SA’s medical schemes regulator has appealed to the industry to limit 2025 contribution increases to the SA Reserve Bank (SARB’s) inflation forecast of 4.4% plus “reasonable estimates of benefit utilisation” so people can retain their cover, but financial experts believe this might be unrealistic.
The Council for Medical Schemes (CMS) warned that anything more would be unaffordable for cash-strapped consumers, and would also create a barrier for new entrants looking to join the private healthcare industry.
“While private medical inflation generally exceeds the CPI (consumer price index) by 2% or 3%, CMS believes that the annual industry price increase assumptions should be closely tied to the CPI,” CMS acting registrar Mfana Maswanganyi said in a circular last week.
“High medical scheme contribution rates also create a barrier for new entrants looking to join the private healthcare industry, posing a threat to the industry’s long-term sustainability.”
BusinessLIVE reports that medical scheme membership has remained flat for many years, largely due to the high unemployment rate. Slightly more than 9m people were on private medical aids at the end of 2022.
Insulate
The “reasonable” increase for 2025 should be anywhere between 6.4% and 7.9%, reports BusinessTech, with the CMS advising that this would “insulate members against further financial hardship and the risk of losing health insurance”.
“The Registrar is also cognisant that some schemes may require contribution increases higher than the CMS’ recommended CPI-linked increments. In such instances, Trustees must provide the Registrar with a comprehensive actuarial business plan justifying the proposed contribution increases above inflation.”
The CMS’ estimates are based on consumer price inflation data from Stats SA and the South African Reserve Bank.
The year-on-year headline inflation, as measured by the CPI, remained constant at 5.2% for April and May before decreasing slightly to 5.1% in June 2024.
Overall, inflation is expected to average 4.9% in 2024 (SARB data).
According to the Reserve Bank’s latest inflation forecast, as outlined in the July Monetary Policy statement, headline inflation is expected to average 4.4% and 4.5% in 2025 and 2026, respectively.
Despite the CMS’ recommendations, however, medical aid schemes have been mixed in their actual implementation of price hikes.
The average industry contribution increase rate of 6.8% for the 2023 benefit year was 0.7 percentage points higher than the average CPI of 6.1%.
Medical aids increased monthly contributions by between 8% and 9% in 2024, broadly in line with recommendations by the CMS.
But the increase was not flat across the board, and members of some medical aid plans, particularly on the higher, comprehensive end, saw much bigger increases.
For Discovery, for example, increases ranged from 3% to 13%, with the biggest increases seen in the “premium” segment.
Last week Momentum warned that schemes would probably hike next year’s prices far beyond inflation, adding that benefits are also likely to be reduced to contain increases as much as possible – in 2024, it had announced a weighted increase of 9.6%, the same as BestMed, which had the same average.
Bonitas had the lowest weighted average at 6.9, but even its “comprehensive” cover could not escape the premium ‘tax’, seeing a 9.6% surge in prices.
Acting registrar
In a separate statement, the CMS said Health Minister Aaron Motsoaledi had appointed Maswanganyi acting registrar for three months, after former registrar Sipho Kabane’s term ended on 31 July.
Maswanganyi issued his circular as schemes finalise their planned benefits and contribution increases for 2025, emphasising that schemes should make it clear that any changes to benefits and contributions announced in the coming months were subject to regulatory approval.
Last October, the CMS’ then-acting registrar, Zongezile Baloyi, sent letters to SA’s five biggest open medical schemes, instructing them to retract all communication about their planned premiums and benefits for 2024 because they had not yet been approved by the regulator.
His move stunned the industry because for the previous 25 years, medical schemes had publicised their plans for the following year in September, to give financial advisers, employers and consumers time to consider their options before changes that take effect on 1 January.
CPI hikes ‘unrealistic’
However, because schemes are facing escalating costs due to ageing membership and increased usage, it was unrealistic to expect them to keep their contribution increases for 2025 in line CPI, said Alexforbes branch head for technical and actuarial consulting solutions Paresh Prema.
Schemes were experiencing increased cancer costs due to the delayed diagnosis of some patients during the pandemic, new treatments as well as an population, he added.
Medical aid schemes usually start announcing contribution and benefit changes for 2025 in September and October.
See more from MedicalBrief archives:
Sizwe Hosmed in financial trouble as other schemes hike prices
Shrinking proportion of South Africans on medical aid
CMS backtracks on medical aids increase notices