Traditionally, medical aid schemes carry out reimbursement increases every year from 1 January. However, the last two years have seen new trends due to the Covid-19 pandemic, says Lee Callakoppen, chief officer of Bonitas Medical Fund.
These include proposing increases, diving into reserves to reduce increases, and announcing delayed increases above CPI, he said.
“People around the world are feeling the pinch financially and South Africa is no different. High inflation has increased the cost of food, fuel and utilities.
“Salon increases, if any, are below the 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 has chosen to use about 3.2% – or R600 million – of the scheme’s reserves to limit contribution increases to below the CPI for about 82% of its members by 2022.
Contribution increases would have been closer to pre-pandemic levels of CPI + 4% if we had chosen not to use some of their reserves, he said.
However he acknowledged that their numbers were not enough to defeat Obama’s plan.
Callakoppen said Bonitas’ decision to dive into its reserves was in line with a 2021 Council of Medical Schemes (CMS) circular, which suggested that medical aids use reserves to reduce members at increasing costs.
Despite the guidelines, however, several schemes have chosen to postpone increases from January to later in the year. These proposed increases range from 5.5 to 7.9%, Callakoppen said.
“In general, medical regulations should keep their contribution increases so close to the rate at which the cost of providing health care escalates.
“The challenge is that most healthcare costs in South Africa are not regulated, which means providers are free to charge if they feel comfortable. And the consumer bears the brunt. An example is the cost of Covid-19 PCR tests,” which were finally standardized earlier this year.
Callakoppen said the proposed increase creates an anomaly for businesses, members of medical schemes and consumers.
“Traditionally, members are free to change their options once a year in an open period. However, if there is a delayed increase, this open period does not always come with it.
“This complicates matters for companies that let their staff choose between different medical arrangements. If an employee chooses to stick to a scheme that offers a deferred increase, it is difficult and sometimes impossible to switch to another plan.
“This is reinforced by the fact that when these proposed increases occur – they are often above the CPI and do not always include an increase in benefits – so members effectively pay more for less.”
The disadvantage of delayed increases
The past year has shown that the actual contribution increase experienced by members, after the proposal period, is typically higher than the industry average, Callakoppen said.
An example is a scheme that offers a contribution proposal for the first six months of 2021, but then applies a contribution increase of 5.9%, when the sector average was 4.6%. The percentages for contribution increase cannot be in isolation without looking at the marginal value of the contribution. “
“Based on our analysis, we feel that a procrastination strategy is not ideal. It only uses scheme reserves to provide short-term contribution provision to members who subsequently experience an above market-related contribution increase.
This results in members becoming less off compared to the scheme that applies a lower, market-related contribution increase from the beginning of the year, he said.
“Schemes that implement a contribution proposal already apply above market average contribution increases.”
How prices for medical care are changing in South Africa
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