How can members afford it?
Contribution increases too high
ABOVE INFLATION INCREASES by medical schemes will put members under increasing financial pressure, especially next year as consumers feel the full brunt of the typical 18-month lag in the effects of interest rate increases. The high increases in member contributions also feed the vicious cycle of medical inflation and high private sector healthcare costs, a cycle medical scheme administrators should be trying to break by using their leverage to push doctor and private hospital costs down.
If private healthcare doesn’t get costs down, Government might step in and do it for them – not the ideal solution, but a possibility as long as medical inflation and medical scheme contribution increases are higher than the already too high consumer price index.
Last week Liberty Health Medical Scheme ( LHMS) announced average increases for 2009 across all its medical plans of 12,7%. It called those “value-for-money” rates. Two weeks earlier, Discovery Health said headline contribution increases for 2009 would be 12,8% – with an average increase of 12,4% across the Discovery Health plans.
Members can appreciate both schemes are trying to keep a balance between sufficient funding, maintained or improved benefits and affordable increases. But for many members, particularly retired members, contribution increases of that magnitude aren’t affordable.
It’s also notable that two private sector schemes, backed by large life insurance groups, should come up with such similar increases. If that continues, the medical schemes might attract the attention of the Competition Commission.
Andrew Edwards, executive principal officer at LHMS, says the increase will continue to fund the level of real benefits for members. “We encourage our members and potential members to look at the actual cost of their scheme versus the real benefits received, because it’s simply not possible to have below medical inflation increases yearon-year without compromising on members’ benefits. That isn’t something we’re prepared to do.”
His dilemma is understandable and, of course, the scheme should strive to maintain member benefits. But using medical inflation as a benchmark, as Edwards seems to imply, is probably worse than Discovery’s “corridor of certainty” of CPIX plus 3%, which we called an unhealthy benchmark ( Finweek 25 September).
Edwards says, generally, very few changes have been made to most options for 2009 but some scheme offerings promise to be more attractive due to a market segmentation study conducted this year. “That study seeks to determine individuals’ needs and wants based on a combination of factors, such as current life circumstances, purchasing power and even where members live. By looking at needs and then categorising them, the scheme is able to build more relevant options that fulfil an individual’s requirements in a cost-effective manner and develop a logical movement through the various options as an individual’s needs change.”
What’s encouraging is the entry-level corporate network option LHMS introduced this year, aimed at employers wanting cover for their lower-paid staff. Only about 3m working South Africans belong to medical schemes out of nearly 10m employed people. It’s vital to get more people under medical cover, for their sake and the health of medical schemes, where membership growth in many schemes is stagnant. Called Corporate Network, the overall premium increase for