some actuaries active in the healthcare industry, this situation is not expected to change in the foreseeable future. Due to changes to the Income Tax Act, the benefit of having an employer subsidise a medical scheme contribution is practically non-existent. As a result, it is very likely that more employers are going to continue to subsidise medical scheme contributions in 2015. This change could mean that in 2015 not only low-income earners, but everyone could be forced to choose between medical scheme and other household needs that compete for their disposable income.

Opting out

Healthcare experts suggest that younger people are becoming less willing to accept that they need to subsidise older, sicker people when they join a scheme, with the result that the 20 to 30 year olds are increasingly migrating off medical schemes, resulting in an increase in the costs.

Generally speaking, the medical scheme industry landscape in South Africa is not entirely a happy place right now. For those privileged enough to afford private healthcare, it is and will always be a grudge purchase followed by endless negative publicity about high costs, decreasing cover, exorbitant trustee fees and excessive non-healthcare expenditure. For those less privileged, the battle for peace of mind continues unabated.

This is where brokers play a crucial role; by ensuring that their clients understand the rules of the medical scheme and, therefore, that medical schemes act in a transparent and open manner. Brokers know their clients’ needs best and have a responsibility to assess the offerings in the market against their clients’ needs and to provide products that meet those needs.

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