Medical aid price hikes for 2024 – what to expect

The Council for Medical Schemes (CMS) in South Africa recommends that medical aids in the country limit their 2024 price hikes to 5% “plus reasonable utilisation estimates”.

The council said that historical data points to reasonable utilisation estimates adding around 3.2% to 3.8% to the hikes – thus making the potential increase for 2024 closer to 8.5% – but it has requested that all medical schemes submit data justifying such an increase.

The recommendation was put through to all medical aids in the country through the CMS’ latest circular.

As per regulations of the Medical Schemes Act, the Registrar must issue a notice to all medical schemes every 31 July of each year, outlining the requirements involved when submitting contribution increases and benefit adjustments.

To this end, Circular 27 of 2023 was issued and circulated to all 72 (open and restricted) medical schemes.

According to the CMS, over the past decade or so, medical aids have been hiking contributions by far higher than inflation, with medical aids themselves often positing an industry norm of CPI+4%.

This trend was heavily disrupted by the Covid-19 pandemic in 2020, which resulted in below-inflation hikes in 2021 and 2022, with a slight resurgence in 2023 where many schemes opted for deferred price hikes.

“In recent years, costs in the private healthcare sector have been rising faster than inflation, while growth in medical scheme membership has stalled.

“Lack of beneficiary growth, demographic changes and worsening health status of covered lives threaten the long-term sustainability of medical schemes,” the CMS said.

In addition to this, South Africa is facing widespread adverse macroeconomic conditions – characterised by multi-year higher interest rates due to stubbornly higher inflation rate, a volatile domestic currency and surging energy prices and overall lacklustre economic growth.

“It is evident that most household budgets will remain constrained for a foreseeable future, leaving most consumers in a precarious financial position,” the CMS said.

“To protect medical scheme members from further financial distress and the likely risk of losing health insurance coverage due to affordability constraints, medical schemes are advised to limit their cost assumptions for tariff increases to 5% plus reasonable utilisation estimates for the 2024 benefit year.”

Reasonable utilisation estimates

Medical aids not only have to cover their base costs but also have to plan ahead for the utilisation of the funds.

The CMS noted that the utilisation of healthcare services trajectory was impacted severely in the past two years, with a significant drop in actual utilisation in the aftermath of the Covid-19 pandemic.

While emerging trends points towards a normalisation path and return to the pre-pandemic health-seeking behaviour, there is still a high degree of uncertainty about a clear post-Covid-19 utilisation trends, it said.

“Medical schemes must therefore assume reasonable utilisation estimates for 2024 based on historical utilisation data pre-pandemic, the scheme’s current demographic profile, as well as more recent available actual claims data,” it said.

Cost increase assumptions analysis for 2023 showed that the combination of demographic and utilisation factors are projected to add about 3.2 percentage points to the total cost increases for medical schemes this year.

This projection is lower than the 3.8 percentage points estimate for the 2022 benefit year. Given these estimates, it is assumed that 2024’s hike will be in a similar range.

As was the case in the previous year, the CMS said it is concerned that the utilisation estimates submitted by the schemes do not always correlate with the changes in a scheme’s demographic and risk profile.

“Medical schemes are thus requested to submit a comprehensive analysis of these factors when motivating for their respective cost increase assumptions.

“Contribution increases higher than CPI plus a reasonably assumed utilisation factor will be evaluated and approved on the strength of the motivation submitted. Only contribution increases that have been approved by the Registrar may be implemented by medical schemes.

“Moreover, it is advised against communicating any benefit changes or contribution increases before obtaining the necessary approval from the regulator,” it said.

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