In the current high inflation environment, where fuel prices and unemployment statistics are at record levels, South Africans are looking for alternative ways of funding their access to private healthcare \u2013 and medical schemes need to plan now if they\u2019re to ensure future relevance and sustainability, says ASI Financial Services.<\/p>\n
With inflation exceeding the higher end of Treasury\u2019s targeted range, consumers are under more pressure than ever, and while medical schemes have responded to Covid-19 conditions with delayed or lower contribution increases, the fact remains that pre-Covid 19 average annual medical scheme contribution increases always exceeded headline CPI, it said.<\/p>\n
The independent advisory firm said that medical schemes must also adapt to cover the costs of new technology, prescribed minimum benefits (PMBs) \u2013 examples include meningitis, appendicitis, limb amputations and HIV; fraudulent claims, and the requirement to hold 25% of contributions in reserves from day one of a new member joining the medical scheme as well as other drains on their reserves.<\/p>\n
Even though younger consumers are unsure of which medical scheme and\/or plan option to choose \u2013 if indeed they want to join a medical scheme at all \u2013 they\u2019re often unsure of whether they need gap cover or not, whether to opt for a medical insurance product, or to rely on public healthcare, said Fazlin Swanepoel, managing director of employee benefits at ASI Financial Services.<\/p>\n
This quest for different ways of funding one\u2019s healthcare needs in South Africa adds to the pressure on medical schemes themselves. For example, as young people turn to more cost-effective solutions (at least in the short term) like hospital plan options or pre-paid healthcare, the pensioner ratio for open medical schemes increased from 7% in 2013 to almost 9% in 2020, she said.<\/p>\n
South Africa\u2019s very high youth unemployment rate also means that medical scheme coverage is out of reach for most young people. This directly impacts medical schemes\u2019 pricing as this growing group of older members use more benefits than what they contribute towards medical schemes, said ASI.<\/p>\n
Similarly, the average age of beneficiaries in open medical schemes increased from 33.5 years in 2013 to 35.9 years in 2021, while medical schemes\u2019 total membership has remained more or less consistent since 2013. In fact, according to the latest Council for Medical Scheme\u2019s reports, open medical scheme membership reached a high point in 2018, before declining in 2019 and 2020, increasing slightly in 2021, it said.<\/p>\n
“A smaller portion of younger members means that fewer people are contributing to the cross-subsidisation of older and less healthy members. Medical schemes need to find ways to attract more younger members to protect their members\u2019 interest, but also to guarantee their long-term sustainability.<\/p>\n
“The South African healthcare system and global healthcare systems have come under additional pressures post Covid-19, and should the present trends continue, healthcare systems will be heading for an even greater affordability crisis in the coming decades,” it warned.<\/p>\n
Younger people who choose alternate solutions and only consider joining a medical scheme when they hit their late 30s or 40s face being penalised with loaded contributions when they do eventually join a medical scheme.<\/p>\n
Employers are also caught in a difficult predicament: if they\u2019re to manage productivity and count on their employees being able to take care of their own health, employers are more and more considering subsidising or fully paying for medical scheme cover or low-cost healthcare options for low-income earners, said Swanepoel.<\/p>\n
This is centred once again around the fact that the high cost of healthcare deters staff from opting in to begin with. It is for these reasons that employers are considering subsidising low-cost options such as primary care, health insurance and even pre-paid healthcare to mitigate this risk.<\/p>\n
They also feel compelled to make this a part of employees\u2019 cost to company, when many of those employees would prefer to have the money rather than the cover, either because they\u2019re willing to use public healthcare services, or because they believe they\u2019re at low risk of needing broader cover\u201d.<\/p>\n
It\u2019s also an incontrovertible truth that nobody wants to be faced with the choice between slow, substandard healthcare or crippling lifelong debt, when they really need the best care available in an emergency, or in the face of a life-threatening illness.<\/p>\n
\u201cIt\u2019s time for South Africans to consider \u2013 if not demand \u2013 hybrid healthcare solutions,\u201d said Swanepoel.<\/p>\n
\u201cThere\u2019s no doubt that medical schemes are already unaffordable \u2013 but the need for quality primary, chronic, and emergency healthcare will not go away any time soon \u2013 not even if and when NHI rolls out. Everyone in the industry needs to be more creative in finding a solution that more people can afford,\u201d she said.<\/p>\n
\u201cDespite planned changes in public sector healthcare, the private sector is counting on an evolved medical insurance solution. Meantime, regular South Africans are faced with very few real choices that respond to their needs while they wait for the sector to evolve.”<\/p>\n
There\u2019s no clear single \u2018silver bullet\u2019 solution at present, although market forces are coming into play with the emergence of various insurance products, gap cover, low-income medical schemes, and telemedicine solutions.<\/p>\n
\u201cMedical cover was never a simple thing to navigate, for employers or individuals,\u201d Swanepoel said. \u201cAs the industry evolves over time, anyone who is making decisions about healthcare cover of any kind is going to need the advice of an independent expert, who has the knowledge and insight to balance peoples\u2019 needs and means, and what their employers are able and willing to offer.<\/p>\n