SA’s medical schemes forced to dip into savings for third year

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The Alexander Forbes Health annual Diagnosis report hows that most South African medical aid schemes are, for the third year, paying out more in claims than they earned in premiums, which will again increase 2.5% to 4.5% above inflation next year.

The Times reports that the “Diagnosis” report shows that last year the medical aid industry spent R2bn more than it earned in monthly premiums. The overall industry deficit was R2.39bn, almost twice the R1.219bn gap of 2015.

Roshan Bhana, head actuary of technical actuarial consulting solutions at Alexander Forbes Health, said the company’s research team expected that this year’s financial results would reflect an improvement over 2015 and 2016. “This is in part due to the interventions that schemes have put in place to manage two years of unusually high claims,” Bhana said.

“The industry as a whole also experienced its highest claims ratio since 2009,” according to Alexander Forbes Health.

“The risk claims ratio for all medical schemes increased from 91.4% in 2015 to 92.1% in 2016.”

The report says medical aid schemes are dipping into their investment income to cover claims. “In 2016, 54 of 82 medical schemes (65.9%) failed to achieve an operating surplus and had to draw on their investments.”

 

A claims ratio is a calculation how much of all members’ monthly premiums are paid out in claims. The Times quotes Alexander Forbes Health as saying that “the generally accepted risk claims ratio benchmark” was 85%‚ meaning 85% of premiums should be spent on members’ healthcare needs. Again‚ this was not the case. “The risk claims ratio for all medical schemes increased from 91.4% in 2015 to 92.1% in 2016.”

The company also worked out that increases to medical-aid premiums had ranged between 2.5% and 4.5% above consumer price inflation over the past 17 years.

The Times report
Diagnosis report
The Times report


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