The Council for Medical Schemes (CMS) has recommended that medical schemes contribution increases be limited to 4.2% in 2022.
In a circular sent to schemes this week, the regulator said that this is in line with the National Treasury’s projected Consumer Price Inflation (CPI) increase.
“In instances where it is economically feasible to implement a lower contribution increase than the CMS recommended CPI-linked rate, Trustees are encouraged to adopt innovative pricing models, subject to an independent actuarial evaluation,” it said.
“The CMS is also cognizant of the heightened uncertainty regarding the impact of the pandemic on healthcare claims costs, as well as how quickly member’s health-seeking behaviour will normalise.
“As such, pricing decisions for the 2022 benefit year should be largely data-dependent and sensitive to the demographic risk profile and financial position of each scheme.”
According to the CMS, there are about 4.05 million registered members of different medical schemes, serving a total of 8.94 million beneficiaries. This is about one in six of South Africa’s population of nearly 60 million.
A sudden spike in claims
As the trajectory of the pandemic continues to unfold in the coming months, some medical schemes may experience sudden spikes in high-cost claims – although the overall economic cost of the pandemic on the industry remains uncertain, the CMS said.
The adverse impact of the pandemic on the industry also depends on schemes’ demographic risk profiles, the size of the population covered, and the extent of existing cross-subsidies within benefit options or schemes.
In addition, the individual financial position of a medical scheme pre-pandemic will determine the degree to which it is likely to absorb the possible high-cost claims related to the Covid-19, it said.
“The CMS believes that medical schemes with high accumulated reserves should be well insulated against this spike.
“On the other hand, schemes that were already in a weak financial position pre-pandemic may be vulnerable in the long-run, potentially requiring interventions such as amalgamating with other schemes.”
The CMS said schemes should also be cautious of pent-up demand as South Africans aim to make use of their medical aids as concerns around Covid-19 decrease.
“In this regard, it is expected that as the vaccination rate increases, and the number of Covid-19 cases abate, some of the minor medical conditions that were postponed, may potentially require complex and costly medical interventions to restore patients’ initial health status,” the regulator said.
“Studies also indicate that as countries move out of different Covid-19 waves, hospital visit volumes slowly recover, although the utilisation rates of different services remain well below pre-pandemic levels.”
It is also probable that some healthcare services will be completely forgone, leading to lower than budgeted claims cost, the CMS said.
“On the contrary, the catch-up of medical procedures after Covid-19 may also last longer and be more costly than assumed. Accordingly, medical schemes need to prepare for all these prospects and the possible higher claims in areas directly tied to the pandemic – including Long Covid.”