Traditionally, medical aid schemes apply fee increases from January 1 each year. However, the past two years have seen new trends emerge due to the Covid-19 pandemic, says Lee Callakoppen, senior director of Bonitas Medical Fund.
These include postponing increases, dipping into reserves to reduce increases and announcing delayed increases above the CPI, he said.
“Globally people are feeling the financial pinch and South Africa is no different. High inflation has increased the cost of food, fuel and utilities.
“Wage increases, if any, are below CPI and many South Africans have lost their jobs. More than ever, everyone is looking for value for money and better benefits, especially when it comes to health care. »
Callakoppen said Bonitas had opted to use around 3.2% – or R600m – of the scheme’s reserves to help limit contribution increases below CPI for around 82% of its members for 2022.
Contribution increases would have been closer to pre-pandemic CPI +4% levels had we chosen not to use some of its reserves, he said.
However, he said other schemes were considering deferred payments or simply pass-through of costs, which would lead to a change in the traditional pricing of medical aids in South Africa.
Callakoppen said Bonitas’ decision to dip into its reserves in line with a 2021 Council on Medical Schemes (CMS) circular, which suggested that medical aids use reserves to protect members against rising costs.
However, despite the guidelines, several plans have chosen to postpone the January increases until later in the year. Those delayed increases range from 5.5 to 7.9 percent, Callakoppen said.
“In general, medical plans should keep their premium increases as close as the rate at which the cost of providing health care increases.
“The challenge is that most healthcare costs in South Africa are unregulated, meaning providers are free to charge as they see fit. And the consumer pays for it. One example is the cost of Covid-19 PCR testing, which was finally standardized earlier this year.
Callakoppen said the postponement of increases creates an anomaly for businesses, medical plan members and consumers.
“Traditionally, members are free to change their options once a year during an open period. However, when a delayed increase occurs, this open period does not always accompany it.
“This complicates things for companies that allow their staff to choose between different medical plans. If an employee chooses to remain in a plan offering a deferred increase, it is difficult, if not impossible, to switch to another plan.
“It’s compounded by the fact that when these deferred increases take place – they’re often above the CPI and don’t always include a benefit increase – members are effectively paying more for less.”
The downside of delayed raises
The past year has shown that the actual dues increases experienced by members, after the adjournment period, are generally above the industry average, Callakoppen said.
“An example is a plan that offered a contribution deferral for the first six months of 2021, but then applied a contribution increase of 5.9%, when the industry average was 4.6%. Percentage increases in dues cannot be looked at in isolation without considering the rand value of the dues.
“Based on our analysis, we believe that a postponement strategy is not ideal. It simply uses the plan’s reserves to provide short-term contribution relief to members who subsequently experience an above-market contribution increase.
The result is that members are worse off than the scheme which had applied a lower, market-related contribution increase since the start of the year, he said.
“Plans implementing contribution deferral are already delivering above-average contribution increases.”
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