When it comes to medical aid, affordability is usually the biggest consideration. However, monthly premiums should be weighed and balanced against the actual benefits and healthcare coverage being offered in order to make an informed decision.
The biggest question around medical aid costs is why healthcare inflation is rising at such an alarming rate and how schemes deal with this. ‘Currently, medical inflation is outpacing general economic inflation by between 3 and 4%,’ says Gerhard van Emmenis, Principal Officer of Bonitas Medical Fund. ‘And while the jury’s still out in the form of the Health Market Inquiry into the private healthcare sector, fingers are being pointed at all role players from private hospitals and specialists to medical schemes. However, you need to remember that the former are all about the bottom line, while medical schemes are not-for-profit.’
Consumers, unable to make Rands or sense of the many plans available and what they’re actually offering, are often tempted to migrate to what is perceived as a more affordable plan, but with less coverage.
‘Comparing the average percentage increase in isolation is not an indicator of the value of the healthcare being provided,’ says Van Emmenis ‘We urge consumers to compare monthly contributions with the benefits to ensure they are getting the cover they need.’
He maintains that simply comparing the average percentage increase announced by the various schemes is not a litmus test for value for money, since it does not take into account the basis on which the increase applies.
Here is a simple maths example: Two schemes offer the same benefits however, Scheme A costs R1 000 pm while Scheme B costs R1 100pm. If Scheme A announces a 10% increase
(R1 100pm) and Scheme B announces a 7% increase (R1 177) but neither change or increase the benefits, then Scheme A is still providing the same benefits, at a lower cost, even though it announced a higher contribution increase. ‘That’s why it’s important to compare the actual benefits and contributions rather than only looking at the percentage increase,’ says Van Emmenis.
This is where a Broker can be invaluable. While consumers are becoming more savvy and educated on the inner workings of the medical scheme industry there is confusion. Brokers assist consumers by making informed recommendations that take into account their specific needs. They also play a vital role in education around the offerings, how to maximise your benefits, how to benefit from Managed Care, both financially and in terms of quality of life, various healthcare terminology and assisting members with claims.
Van Emmenis explains that schemes with a growing membership base will require additional loadings in the monthly contributions to increase the reserves in order to meet the statutory solvency requirement of 25%. ‘This is a legislative requirement and does not imply the scheme is performing poorly – in fact the opposite is true in this context,’ he says.
According to data released by the Council for Medical Schemes (CMS), the market has not been successful in attracting young, healthy people who are less prone to chronic health conditions like diabetes or hypertension: Lifestyle diseases that adversely effect of the pool of contributions.
The increasing age of beneficiaries is also a huge concern. The CMS reported that the industry average beneficiary age increased from 31.9 years in 2013 to 32.5 years in 2016. The pensioner ratio increased slightly to 7.9%, with a general rise in the ratio for both males and females.
Schemes with an ageing membership base generally experience increased claims costs, in excess of inflation, due to the higher use of benefits. ‘We have seen around a 2% increase in claims by members annually as they age,’ says Van Emmenis.
‘In addition, all chronic conditions, except Type 1 Diabetes, have shown an upswing, ‘says Van Emmenis. ‘These conditions are PMBs that need to be paid in full by all schemes. So, although the regulation is well intended, it is without doubt one of the factors driving up the cost of healthcare. At the same time, there have been particularly steep increases in the cost of specialists and hospitals, which together account for more than 61% of total claims paid.’
Runaway healthcare costs are difficult to contain because of a myriad of contributing factors. Most rooted deeply in a complex health system where much of what happens is beyond the influence of the schemes.
Take for example the over-regulation in the form of exclusion from collective bargaining by the Competition Commission. This leaves schemes with no option but to negotiate individually with service providers, blocking the development of a more efficient and cost-effective healthcare sector.
Open enrolment also impacts costs as schemes have to accept anyone who wishes to join, regardless of their health status, which does maximum damage to risk equalisation.
So what is the best approach for medical schemes going forward? Van Emmenis says that schemes need to continue to explore and implement cost containment strategies and offer value for money to members. ‘Access to quality healthcare remains a concern and priority for the majority of South Africans. Our mandate has always been to provide quality healthcare at affordable prices and this will continue.’