After its unexpected announcement demanding medical aids withdraw notices of their planned premiums and packages for next year, the Council for Medical Schemes (CMS) has softened its stance.
The CMS now says it acknowledges the need of medical aids to communicate with consumers but adding that they must make it clear they are still waiting for sign-off.
Last week, its then acting registrar, Zongezile Baloyi, instructed SA’s five biggest open medical schemes to retract all communication about premiums and benefits for 2024 as the regulator had not yet given them the green light, reports BusinessLIVE.
CMS registrar Sipho Kabane said Baloyi was in an acting registrar position last week because he had been in Namibia.
The letter from Baloyi stunned the sector because for the past 25 years, medical schemes have publicised their plans in the previous September to give financial advisers, employers and consumers time to consider their options ahead of changes that take effect on 1 January.
The regulator appears to have targeted only five schemes – Discovery Health Medical Scheme (DHMS), Bonitas, Momentum, Bestmed and Medihelp – while ignoring smaller schemes that have also communicated their plans.
Discovery Health subsequently filed an appeal against the directive, with CEO Ryan Noach saying the schemes’ approach was in line with the Medical Schemes Act’s requirements to communicate clearly with members.
“The communication typically also includes clear disclaimers that the implementation of proposed benefit changes is conditional on approval by the CMS.”
Noach told MoneyWeb the Act is explicit that benefit amendments may not be implemented without the formal approval of the CMS.
However, he noted that the MSA specifically “makes no statement about the requirement for formal CMS approval prior to communication of intended changes, whatsoever”.
“No law has been broken. The regulator is aggrieved that open schemes across the industry have not adhered to guidance in a circular – but it is not legally binding,” he said.
Discovery Health Medical Scheme executives were in regular contact with CMS staff before its 2024 product launch in September and nothing in the announcement would have come as a surprise to the regulator, he added.
“There is nothing new about this year’s process: it has the … timing as it has for the past 25 years and takes into account the needs of financial advisers and members who must be equipped to make year-end decisions.”
The Board of Healthcare Funders (BHF), an industry association for medical schemes, had called the CMS’ instructions impractical, saying its threat of fines for schemes that failed to comply was at odds with the Act.
BHF head of research Charlton Murove said the directive was not in the interest of medical scheme beneficiaries.
“People need time to consider, consult with their brokers. Waiting until the CMS approves (plans) in December is completely impractical,” he said.
The medical aid watchdog had said that to its knowledge, only five of the 71 medical schemes it regulates had failed to comply with its directive not to make public pronouncements on changes to benefits and contributions for 2024 without indicating that these changes were subject to its approval.
Limit contributions
In July, a CMS circular to medical schemes “advised” schemes to limit their 2024 contribution increases to 5% in line with inflation and the current difficult economic environment.
This follows medical scheme contribution increases over the past decade consistently exceeding the Consumer Price Index (CPI), with the exception of 2021 and 2022 when the Covid-19 pandemic resulted in people using their medical schemes less.
On 23 September, Discovery had announced its 2024 planned contribution increases and/or benefit changes but noted that these increases and benefit changes had been submitted to the CMS and were subject to the regulator’s approval.
But a Moneyweb report says, skirmish aside, it is likely that the proposed increases tabled by the five under-fire schemes will be ‘approved’ – a technical administrative hurdle, nothing more.
DHMS announced a weighted average contribution increase across all benefit plans of 7.5% for 2024, to take effect from 1 January 2024.
The publicly announced 7.5% average, however, includes some sleight of hand where medical savings accounts (MSAs) on its most popular plans – including Classic Saver and Essential Saver, which together have around half a million members – have been slashed.
Were it not for these sharp reductions to MSA allocations, the contributions for these Discovery plans would’ve seen increases of between 8% and 11% from January.
This would’ve meant an average jump in DHMS contributions of 10.25% (excluding Classic Smart Comprehensive, which has been overhauled and now includes an MSA).
Alexforbes, as an independent healthcare consultant, has published a comparison of the increases announced thus far across the industry. It is important not to look at these increases in isolation and that a comparison needs to be done including all adjustments from 2020, where the impact of the Covid-19 pandemic on healthcare utilisation across the sector saw little to no contribution increase in many schemes.
The average increase on Bonitas Medical Fund’s plans is 6.9%, with the risk contribution on its Primary, Primary Select, BonSave, BonFit Select, BonEssential, BonEssential Select, BonStart, BonStart Plus and BonCap plans increasing by 6%. It says these “options contribute to over 70% of new business”.
Lee Callakoppen, Bonitas’s principal officer, says about two thirds of its base, or 227 000 members “will experience an increase below CPI”.
Bonitas notes that plan increases range from between 2.7% to 9.6%. The nearly 10% jumps in contributions are on its three top-end plans, where these range from R5 300 to R9 800 (for main members).
Bonitas says it has increased the allocation to savings on plans, which stands in stark contrast to DHMS.
On BonSave, it says the savings allocation increase is 25%.
Momentum, the third largest scheme by members, says that benefit limits will be “enhanced” by around 5.5% next year, in line with medical inflation, which translates to an average weighted increase across its plans of 9.6%.
Damian McHugh, chief marketing officer for Momentum Health Solutions, says ”as the administrator of medical schemes with almost three million members, we have seen claims costs increasing to higher than pre-Covid levels. At the same time, inflation means that the average cost per claim has also increased notably”.
“What you don’t want to see is increasing contributions, coupled with reduced benefits, of which we have recently seen a few examples,” says McHugh.
“Momentum Medical Scheme has consistently had one of the lowest increases in the market without reducing benefits and has managed to bring certainty to advisers and consumers in difficult times.”
Having enhanced benefit limits by around 5.5%, in line with medical inflation, the scheme’s weighted average increase for 2024 will be 9.6%.
Medihelp has announced the biggest jump in weighted average contribution increases, at 15.97% from January.
It says the “scheme’s adjustment should be set off against the past three years’ average adjustments of 5.8%, -0.45%, and 7.5%, bringing it to an average increase of 7.2% per year over four years”.
It also contends that the “majority of Medihelp’s options are currently priced lowest in the market, which provides a very low base for adjustment and ensures that the product range remains well-positioned despite the increase”.
BusinessLIVE PressReader article – CMS eases stance on proposals (Open access)
Moneyweb article – Discovery Health appeals regulator’s directive on 2024 hikes (Open access)
Moneyweb – Medical aid 2024: Highest and lowest increases announced so far
See more from MedicalBrief archives:
Discovery, Momentum and Bonitas hike premiums for 2024
How medical aid premiums are calculated and spent
Return of medical schemes’ premium hikes