Covid-19 gives medical scheme members a fees reprieve
Members of some of the country’s biggest medical schemes will see limited increases in their 2021 premiums. A number of schemes have published their pricing plans for next year, which are in line with the guidance from the Council of Medical Schemes (CMS) to cap increases where possible.
On July 23, the CMS said that where schemes are unable to freeze their contribution increases for 2021, they should limit them to 3.9% in line with the Consumer Price Index (CPI), and the increase in hospital fees and therapeutic appliances should also be limited to 3.9%.
The council noted: “Covid-19 has disrupted global supply chains and almost ground international trade to a halt. Despite countries easing lockdown restrictions, global economic recovery is mired by uncertainty, as the worldwide rate of infections continues to surge. Accordingly, the economic cost of the pandemic on the global output will remain bleak and uncertain.”
The CMS said 80% of people who are infected with Covid-19 will not have significant symptoms that require expensive inpatient treatment. But “… 10% to 15% of people under the age of 50 who are infected with Covid-19 are likely to have moderate to severe infections. Some of these cases will require intensive care, whilst older adults are particularly at a significant risk of severe infections, with around 10% of Covid-19 cases in this segment of the population requiring intensive care unit admissions and 95% of deaths have occurred in those older than 60 years ...”
The adverse impact of the pandemic on the sector depends on each scheme’s demographic risk profile, the size of the population covered and the extent of existing cross-subsidies within the benefit options or schemes, it said. “The CMS believes that medical schemes with high accumulated reserves should be well insulated against this shock, while schemes that are already in a weak financial position, may potentially require other interventions including closure of non-performing benefit options or looking for potential amalgamation partners.”
With elective surgeries and other non-urgent medical services postponed for large parts of the year, overall consumption of related medical services decreased, which can potentially reduce total healthcare costs by up to 4% in 2020, but this could also lead to large cost increases due to the deferral of services by patients unless their medical condition become critical.
Affordability for members is a particular concern, where annual salary adjustments are unlikely to keep pace with contribution increases and unemployment pushing members to downgrade or opt out of schemes.
How the sector responded
Discovery Health Medical Scheme (DHMS), South Africa’s biggest scheme by membership, is the only scheme to announce it had instituted a premium freeze, albeit only until the middle of 2021, by which time a Covid-19 vaccine is expected to be available. It announced that, “With the total cost of healthcare expected to rise by mid-2021, contributions will be reviewed in July 2021 and the current estimated increase may be no higher than 5.9%. DHMS members can look forward to updated network benefits, out-patient mental well-being cover, access to fertility therapies, Shariah-compliant plan options, and new clinics and other services for employers.”
Both Bonitas and Momentum have announced price increases below the industry standard. Momentum will be increasing prices on average by 3.9% for 2021.
Bonitas has frozen fees on one plan, BonFit Select; the rest will be increased by between 4% and 7%. The group has also introduced two new plans for 2021, targeting active urbanites and singles.
Fedhealth has announced that the average member increase for the scheme across all options will be 8.8% for 2021, which principal officer Jeremy Yatt defended, saying: “We also don’t want to take some of our members’ medical savings account away to fund risk benefits, which some providers do, hoping that the members don’t notice. In general, we know that if a medical aid is reckless with premium increases, these mistakes are very difficult to fix in future.”
The Government Employees Medical Scheme, South Africa’s largest closed scheme, says it has yet to finalise its increases for 2021.
Lee Callakoppen, the principal officer of Bonitas Medical Fund, has cautioned against comparing percentage increases in isolation, “without taking a holistic view of the situation”.
“What is of concern is the emphasis placed on the increases announced by all medical schemes without analysis of what these increases include. Comparing the average percentage increase in isolation for a scheme in a particular year is not an indicator of the value for money provided by a scheme, since it does not take into account the basis on which the increase applies.”
John Cranke, a financial adviser at PSG Wealth Employee Benefits in the Midlands, notes the limited increases are a win for consumers – they are the lowest the industry has seen for some time. “In the past, medical schemes have generally passed annual increases in the inflation plus 3% to 5% range, which would have meant total increases in the 6% to 8% range. However, increases for 2021 have generally been in the 4% to 6% range (with several schemes surprisingly announcing increases of even lower than 4%).”
He says demographic and utilisation factors will always prevail to ensure schemes can ensure financial sustainability, which is why some schemes have been forced to increase at higher rates.
Lower demand for surgeries and fewer trauma cases during the Covid-19 crisis have meant claims have been substantially lower, but since Covid-19 was added to the prescribed minimum benefits in May, schemes were obliged to cover testing and treatment from risk, as opposed to day-to-day, benefits, which added to their costs.
“Medical schemes with younger age profiles or those in a robust financial position will in all likelihood be those with the lower increases for 2021, while the opposite will hold true for schemes with older member profiles or poorer financial positions,” Cranke says.