Medical aids are not-for-profit: Discovery Health

CEO of Discovery Health says that customers have a right to question the medical aid scheme’s new tariffs for 2017.

Discovery Health Medical Scheme has announced its new premiums for 2017, which are set to increase between 7.8% and 14.9%.

The average premium increase across Discovery Health Medical Scheme’s plans are 10.2% – significantly higher than last year’s 8.6%, and even higher than the forecast CPI of 6.8%

The increases for individual Discovery Health Medical Scheme plans are as follows:

• Executive and Comprehensive: 11.9%
• Coastal Core: 14.9%
• Coastal Saver: 7.8%
• All other plans: 9.9%
• Medical premiums increase to pay for higher claims

Dr Jonathan Broomberg, CEO of Discovery Health, noted in an opinion piece that the recent announcements of above-inflation medical scheme increases have generated significant media coverage and member concern.

“Questioning above-inflation premium increases is understandable,” he said.

“The truth is that premium increases are driven by rapidly increasing claims, including both more claims and higher-cost claims. Unfortunately, medical inflation exceeding consumer price inflation is a global phenomenon, and many developed and emerging economies are experiencing even higher medical inflation rates than is the case in South Africa,” Broomberg said.

Medical aids are not-for- profit

In order to understand why medical scheme premiums increase at a higher rate than Consumer Price Inflation (CPI), Broomberg said it is critical, firstly, to understand the structure and functioning of medical schemes in South Africa.

“Medical schemes do not operate like regular insurers. By law, South African medical schemes are non-profit trusts, owned by their members. Every year, schemes carefully set their premium increases as low as possible to ensure sufficient income to meet claims costs submitted by members, as well as operating expenses,” the chief executive said.

He said that in order to understand what drives medical scheme premium inflation, it’s important to look at trends in medical scheme claims.

Since 2008, CPI has increased by 6.3% a year on average, while Discovery Health Medical Scheme claims increased by 11.4% a year. That means member claims are 5% higher than inflation every year. This explains why premiums increase by at least CPI + 3-4% annually, Broomberg said.

Members claims rising

According to Discovery Health, its own data shows several factors are driving the increases in the volume of services being claimed each year, including:

• an ageing medical scheme membership (for each year a scheme membership ages, claims increase by 2-3%);
• increased chronic disease prevalence (20% of DHMS members suffer from chronic diseases, and claim four times more than healthy members);
• and a growing trend of people staying off medical schemes until they are ill or planning a family.

“This means that the scheme has more older, sicker members and fewer younger, healthier members, thus increasing claims cost per member,” Broomberg said.

“These challenges are aggravated by a rapidly expanded supply of private hospital beds – 23 private hospitals opened since 2008. While this has improved access to healthcare, it has led to increased hospital admissions, further driving up total medical scheme claims,” he said.

Another major factor driving costs is the increasing pace of technology innovation, with large numbers of new, advanced medicines and procedures being launched every year, at much higher costs than the technology they are replacing, the chief executive said.

Two final factors are claims fraud and waste, Broomberg stated. This occurs, for example, when patients are admitted to hospital to avoid paying out of pocket for investigations, or when blood tests or expensive scans are repeated because the results aren’t shared between doctors.

Technology can help: Discovery Health

Health, for example, now has a fully electronic patient record – HealthID- to house clinical history, and is working with doctors, hospitals and the pharmaceutical industry to reduce claims costs while improving quality of care, Discovery Health said.

Tariffs and administration costs do not drive premium increases

Discovery Health said that tariffs paid to highly qualified healthcare professionals typically increase at CPI, and therefore do not drive medical inflation. Doctors only earn more as they work more.

“The cost of administering Discovery Health Medical Scheme is deflationary, as these fees are falling each year in real terms due to cost efficiencies,” Broomberg said.

Addressing the cause will be positive for all

“To fulfil their promise and obligations, medical aid schemes have no choice but to increase premiums to fund improved access to hospitals, technology and care for their member,” Broomberg said.

The long-term solution: make people healthier by combating the four lifestyle diseases that drive 60% of the global health burden.

“The benefits are obvious: a healthier South Africa and lower costs. That’s where our collective fight should focus,” Broomberg said.

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