Good news for medical scheme members: new price hikes should be much lower
- The Council for Medical Schemes wants medical aids to freeze their price hikes for next year - or keep it in line with inflation, which is currently around 4%.
- Last year, prices were hiked by an average of more than 8%.
- In the end, the average hike will probably fall somewhere in the middle, one expert predicts.
- For more articles, go to www.BusinessInsider.co.za.
Medical schemes are expected to announce their fee hikes for 2021 in the next few weeks, with the Council for Medical Schemes (CMS) urging them to freeze prices for next year – or at least to limit hikes to 3.9%, around the current inflation rate.
Last year, SA's biggest medical scheme Discovery hiked its contributions by an average of 9.5%, while Bonitas increased its prices by 9.9%. Momentum's price hike was around 8.2%.
The CMS warned that the long-term economic consequences of the Covid-19 global pandemic are likely to be dire, and that medical schemes may see “a significant drop in membership, as households grapple with shrinking household budgets or total loss of income”.
To “insulate members facing financial hardship”, the CMS recommends that medical schemes that are in a strong financial position, must consider freezing contribution increases for 2021.
“In cases where schemes are unable to freeze their contribution increase for 2021, CMS recommends that schemes should limit their increases to 3.9% in line with CPI.”
Only medical schemes that were already in financial distress before Covid-19 may require increases higher than the recommended 3.9%, the CMS says. “Such schemes must provide the CMS with a detailed motivation for such increase,” the council said in a recent circular.
Medical schemes must submit their fee hike plans to the CMS from this month.
While they had to pay for Covid-19 treatments, the schemes are expected to have enjoyed lower claims during lockdown as South Africans stayed away from hospitals and doctors for fear of getting infected. Discovery reported last week that 51% fewer mammograms were performed during April to July, compared to 2019. In the same period, there was fall of 51% in the number of members who registered for depression.
“Since the outbreak of the pandemic locally, schemes have built up surpluses due to lower claims as elective procedures were deferred to make way for Covid-19 related hospitalisation," says Phoenix Financial Services Group (PFSG) CEO Clayton Samsodien. "The alcohol ban which was in place also benefited schemes in terms of lower emergency and trauma-related claims. As a result, the lower than expected claims could help alleviate annual increases bringing much- needed relief to consumers."
But despite the CMS’s recommendation, it is a very unlikely that prices will be frozen or hiked in line with inflation, Samsodien says. He thinks consumers can expect an average medical scheme rate increase of around five to six percent for next year.
The CMS expressed concern about the fact that medical scheme contribution hikes have been consistently above inflation in recent years. Last year’s average increase of 8.2%, was double the average CPI of 4.1%.
“CMS remains concerned about this trend, as this places an undue financial burden on members of medical schemes and further serves as a barrier to entry for potential new members. The high increase differential between medical scheme contributions increase rate and CPI, poses a serious affordability challenge for members, especially in the current and post Covid-19 economy, where annual salary adjustment are unlikely to keep pace with medical schemes contribution increases," the council said.
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