Medical aid plan hikes return

PERSONAL FINANCES


During the Covid-19 pandemic, medical plans saw a drop in claims as members postponed elective procedures or were reluctant to seek medical treatment for non-Covid health issues.

This meant that medical plans were running surpluses, with the value of claims being less than premium income.

Many plans have used these surpluses to defer premium increases, implement increases below inflation, and increase member benefits.

“The reduction in claims experienced during the Covid-19 pandemic, alongside a desire to maintain affordability for members in a low inflation environment, has seen many plans postpone their increases from 2022, the largest open medical plan – Discovery – originally postponing its increase from January to May 2022, then again until October,” says Jill Larkan, head of healthcare consulting at financial advisory firm GTC.

According to Discovery Health, “the scheme’s excess solvency has been used to benefit members, with R6.8 billion realized in contribution savings in 2020 and 2021 from deferred increases.

“It also increased effective annual dues 50 basis points below market in those two years.”

Bonitas Medical Scheme says that by implementing small contribution increases since December 2020, the scheme has effectively returned R1.4 billion in savings to members.

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According to the Council for Medical Schemes, the increases announced last year were the first time in more than a decade that the industry had implemented contributions below the official consumer price index (CPI).

In previous years, medical plan premium increases have typically exceeded the CPI by about 4%, and Larkan says that with a “return to normal,” many plans have announced increases above the inflation.

The good news is that plans that had postponed their increases until April or October this year have again announced a postponement of increases until next April, putting some pressure on members’ pockets.

However, Larkan says this will likely be the last time the programs will be postponed and normal January increases will return in 2024.

COST PUSH FACTORS

One of the reasons for the return to normal was the increase in complaints.

Medical inflation continues to rise, and we expect it to be on a larger scale in 2023,” says Damian McHugh, executive at Momentum Health Solutions, adding that the program has noticed an upward trend in terms of events. hospitable.

“On top of that, we’ve seen the costs of these treatments rise, mostly in line with medical inflation, which is 3% to 4% above the CPI.”

According to the Discovery Medical Scheme, hospital admissions have almost entirely returned to pre-Covid-19 levels. “While Covid-19 hospital admissions have declined with the rollout of vaccinations and less severe Covid-19 waves, non-Covid-19 hospital admissions (including elective surgeries) returned to the levels seen in 2019,” said Deon Kotze, head of research and development at Discovery Health.

Leo Dlamini, Senior Director of Bestmed Medical Scheme, said he saw a significant increase in the value of members’ claims in the second half of the year, particularly with regard to hospitalizations.

After investigation, we determined that it is not necessarily because more members are being admitted to the hospital, but that the average cost per admission has increased significantly.

Dlamini says these higher claims have affected the plan’s claims ratio, leading to higher premium increases for next year.

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Age plays an important role in the claims experience of a scheme. Dlamini says that for each year that the average age of plan members increases, a member’s claims increase by about 1.5% to 3%.

This means that if the average age of plan beneficiaries increases by just one year, for example from an average age of 37 to 38, claims could increase by around 3%. Add to that rising medical costs and an aging plan could soon find itself in financial trouble.

This was the experience of Health Squared, recently placed under curatorship. The Council for Medical Schemes identified its high proportion of older members as the reason for its financial difficulties. Its retiree ratio was 25.9%, significantly higher than last year’s open plan industry average of 11%.

This has the effect of leading to higher hospital admission rates and higher costs when people are admitted.

Many plans reportedly registered Health Squared members, which impacted the plan’s average age.

Dlamini says, for example, that the average age of members who applied to Health Squared’s BestMed was around 60.

Plans that can attract younger members are able to contain their premium increases.

Bonitas announced that it had increased its membership by 190,000, with the average age of new members being about 15 years younger than current members.

ANNOUNCED INCREASES

While Discovery confirmed a 7.9% increase this month, it announced it would delay its 2023 increase until April.

The scheme has not officially announced its increase for next year, which it says “will be in line with medical inflation, which is typically 3% to 4% above the CPI, although members will experience a real annual increase between CPI and CPI + 2%, taking into account the carry-over”.

Depending on the rate of inflation next year, members could see a double-digit increase in April.

Momentum Medical Scheme announced an effective annual premium increase of 6.4% in the market, with no reduction in benefits. The deferred increase takes effect on April 1.

Medshield announced a 6.7% increase from January, as did Fedhealth, which will increase its average rate by 8.8%.

Bonitas Medical Fund has introduced a three-month price freeze on membership fees, which means the increases will only come into effect from April 1. This increase will average 5.9% across all plans, but, with the deferral, it averages 4.8%, with a 0% increase on Bonstart, its entry-level offer for young bachelors.