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Sunday, 9 February, 2025
HomeFocusCMS probes medical aid AGM costs amid hefty premium hikes

CMS probes medical aid AGM costs amid hefty premium hikes

Medical schemes, under fire for high premium increases for 2025 – which in most cases will be pegged above 10% – are also being probed by the Council for Medical Schemes (CMS) for exorbitant costs related to annual general meetings, with inquiries already launched into six schemes.

Moneyweb reports that the CMS provided an update on its investigation launched in January 2024 into the potential factors contributing to the “extravagant costs” incurred by schemes in hosting annual general meetings.

It has conducted six inquiries, which are ongoing.

The CMS said the volume of information that has to be analysed across the six schemes requires more time. It is unclear which six schemes are being probed.

The investigation was launched after a new report published by the CMS provided evidence that some schemes are paying exorbitant fees to host AGMs: 33 of the country’s 71 registered schemes spent R29.2m to host AGMs for 8.1m scheme beneficiaries – an average of R884 848 each.

The report revealed that five exhibited significantly higher spending than other schemes, bearing a substantially higher proportion of the total AGM expenditure.

These are:

• Sizwe Hosmed Medical Fund;
• Medipos Medical Scheme;
• Engen Medical Benefit Fund;
• Motohealth Care; and
• Foodmed Medical Scheme.

Other schemes with possible high AGM-related expenditure were:

• University of KwaZulu-Natal Medical Scheme;
• TFG Medical Aid Scheme;
• Cape Medical Plan;
• SAMWUMed; and
• Discovery Health Medical Scheme.

The CMS said it was imperative to note that the report is meant for the registrar and the medical schemes concerned, “as per Section 60 of the Medical Schemes Act, which prohibits the publication thereof”.

This comes as medical schemes face heavy criticism for announcing hefty contribution increases for 2025, signalling bad news for financially squeezed consumers, who are already buckling under economic pressure.

The Daily Maverick reports that among the top six open medical schemes, Bestmed, Fedhealth and Medihelp have reported the highest weighted average increases of 12.75%, 12.4% and 10.8% respectively, followed by Bonitas with 10.2%, Momentum with 9.4%, and Discovery with 9.3%.

Jeremy Yatt, principal officer of Fedhealth, told Daily Maverick that external factors played a role in price formulation. “Medical inflation, currently 3% to 5% higher than general inflation, is driven by factors such as the rise in lifestyle diseases, with chronic conditions among younger people more than doubling in 15 years, and chronic claims increasing by around 28% since 2008,” he said, adding that these were industry-wide trends.

Dr Ron Whelan, CEO of Discovery Health Medical Scheme administrator Discovery Health, said contribution increases had to account for medical inflation and expected claims for healthcare by members in 2025.

Medical inflation, he added, was driven by:

• increases in the price of healthcare services, typically in line with CPI;
• increases in the demand for healthcare services, as a result of a gradually ageing membership, increasing prevalence of chronic illnesses, and an increasing proportion of high-cost claimants; and
• increases in the supply of healthcare services through new medicine, new medical technologies, advances in medical procedures and increased need for specialised care.

Although Discovery’s weighted average contribution increase is 9.3%, premium hikes will range from 7.4% to 10.9%, depending on the various benefit options.

Paresh Prema, head of healthcare actuarial at Alexforbes, said contribution increases need to allow for CPI, plus an additional margin to account for ageing and utilisation (on average usually 2.0%-4.0%), benefit changes, as well as an allowance to maintain reserves, as these are needed to protect a scheme during unexpected events.

In the August 2024, CPI from Stats SA, the component relating to healthcare cost inflation stands at 5.1%, outpacing the overall CPI of 4.4%.

“A combination of inflation and utilisation rates over recent periods, along with the need for enhanced margins to provide a cushion against adverse experience, has necessitated contribution increases that exceed the rate of CPI,” Prema said.

Significant increases in healthcare costs are neither affordable nor sustainable in the long run, he added.

“Medical schemes have implemented substantial short-term increases to rebuild reserves and enhance the sustainability of loss-making options. However, we do not anticipate that these high increases will persist in the future. Instead, we expect to see more moderate increases as reserves strengthen and the sustainability of previously loss-making options improves.”

