Medical schemes should start planning now if they intend ensuring future sustainability and relevance, warns ASI Financial Services, adding that people are now seeking alternative means to fund their access to private healthcare in the existing economic climate.
Within the environment, where fuel prices and unemployment statistics are at record levels, and inflation exceeding the higher end of Treasury’s targeted range, consumers are under more pressure than ever, reports BusinessTech. And while medical aids have responded to COVID-19 conditions with delayed or lower contribution increases, pre-pandemic average annual medical scheme contribution increases always exceeded headline CPI.
ASI, an independent advisory firm, said medical schemes must also adapt to cover the costs of new technology, prescribed minimum benefits (PMBs) – examples include meningitis, appendicitis, limb amputations and HIV; fraudulent claims, and the requirement to hold 25% of contributions in reserves from day one of a new member joining the scheme as well as other drains on their reserves.
Even though younger consumers are unsure of which medical scheme and/or plan option to choose – if they want to join a medical scheme at all – they’re often unsure of whether they need gap cover or not, whether to opt for a medical insurance product, or to rely on public healthcare, said Fazlin Swanepoel, managing director of employee benefits at ASI.
This quest for different ways of funding healthcare needs in South Africa adds to the pressure on medical schemes themselves.
The country’s sky-high youth unemployment rate also means medical scheme coverage is out of reach for most young people, affecting the medical schemes’ pricing as the growing group of older members uses more benefits than what they contribute towards medical aids.
The average age of beneficiaries in open medical schemes increased from 33.5 years in 2013 to 35.9 years in 2021, while medical schemes’ total membership has remained more or less consistent since 2013. In fact, according to the latest Council for Medical Schemes’ reports, open medical scheme membership reached a high point in 2018, before declining in 2019 and 2020, increasing slightly in 2021, it said.
“A smaller portion of younger members means fewer people are contributing to the cross-subsidisation of older and less healthy members. Medical schemes need to find ways to attract more younger members to protect their members’ interest, but also to guarantee their long-term sustainability. Should present trends continue, healthcare systems will be heading for an even greater affordability crisis in the coming decades,” it warned.
Younger people who choose alternative solutions and only consider joining a medical scheme when they hit their late 30s or 40s face being penalised with loaded contributions when they do eventually join a scheme.
Nobody wants to be faced with the choice between slow, substandard healthcare or crippling lifelong debt, when they really need the best care available in an emergency, or in the face of a life-threatening illness.
“It’s time for South Africans to consider – if not demand – hybrid healthcare solutions,” said Swanepoel.
“Medical schemes are already unaffordable – but the need for quality primary, chronic and emergency healthcare will not go away any time soon – not even if and when NHI rolls out. Everyone in the industry needs to be more creative in finding a solution that more people can afford,” she said.
“Despite planned changes in public sector healthcare, the private sector is counting on an evolved medical insurance solution. Meantime, regular South Africans are faced with very few real choices that respond to their needs while they wait for the sector to evolve.”
BusinessTech article – South Africa’s medical schemes have a problem (Open access)
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