In its latest analysis of the South African medical schemes industry, financial services group Alexforbes said that despite challenges, the sector remains stable.
In its sustainability index for the top 10 open and top 10 restricted schemes, it ranked Discovery Health Medical Scheme highest among the open schemes, followed by Bestmed, while LA Health was the top restricted scheme, followed by the Government Employees Medical Scheme (GEMS).
Restricted schemes are limited to employer or professional groups while open schemes will enrol anyone who can afford their premiums, reports BusinessLIVE. The index includes factors like the relative size of the scheme, average beneficiary age, and its solvency ratio.
While many schemes had deliberately run up an operating deficit in 2022 as they drew down on reserves accumulated during the pandemic, some had experienced a higher than anticipated increase in claims in 2022, requiring steeper contribution increases in 2024, said Paresh Prema, Alexforbes branch head for technical and actuarial consulting solutions.
“Contribution increases always lag: you only see the impact of a more difficult year two years later, and we are seeing schemes correcting (now) for 2022,” he said.
Increases
The 2024 contribution increases for the 10 open schemes ranged from 6.9% to 16% – relatively high compared with the increases announced during the pandemic.
A total of 16 of the 20 schemes included in the analysis did not have sufficient contribution income to cover claims and expenses in full, so ran at an operating loss in 2022. They used investment income and reserves in some cases, to subsidise the costs incurred.
Of these 16 schemes, 12 did not have sufficient investment income, resulting in a negative net result for the year, showed the analysis.
On average, restricted schemes maintained higher solvency levels than open schemes. In 2020, the average solvency for all schemes increased significantly because of the large surpluses resulting from Covid-19. In 2022, the average solvency for all schemes increased to 47.2% from 46.7% in 2021, and from 44.6% in 2020.
The solvency level for open schemes decreased from 39.6% in 2021 to 38.0% in 2022, while the overall solvency level for restricted schemes increased from 56.2% in 2021 to 59.5% in 2022.
The Medical Schemes Act requires all schemes to have a solvency ratio of at least 25%.
BusinessLIVE article – Medical scheme sector is stable despite challenges (Restricted access)
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