THE BIGGER PICTURE

It is not good enough to find a scheme with good benefits; you also need to know if your scheme will be able to provide those benefits into the future. For this reason, it is useful to consider the financial health of a scheme.

In the GTC Medical Aid Survey 2016, Jill Larkan, GTC’s head of healthcare consulting, considered four “macro” factors that can influence a scheme’s financial health. The factors were:

◆ The growth in the scheme’s membership;

◆ The ratio of pensioners to members under the age of 65, because pensioners typically use more medical benefits, resulting in higher contribution rates for schemes;

◆ The solvency ratio (the ratio of money a scheme has in reserve to the annual contributions it collects); and ◆ The average age of members. Larkan weighted these four factors equally when she rated medical schemes, but you or your adviser may believe the average age of a scheme’s members is more important to the future health of the scheme than its growth rate or solvency ratio.

Larkan says there are many other “macro” factors that could be taken into account. Each year, the Council for Medical Schemes publishes its annual report, which contains information about each scheme’s financial status, membership, complaints laid against the scheme, how much it spends on healthcare and non-healthcare expenses, and whether each option is, as required by law, self-sustaining (the option’s contribution income must meet its claims and non-healthcare costs).

Larkan says that, for example, while the Compcare NetworX option scored highly in the survey as an entry-level option, it made an operating loss last year and this may be a concern. Because schemes must ensure that options are self-sustaining, if an option makes a loss, the scheme must cut benefits, increase contributions or both.

Financial services company Alexander Forbes publishes an annual medical scheme sustainability index that indicates how sustainable schemes are, in its annual Diagnosis publication.