Medical schemes in South Africa face uncertainty from many angles, with ongoing concerns around the Covid-19 pandemic making it an especially taxing period.
Speaking at a recent Institute of Health Risk Managers (IHRM) event, Christoff Raath, joint chief executive of Insight Actuaries and Consultants, said it is both the worst time and the best time to be an actuary because of the many uncertainties pulling in many different directions. These uncertainties are brought about predominantly by Covid-19, he said.
Raath said that some of the major uncertainties facing medical aids include:
- The development of more Covid-19 waves;
- Long-term Covid, which is not fully understood yet;
- Long-term vaccine efficacy;
- The need for booster shots and how much it will cost;
- More strains of the virus developing;
- Withdrawals due to the tough economic climate, resulting in healthy people resigning from their medical aid because of unemployment or unaffordability.
“Medical schemes are now sitting at record solvency levels. Trustees are legitimately asking how these record highs can be used to help medical scheme members,” Raath said.
While schemes have healthy reserves and are indeed exploring ways to transfer this to the members, it is difficult to judge the rate at which these reserves must be used given the uncertainty of a Covid -19 future.
He added that certain schemes have used their reserves to keep annual contribution increases below inflation. While this will work in the short-term, the long-term risk is that this could result in low solvency issues in the future.
“Some people, for different reasons, have not accessed healthcare services – some are reluctant to go to health practitioners and medical facilities for fear of contracting Covid-19. The long-term effects of deferring health services is yet to be understood. It is envisaged that this could culminate in more severe health issues down the line.
“The utilisation of health services could soon change, as more people get vaccinated, translating into what will be the new normal. This could result in a correlating increase in people seeking normal day-to-day healthcare and going for elective surgery. It could also mean that people may feel differently about belonging to a medical scheme.”
Raath said that the industry could also experience higher resignations (i.e. no membership growth), especially given the current challenging economic climate – another possible long-term impact of Covid-19.