It doesn’t take a crystal ball to understand that the past two years have been tough for consumers and businesses and that in many sectors, the shockwaves of the COVID-19 pandemic are going to rattle the market for years to come. The medical aid industry as a whole has done well to weather the COVID-19 storm, reinventing itself with new offerings for the consumer. Therefore, it is an industry imperative to continue to innovate in the coming years to provide members with a service that consistently takes ever-changing technology, that will improve overall member experience, into account.  Additionally, every effort needs to be made to simplify administration to accommodate and better serve its members and service providers. Based on recent history, it is reasonably safe to assume that if the medical aid industry does not continue to shift and adapt once more, additional medical schemes may no longer exist in the future.

Price deferments

During the pandemic, the demand for elective procedures and other routine ongoing healthcare services declined which led to an overall drop in healthcare utilisation and resulted in medical scheme cost-saving. The impact of the reduction in claims experienced during COVID-19 coupled with a low-inflation environment has allowed most South African medical schemes to defer their annual contribution increases for the past 24 months.  This, in response to ever-increasing financial pressure on consumers, and the desire to maintain affordability for struggling members.

 However, now that we seem to have gotten through the worst of the COVID-19 pandemic, there has been a growing demand for healthcare services and routine healthcare is now back to pre-COVID levels and in some cases, has even increased.  Despite this, rather than getting back on track, many schemes have yet again delayed their 2022 increases. This is causing murkiness in the water for medical aid members as it is next to impossible for them to make informed decisions regarding their health care.

If members decide to remain with their current medical aid provider, they have no idea how costs will escalate next year. South Africans are tightening their belts and medical aid (and gap cover) are often areas where cash-strapped families look for savings. But even if members downgrade their plans, they have no idea if this will bring them any form of financial relief as they simply do not know how much their health care package will cost when the percentage increases are revealed.

A changing environment

The fact that medical schemes will eventually have to push up their prices is beyond doubt. During COVID-19, medical aids were challenged to look differently at service provision, which introduced the move toward Virtual Care. Schemes set up help lines and call centres with agents specifically trained to deal with COVID queries, virtual consultations to minimise face-to-face interaction were launched, as well as e-scripts, which were emailed to members with medications being delivered rather than collected.

The financial impact on each Medical Aid depended on its demographic profile and how it managed cross-subsidisation within benefit options. Schemes that were already financially constrained pre-pandemic came under mounting pressure with interventions needed to either amalgamate with other schemes or liquidate. As a result, the following ownership changes occurred in the sector:

• Metropolitan amalgamated with Momentum – Circular 14 of 2020
• GEMAS amalgamated with Bestmed – Circular 43 of 2020
• Sizwe amalgamated with Hosmed – Circular 61 of 2021
• Bonitas amalgamated with Medgroup – Circular 65 of 2021
• Healthsquare submitted voluntarily liquidation in August 2022

Health care renewal period

As healthcare services normalise, the period of grace and annual price deferments for members is inevitably drawing to a close. Medical schemes have to recover their costs and claw back the normal annual increases.

Traditionally, October is the time of year that members are notified about contribution increases and benefit changes. Some companies – such as Medihelp – have braved the market conditions and announced their annual increases. In 2021, this medical scheme introduced an average weighted increase of 0.45% for 2022, but in 2023, its members will be paying an average weighted increase of 7,5% more on their contributions. While this may seem like a substantial jump, it is in line with the rest of the industry and still below the traditional increase of up to 10% or more which was the norm pre-COVID.

The transparency demonstrated by Medihelp is commendable. Where the problem comes in is that instead of taking advantage of the regular healthcare renewal period, some of the larger companies have once again deferred their annual increases.

Council of Medical Schemes

In a circular published in July this year (Circular 44 of 2022: Guidance on benefit changes and contribution increases for 2023), the Council of Medical Schemes (CMS) recommended that contribution increases for the 2023 benefit year should not exceed 5.7%, “in line with the 2023 consumer price inflation (CPI) forecast of the South African Reserve Bank,” but that “due to unique industry specific cost-push factors… some schemes may require contribution increases above inflation.”

The CMS circular, however, notes that “…. Medical scheme contribution increase rates have consistently surpassed the CPI, except in 2021… (which was) the first time in over a decade that the industry implemented contribution increases below CPI.”

Conclusion

Exceeding the CMS increase guidelines is nothing new and typically medical schemes issue price increases that are around 4% higher. So, if the larger companies follow the pre-COVID trend, their annual contributions may be pegged around the 10% mark and only time will tell how members will respond to this.

Globally, people are feeling the financial pinch and South Africa is no different. High inflation has increased the cost of food, fuel and utilities. Salary 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 and as a grudge purchase, healthcare may just be in the firing line, especially when members can only guess what they may be paying for their healthcare for the foreseeable future.