As medical schemes announce their pricing and benefits for next year, most have delayed the increase of premiums until later in the year.
The schemes are not pushing through these increases in January because of the significant surpluses they built up this year.
Jill Larkan, head of healthcare consulting at wealth advisory business GTC, says the higher surpluses have been a direct result of the Covid-19 lockdown.
While the coronavirus hospitalisations increased costs for medical schemes, these were more than offset by a decrease in trauma admissions, as well as a significant fall in the number of elective surgery procedures. The lower utilisation of services is not to be confused with the cost of medical care, which has still increased above inflation.
As Larkan explains, premium increases are driven by medical inflation – currently about 7.6% per annum. These are the price increases from medical service providers, including doctors, specialists and hospitals.
Ultimately, schemes must absorb these cost increases to remain solvent. However, if members are claiming less than expected, then the scheme is collecting a surplus. It is this surplus that will be used to offset the premium increases for the first few months of the year.
Fedhealth announced that its premium rates increase will be moved to April, while Discovery Healthy will be postponing its increase to July and Momentum Health’s price hikes will be in September.
According to Momentum Health, the delay of its 6% price increase will result in a R212 million reduction in premium collection and will give members an effective increase of only 2% for the whole year. The challenge for members, however, is to remember that the increases are still coming and to budget for them.
Damian McHugh, head of marketing at Momentum Health, says the scheme is hoping that, by next September, the economy will have recovered sufficiently, and salaries normalised. However, if members are unable to absorb the premium increase, they will be able to change options at any stage.
McHugh says Momentum will review its 2023 increases based on claims next year. The scheme is concerned that, with the arrival of a fourth wave, Covid-19-related hospitalisations may increase, but government may avoid further lockdowns.
This would mean an increase in trauma and elective procedures on top of the higher Covid-19 hospitalisations – driving up the number of claims. If, however, the claims remain subdued, the scheme hopes to provide further relief by delaying the increases to later in 2023.
“It would be great to see a trend where medical schemes give back to members when they experience surpluses. This would hopefully encourage members not to over-utilise their medical schemes and to be more cost-conscious,” says Larkan.