Medical aid contribution increases: The deferred increase debate
Times are tough and South Africans are feeling the financial pinch of increased costs on food, fuel and utilities.
Everyone is consolidating household expenses, looking for ways to save and get value for money, healthcare is no different.
Traditionally, medical aid schemes increase fees from 1 January every year. However, the last two years have seen new trends emerge directly because of the Covid-19 pandemic.
These include deferral of increases and dipping into reserves to reduce increases. What does this mean for consumers?
The balancing act
Lee Callakoppen, Principal Officer of Bonitas Medical Fund says it’s a delicate balancing act to maintaining the sustainability of a Scheme, while ensuring members have access to affordable, quality healthcare.
“For 2022, we opted to utilise around 3.2% (R600 million) of the Scheme’s reserves to limit contribution increases to below CPI for around 82% of our members.”
“Otherwise, the increases would have been closer to pre-pandemic levels of CPI+ 4%.”
“We were the only Scheme to announce a 0% increase on Bonfit for 2021 as well as announcing an industry first by reducing the BonStart premium by 7,9% for 2022.”
Deferred increases vs using reserves
The Council of Medical Schemes (CMS) recommended the use of reserves to cushion members against increasing costs.
However, despite these guidelines, several schemes opted to defer increases from January to later in the year.
These deferred increases range from 5.5 to 7.9% which are above CPI.
Is there freedom to change schemes with deferment?
Deferment creates an anomaly for companies, medical scheme members and consumers.
“Members are free to change their options, once a year, during an open period. However, when there is a deferred increase, this open period does not always correspond to it.”
“This complicates matters especially for companies which allow their staff to choose between various medical schemes.”
“If an employee chooses not to stay with a scheme offering a deferred increase, it is difficult and sometimes impossible, to switch to another plan.”
“This is exacerbated by the fact that the increase is often above CPI and don’t always include an increase in benefits – so members effectively pay more for fewer benefits.”
Know what you are getting
“By announcing our contribution increases in September, for the following year, members know what they would be paying from the outset and can plan accordingly. In addition, they can adjust their benefits to align with their healthcare needs and budgets. With the scenario of deferred increases, our advice is for companies to consider a later open period to allow employees to change schemes or options to benefit already cash-strapped employees.”
The downside of deferred increases
The past year has shown that the actual contribution increases after the deferment period, are typically higher than the industry average.
In addition, increase percentages cannot be viewed in isolation without looking at the Rand value of the contribution.
“Based on our analysis, we feel that a deferment strategy is not ideal. It provides short-term relief to members who subsequently experience an above market related contribution increase.”
“This results in members being worse off compared to the scheme that applied a lower, market related contribution increase from the beginning of the year.”
“However, no matter whether a scheme has chosen to increase contributions or defer them, South Africans need to make sure they get the healthcare cover they need.”
“It’s important to interrogate what is covered, the value-added benefits offered and your family’s healthcare needs before finalising your decision.”
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