Medical aid increases well above inflation are expected to hit members in 2019. Business Tech reports that according to data from medical aid companies, the industry generally follows the guideline of CPI+3% when determining price increases every year, but this has not always been the case. Data published by financial advisory group GTC shows that the average increase across medical aid schemes over the last decade has hit as high as 6.4 percentage points above inflation, with the average since 2006 sitting at CPI+3.4%.
Between 2006 and 2010, medical aid users would have seen annual increases well beyond 10%, with the largest increase seen in 2008, when prices went up by almost 13%. However, inflation that year was also incredibly high (in the wake of the global economic crisis) at 11.3%, meaning much of the rising costs were actually absorbed by the medical aid industry.
In fact, the report says, that was the year that registered the lowest difference between inflation and medical aid increases, at CPI+1.4%. Looking beyond the data (post 2016/17), the medical aid industry in hiked prices by 9% in 2018, coming in range of CPI+3%, while the average across the industry is expected to be in the range of 8% in 2019.
According to GTC, the data should serve as a warning and guideline for medical aid members who are plotting their financial security into retirement, as it is one of the most overlooked aspects of financial planning. GTC consultant André Lindeque is quoted in the report as saying that that retirement plans in particular should incorporate planned increases in medical costs – not only for medical aid schemes, but also for the ad-hoc expenses that come with growing older.
“The cost of a medical aid is one of the more significant expenditures for many households, and naturally people are tempted to decrease this line item in their budgets, as they attempt to scale down their lifestyles,” Lindeque said. “However, great care should be taken before considering downgrading your provision for healthcare funding.” This is mainly due to the likelihood of greater healthcare needs during retirement years.
The report says while forward planning for healthcare during retirement should be priority for all – uncertainty still lingers across the medical aid industry as well the private healthcare sector in the face of government’s plans to roll out a National Health Insurance. Medical aid schemes in particular will already be feeling the impact, following the publishing of the Medical Schemes Amendment Bill in June, which outlined how they will have to change once brought into law.
Among the changes is the abolishment of co-payments – the out-of-pocket payments that need to be made by members when they are billed above the agreed rates of the medical aid schemes. The government’s plan is also to do away with Prescribed Minimum Benefits (PMBs) and replace them with comprehensive service benefits.
The report says these, among many other changes, will have a profound effect on medical aids in the future, and, according to industry experts, may have the effect of increasing the cost of private healthcare, or severely limiting what they can cover.
According to GTC, PMBs already cost around R700 per month per beneficiary on medical schemes – but this escalates to well beyond R3,000 once beneficiaries get older (85+). Ad-hoc or out-of-pocket costs, meanwhile, totalled R30bn in 2016.
“The government’s proposed National Health Insurance may promise cheaper universal healthcare over the long term, but there is still considerable uncertainty over the exact mechanics of the scheme – including what it will cover, to what extent, as well as the ultimate cost of the insurance to individuals,” GTC said.
“Given the current state of the South African public healthcare system, combined with an anticipated increase in healthcare needs in the retirement years, it is a reality that every retirement plan should cater for regular and unforeseen medical expenses, which need factoring in at a higher rate to other inflationary assumptions, especially if someone is used to, and would prefer to maintain, private healthcare benefits,” it said.Business Tech report GTC Survey 2018