Three years after its debut, Sizwe Hosmed Medical Scheme has been placed under statutory management by the Council for Medical Schemes (CMS), due to the deterioration of its financial reserves and unreliable budgetary and forecasting processes.
The intervention at Sizwe Hosmed comes three years after approval by the CMS that positioned it as the country’s eighth-largest open medical scheme, reports Business Day.
The merger of Sizwe Medical Fund and Hosmed Medical Scheme in 2021 resulted in a combined membership of more than 67 000 and combined reserves of R1.4bn, achieving a solvency level of 49.4%. The scheme boasted the fourth-highest solvency ratio among the 10 largest medical schemes in SA.
It was expected to yield mutual benefits by combining balance sheets and increasing membership size to unlock efficiencies and economies of scale.
However, the scheme’s performance has declined due to several factors, including benefit under-pricing and historically unreliable budgetary and forecasting processes.
“The agreement by the board of trustees and CMS to place the scheme under statutory management is to enable the two parties to work together to stabilise the scheme, ensure its sustainability, and protect the interests of Sizwe Hosmed beneficiaries,” the CMS and board of trustees said in a joint statement.
The intervention is not a curatorship, where the affairs of the scheme are managed solely by a curator. Instead, it is an intervention whereby the CMS and the board of trustees will jointly manage the scheme, the duo said.
Joe Seoloane, who was already assisting the scheme with a turnaround strategy, has been appointed as statutory manager with immediate effect. He is also expected to ensure that all circumstances leading to non-compliance are fully investigated and reported to the registrar.
Meanwhile, in a gloomy prediction for other medical aid members, Momentum Health marketing officer Damian McHugh said hefty above-inflation price hikes should be expected in 2025, reports Business Tech.
Speaking at Momentum Health Solutions’ virtual Healthcare Insights Summit on Tuesday, he said medical fund demands were rising, and attempts to contain contribution increases are causing schemes to incur additional costs.
This has resulted in their having to reduce or tighten benefits to keep increases lower than necessary, which may spill over to next year.
Despite these measures, contributions in 2024 still came in higher than inflation – which McHugh said is likely to happen again in 2025.
Medical aids increased monthly contributions by between 8% and 9% in 2024, broadly in line with recommendations by the CMS.
However, 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.
Discovery members saw increases ranging from 3% to 13%, with the biggest increases seen in the “premium” segment, while Momentum announced a weighted increase of 9.6% for 2024 – as did 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.
For context, before the 2024 hiking season, the CMS recommended that medical aids limit their price hikes to 5% “plus reasonable utilisation estimates”.
The council said at the time that historical data points to reasonable utilisation estimates, adding around 3.2% to 3.8% to the hikes, thus putting the “reasonable” increase in the region of 8.5%.
Headline inflation for 2024 is now expected to average around 5%, putting increases out of step and far above inflation.
In the past, medical aids have argued that medical inflation far outstrips headline inflation, running at a premium of between 3% and 4% higher than CPI.
The CMS has not yet published its recommended guidelines for 2025. However, South Africa is heading into hiking season, when various medical aid schemes will start announcing their increases for next year.
Over the past decade or so, schemes have been hiking contributions by far higher than inflation, with medical aids themselves often positing an industry norm of CPI+4%, noted the CMS.
The regulator warned that the costs in the private healthcare sector have been rising faster than inflation, while growth in membership has stalled.
BusinessTech article – Bad news for medical aid members in South Africa (Open access)
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