A recent reader survey by Daily Maverick revealed that most readers using medical schemes run out of medical savings for day-to-day costs as early as April or June, forcing them to fund doctor visits and medication on their own.

One said her her medical scheme only pays for specific generic medication, often not stocked by the pharmacy she uses. “We moved to a less-expensive option this year and it took the scheme eight months to inform us what the actual benefits and limits are (and some of this is still unclear),” she says.

Another said his medical aid savings run out quite early in the year, so his plan is to switch to a hospital plan in 2025 and simply accept that he will cover all day-to-day costs himself.

Meanwhile, there’s been yet another delay in the release of the report from the Section 59 Investigation Panel appointed by the CMS that was probing allegations of racial profiling and discrimination by medical schemes and administrators.

The panel had finished its investigation and published an interim report for comment in January 2021, with the period in which to comment closing on 5 March 2021.

Then, in April this year, the CMS had announced delays in the release of the final report, saying these were outside its control. Last week, it admitted it was near completion but that some parties had raised objections to the panel.

The investigation panel had subsequently “allowed for further submissions from the parties concerned, which invariably prolonged the delay”.

The CMS told Moneyweb in May that the final expert and legal submissions by Discovery Health and Discovery Medical Scheme were received in February and March 2024 and were being taken into account by the panel in its deliberations.

It expects the report to be ready before the end of the year.

Allegations

The investigation was launched by the CMS after a number of healthcare providers and members of Solutionist Thinkers and the National Health Care Professionals Association – in early 2019 – made allegations that they were being treated unfairly by medical aid schemes, based on race and ethnicity.

The interim report panel said the evidence presented by complainants and the schemes was important for the inquiry regarding how the schemes’ and administrators’ risk management systems worked in practice, particularly those systems dealing with fraud, waste and abuse (FWA).

It found that between 2012 and 2019, black practitioners were more likely than their white counterparts to be found, by Discovery, Medscheme and the Government Employees Medical Scheme (GEMS), to have committed FWA, meaning there was unfair racial discrimination.

While the interim report said the investigation found no evidence of explicit racial bias in the algorithms and methods used by the administrators and schemes to identify FWA, using the data provided by these three, the panel and independent expert Dr Zaid Kimmie found “a substantial difference in FWA outcomes between black and non-black practitioners between January 2012 and June 2019”.

It said schemes and administrators implicated in the complaints denied unfair racial discrimination in their FWA investigation process.

It said this denial was largely based on the fact that the FWA investigations are triggered by either an automated system, underpinned by an algorithm, that flags outlier practices for investigation, or tip-offs and whistleblowers.

The schemes and administrators argued that only practice numbers are known by the automated system and that there is no assignment or identification of race, either explicitly or implicitly, in the system.

Complaints

The 2023/24 CMS Annual Report released last week highlighted that although there was a brief respite after the release of the interim report by the Section 59 Inquiry Panel, this was followed by a resurgence of complaints against schemes and administrators who were clawing back on losses allegedly incurred by healthcare professionals due to fraud, waste, and abuse.

These complaints, according to the report, often resulted from coding interpretation disputes, scope of practice disagreements, and allegations of over-servicing and claiming for services not rendered.

It said healthcare providers criticised the lack of fairness in the claims audit conducted by schemes as well as the methodology applied in quantifying the extent of the alleged losses.

“On the other hand, medical schemes argue that members’ funds are being depleted by the ongoing scourge of FWA.

“The CMS continues to adjudicate these matters while awaiting the release of the final report,” it said.

Despite declining complaint volumes, the CMS remains concerned by payment disputes where beneficiaries incur out-of-pocket payments due to non-payment and/or short payment of claims.

In some cases, beneficiaries were denied benefits to which they were entitled, and the CMS correctly ruled in favour of the complainants.

However, in a substantial number of complaints, schemes had correctly applied the rules.

“In these cases, rulings were issued against complainants… it became apparent their understanding of benefit rules and limits is still lacking,” it said.

 

Moneyweb article – Racial profiling medical schemes report delayed again (Open access)

 

Daily Maverick article – Medical scheme contribution increases are announced – and it’s not good news (Open access)

 

See more from MedicalBrief archives:

 

Report into claims of racial profiling by medical schemes ‘indefinitely delayed’

 

Inquiry finds schemes discriminated against black healthcare providers

 

Discovery rebuttal of racial bias in fraud investigation

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