The Council for Medical Schemes (CMS) issued a guidance note last week, saying medical aids should keep 2023 price increases reasonable.
“In the context of the current economic climate characterised by surging inflation and rising interest rate, it is the view of the CMS that above inflationary contribution increases are simply unaffordable for most members of medical schemes,” it wrote.
The council has to sign off on increases, and the note essentially says that any scheme wanting approval for an increase of more than 5.7% would have to prove why it needs the money, reports Business Insider SA.
That number is based on the Reserve Bank’s current forecast for the consumer price index (CPI), the CMS said, even though medical prices are subject to different pressures from those measured by the CPI basket. South Africa does not have an official index of the price of medical goods and services.
In July, the Reserve Bank hiked interest rates, saying it now expected inflation to hit 5.7% rather than 5% in 2023. At the time the rand had depreciated by 7.2% against the dollar in the year to date. Medical imports, and imported input materials for everything from pills to equipment manufactured locally, are usually priced in dollars.
The council understands there are “… factors like the impact of the weaker rand exchange rate, the burden of diseases, etc. that might mean some schemes need bigger increases.”
However, lower increases might also be appropriate for schemes in a strong financial position, the CMS said, in which case it would need to see calculations showing the scheme would still have adequate income.
During the pandemic, the CMS pushed schemes to keep increases low, anxious it might lose members when mounting financial stress caused by COVID-19 saw those members exit schemes, or just fail to make their monthly payments.
Average monthly payments ended up increasing by 2.2%, on average across all schemes.
With utilisation low, as elective procedures were cancelled because of COVID-19, and lockdowns kept people at home, medical schemes took their accumulated reserves to above R100bn by the end of September 2021.
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