Rising global inflation and interest rates may affect consumer medical aid decision-making

Lower cost options are in the pipeline for medical aid.

Lower cost options are in the pipeline for medical aid.

Published Feb 16, 2023


Dr Sipho Kabane, CEO of the Council for Medical Schemes (CMS) – the registrar and regulator of local medical schemes – said in an interview that South African companies may also be inclined to employ less people since medical aid membership was highly correlated with employment, which will further impact industry numbers.

“Consumer inflation has also added strain to household budgets, and like other sectors, it comes to the fore that the medical schemes will also be at the mercy of healthcare supply chains. Prices of healthcare products and medical services, for example, have increased significantly, necessitating medical schemes to review their benefit offerings. In this context, the CMS had cautioned medical schemes from increasing contributions above CPI,” Kabane said.

He said that medical schemes operated similarly to mutual benefit societies in a sense that the more people took up membership, the more funds were available to cover and cross-subsidise members’ health needs. He added, however, that affordability and the high levels of unemployment remained barriers to entry.

“Internal unaudited data depicts growth in the industry despite market and economic pressures, which is likely to see covered lives exceeding the 9 million beneficiary mark in the near future,” he said.

The registrar said the young’s participation in the economy could play a significant role in local medical schemes realising growth potential. “In South Africa, the average age per beneficiary was 34 years, based on the 2021 schemes’ data. Marketing expenditure in the sector continues to grow, however, this is not always aligned to the growth in the sector, thus indicating a need to demonstrate value.”

Last year, the CMS said that it ensured that the 72 medical schemes operated in a well-regulated and healthy environment. It said solvency levels were above the 45% level, which was higher than the prescribed 25% level, indicating a financially sound sector. “Some of the preliminary data is indicative of a very high claims ratio experienced by schemes, exceeding the 90% mark, especially in the later part of 2022,” it said.

It added that the regulator had altogether approved 307 medical schemes’ benefit options for the 2023 benefit year, ensuring that access to healthcare was conducted in a fair and principled manner.

“Whilst the medical schemes sector generated just over R226 billion in 2021, this was expected to be higher for the year ended December 2022. Also, there were instances during 2022 where the regulator’s hand was forced to act; to put some medical schemes under curatorship due to flouting of corporate governance principles.”

Kabane said that interestingly, last year, the CMS conducted a study to understand medical schemes’ benefit enrichment from the medical scheme member perspective. “One of the study’s key findings was that 44.8%, indicated that they had run out of their day-to-day benefits in the preceding 12 months. The study recommended that the benefit’s design and product development process focuses on member needs.”

He said that on the downturn, the CMS research outcomes on the funding benefits of medical schemes posed a concern. Finalised in 2022, the research study quantified an amount of R470.2 million for the period 2015-2020.

The research revealed a consistently higher degree of non-compliance with regulations where medical schemes continued to fund Prescribed Minimum Benefits (PMBs) from members’ personal savings accounts. This was said to be in contravention of the Medical Schemes Act.

“The CMS engaged with the affected schemes to address the issue and put corrective measures in place to ensure compliance with the Act and that members interests are protected,” Kabane said.

Kabane added that, this year, they expected to finalise the Low-Cost Benefit Option guidelines and recommendations, including the Designated Services Providers Guideline for consideration by the Minister of Health, Joe Phaahla.

The CMS said it was currently analysing and consolidating stakeholder and public comments received on the low-cost option’s advisory committee’s proposed guideline, risk and implementation plan. It said focus would also be placed on key strategic projects, such as the PMB Review, strengthening governance failures in the industry while ensuring compliance to the Act.

The South African Customer Satisfaction Index (SA-csi) for Medical Schemes 2022, conducted by Consulta, which provides scientific insight into the overall satisfaction of members of South Africa’s largest open medical scheme providers (by membership numbers) including Bestmed, Bonitas, Discovery and Medihelp, as well as closed schemes – GEMS – found that South African medical schemes were starting to bounce back when it comes to measuring the gap between what customers expect and what they perceive to receive in return for their premium and loyalty after losing ground during the past three Covid-19 years.