Two large open medical schemes – Discovery Health Medical Scheme and Momentum Health – were this week among the first schemes to announce contribution increases for next year, with both announcing average increases of 8.6 percent.
The increases for members of these schemes and others that follow with above-inflation increases (year-on-year Consumer Price Index inflation is currently 4.6 percent) are likely to be a painful jab, because salaries typically increase more in line with inflation, while pensions often increase at rates below inflation.
If this is your reality, your medical scheme contributions will reduce your disposable income next year.
Discovery Health Medical Scheme’s increases will range from 7.9 percent to 8.9 percent, according to Alexander Forbes Healthcare.
Momentum Health’s increases per option range from 7.9 percent to 9.9 percent.
Momentum Health’s average increase excludes a 12.5-percent decrease in contributions on the Ingwe option’s lowest income band, for what Momentum describes as “competitive reasons”.
Both schemes will now make use of telephonic doctor consultations. Momentum Health will offer all its members, across all options, free access to the Hello Doctor service from next year, while Discovery Health has introduced a new option, the Smart Plan, which will cover video call general practitioner (GP) consultations through a smartphone app and provide unlimited GP visits for a R50 co-payment. In both cases, the GPs must be in a GP network.
The contributions on Discovery’s new option will be lower than those on its Saver options and, according to Discovery, cheaper than competitors’ options with similar cover for hospitals and in-hospital specialists.
The hospital cover, is, however, limited to certain Mediclinic hospitals in major metropolitan areas. Specialist treatment in hospital will be covered at 200 percent of the Discovery Health rates and chronic medication benefits are for medicines on a formulary (list of approved medicines) from three pharmacy networks only.
Discovery Health has increased the thresholds on options with above-threshold benefits by 9.9 percent and has applied the same percentage increases to most of its benefit limits and co-payments as it has to contributions, Alexander Forbes notes.
Oncology benefits have, however, remained the same as this year, and Discovery notes in a publication to brokers that the current limits fully cover 99 percent of members.
Discovery will also apply for registration for its primary care plan as a low-cost benefit option in 2016. According to Alexander Forbes, the “contract fee” will increase by five percent to R209 a month (excluding VAT) for each employee, and dentistry and optometry benefits, which were an additional extra, will be included at no extra cost.
SCHEME MEMBERS ARE ‘BUYING DOWN’
Medical scheme members faced with above-inflation contribution increases are often said to be coping financially by moving to cheaper options with lesser benefits – this is known as “buying down”.
When the Council for Medical Schemes released its latest annual report for 2014/15, Dr Anton de Villiers, the general manager for research and monitoring at the council, said the Council for Medical Schemes had no evidence of buying down.
However, Barry Childs, the joint chief executive of Insight Actuaries and Consultants, says the report notes that last year medical schemes implemented average contribution increases of 9.5 percent on open schemes and 8.2 percent on restricted schemes, while average contributions for 2014 went up by 7.7 percent for open schemes and 7.4 percent for restricted schemes.
He says if members had stayed on the same options from 2013 to 2014, they would have paid 9.5 percent or 8.2 percent more in contributions, but the fact that the average contributions increased by lower amounts is evidence that members are buying down.
Childs says that since 2000, restricted schemes have had contribution increases that were between one and two percent lower than open schemes, because restricted schemes are exposed to much less anti-selection (anti-selection occurs when members join a scheme only when they need healthcare services). He says restricted schemes also have a better average age and pensioner ratios than open schemes.
If you want to reduce your contributions, you can consider giving up some freedom of choice on the hospitals, doctors and other healthcare providers you use.
Medical schemes now offer 42 options with what are known as “efficiency discounted options”. These options give you the choice of paying a discounted contribution if you use a network of healthcare providers, compared with your contribution for the same benefits but with the freedom to visit any healthcare provider you choose.
Andre Bellingan, an actuary at Insight Actuaries and Consultants, says in an article on Insight’s website that schemes calculate the discount on the savings they achieve from channelling members to networks.
He says schemes can analyse data about healthcare providers and form networks of providers that are cost-efficient, but this is technically challenging, because, to determine a provider’s cost-efficiency, a scheme must know how sick the patients are that the provider treats.
Bellingan says the efficiencies have mostly been generated by means of negotiated discounts with providers, and it is in providers’ interests to offer discounts, to increase business volumes.
Bellingan says that while the efficiency-discounted options may offer you some savings, they will not enable schemes to gain control over spiralling healthcare costs because of structural problems in the industry – for example, the fact that membership is not mandatory and many young, healthy people choose not to join a medical scheme.
He says the efficiency discounts also ignore the quality of healthcare being delivered and the poor coordination of care.
This may change as the industry matures in its implementation of these options, Bellingan says.
He says rather than simply competing on price, medical schemes may then start to compete based on the (quantifiable) quality of healthcare offered by their networks.
The Council for Medical Schemes’s annual report for 2014/15 notes that the council is attempting to monitor the medical expenses that you pay out of your own pocket, but says this is difficult because members do not submit all their claims to their medical schemes.
According to the report, the World Health Organisation is of the view that people who have health insurance should not collectively pay more than 15 percent of their healthcare expenses out of their own pocket.
The council says the most accurate information on out-of-pocket expenses is recorded on scheme options that have medical savings accounts and benefits that cover expenses once your savings account is exhausted – known as above-threshold benefits.
On these options, out-of-pocket medical expenses were, on average, R6 000 per beneficiary in 2014.
When you budget for medical scheme contributions for next year, you should therefore also anticipate some out-of-pocket expenditure, which may be higher or lower than the average, even if you enjoy relatively comprehensive cover.