Discounted options restrict your choice of hospital, but you pay lower contributions.

If you, as a medical scheme member, agree to use only certain healthcare providers – hospitals, in particular – you can get a discount of between 10 percent and 20 percent on your contributions. And schemes that have offered these discounts for some time have improved operating surpluses and reserves, which, ultimately, affect the contributions they charge.

The latest annual report of the Council for Medical Schemes shows that seven open schemes offer options with discounted contribution rates to members who use certain healthcare providers.

The seven schemes are CompCare, Discovery Health Medical Scheme, Fedhealth, Liberty Medical Scheme, Medihelp, Momentum Health Medical Scheme and Thebemed.

The council refers to “efficiency-discounted options”, although most schemes have not registered separate options but offer discounted rates within an option to members who agree to restrict their hospital cover to certain hospitals.

Schemes have been granted an exemption from the Medical Schemes Act to offer the discounted rates, because the Act requires that all members on a particular option must pay the same contributions.

The Council for Medical Schemes says the longer-running of the options with discounted contributions are having a positive effect on the operating results of the options in which they are offered.

Momentum Health. This was one of first schemes to obtain an exemption from the Medical Schemes Act to run sub-options with discounted contributions.

Momentum Health offers discounted contributions on its Extender, Incentive and Custom options. On each of these options, members can choose to use any hospital, a hospital within a network (a list of some 120 hospitals and day clinics) or a state hospital.

Members can also choose to use any doctor or pharmacy for treatment of a chronic condition, or a doctor within a network and one or two courier pharmacies for their chronic medication, or to use state facilities for chronic medication.

Members who use a network provider or state facilities do not face a co-payment.

Damian McHugh, sales and marketing director for Momentum Health, says members who choose a discounted option with state facilities as the provider could receive a discount of up to 35 percent on their contributions. Members who use the hospital network and a doctor and pharmacy network for chronic conditions are likely to receive a discount of 15 percent, he says.

The discounted sub-options, as well as the introduction of a programme that rewards members – with enhanced healthcare benefits – for exercising and going for preventative screenings, have had a significant positive impact on Momentum Health, McHugh says.

The scheme has achieved a solvency ratio above that required by law and implemented a relatively low contribution increase for next year, and its membership has, on average, one of the youngest age profiles among the top 10 open medical schemes.

The Council for Medical Schemes’s annual report says the discounted sub-options had a positive effect on the options in which they operated, despite making up only 26.1 percent of the membership of these options.

McHugh says if you join one of the discounted sub-options and choose to use state facilities for chronic medication (because you do not have a chronic condition and think you will not have to make use of a state facility), but you are diagnosed with a chronic condition during the year, you can upgrade to the sub-option that offers cover for chronic conditions at a network provider or at any provider, as long as you pay the difference in the contributions for the full year.

However, if you choose to use the hospital network, you cannot during the year change to an option where there is less of a restriction on the hospitals you are allowed to use.

Apart from allowing you to use the provider of your choosing, the sub-option without discounted contributions has more chronic medications on its formulary (list of approved medicines) than does the network option, McHugh says.

Discovery Health Medical Scheme has six options with discounted contributions: the Delta sub-options of the Classic Comprehensive, Essential Comprehensive, Classic Saver, Essential Saver, Classic Core and Essential Core options.

Alain Peddle, Discovery Health’s head of research and development, says the contribution discounts for members who choose to use a hospital network are 10 percent on the Comprehensive options and 20 percent on the Saver and Core options.

From next year, members of the Delta sub-options will have to use the scheme’s courier pharmacy for their chronic medication. This will not result in members receiving a further discount on their contributions, because only a few users of chronic medicine belong to these sub-options, although the number is expected to increase, Peddle says.

Last year, membership of the Delta sub-options grew 24 percent, he says.

The Council for Medical Schemes’s annual report says the Delta sub-options contributed 32.4 percent to the total surplus made by the Classic Comprehensive, Classic Saver and Essential Comprehensive options, despite the fact that members on these sub-options make up only 11.6 percent of the membership of all the options.

Peddle says the discounted Delta options are attracting more new members and members who are buying up from options that offer fewer benefits than members who are moving down from more expensive options. This trend should benefit the options in which the Delta sub-options are housed, particularly Classic Comprehensive, which has been running at a loss for many years, because it has a high proportion of unhealthy members.

Fedhealth’s discounted option, Maxima Standard Net, is registered as a separate option rather than as a sub-option. It mirrors the Maxima Standard option, but, in return for agreeing to use one of 31 private hospitals, members receive a discount of 10 percent on their contributions.

Phil Hemus, Fedhealth’s chairman, says that Maxima Standard Net has been in operation for three years. However, it is too early to say if its operating surplus – which, expressed as a percentage of risk contributions, was almost three times that of the non-network option at the end of last year – will be sustainable, because the member numbers are still too small. The option has only about 1 220 beneficiaries, while the Maxima Standard option has more than 69 000.

Medihelp offers discounted contributions of between eight and 10 percent on its Dimension Prime 1, 2 and 3 options. These options offer a discount of about 10 percent on the Dimension Prime options and restrict members to using a private hospital network.

The options have been operating for only about eight months, and the uptake has been “satisfactory”, Anton Rijnen, Medihelp’s chief executive officer, says.

Medihelp has used actuarial models to assist it in identifying hospitals based on their efficiency. This has achieved savings without compromising on the quality of care, he says.

Many schemes, including those listed here, also offer a low-cost option that restricts members to using a network of hospitals and that provides most other benefits through a primary healthcare network.

HOW DO YOU KNOW IF A NETWORK IS GOOD?

Medical scheme members will struggle to identify a good network, because it is up to schemes to do a proper due diligence on a network, Reinder Nauta, founder of the CareCross doctor network, says. His views are echoed by Discovery Health’s Alain Peddle and Fedhealth’s Phil Hemus.

Peddle says medical schemes should ensure that the healthcare providers in their networks are of a high quality, are accessible to their members and will result in the scheme saving money.

Nauta says you should have confidence in a network that has been established for many years and has doctors who are willing to comply with the requirement that they adhere to a formulary (list of medicines) and refer patients to specialists.

Some networks subject doctors to a performance review that takes into account the type of patients the doctor sees. Some reimburse doctors in line with performance criteria.

However, other networks have payment arrangements with no requirements on how doctors interact with members.

Nauta and Hemus say having enough doctors in areas where members live or work is more important than the total number of doctors in a network.

A good network should be able to detect and discipline doctors who, for example, send members for unnecessary tests, Nauta says.