Med­i­cal schemes pass their pain on to you

The lat­est an­nual re­port from the reg­u­la­tor for med­i­cal schemes high­lights some wor­ry­ing trends, writes

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Med­i­cal schemes are an­nounc­ing steep con­tri­bu­tion in­creases for next year – av­er­ag­ing about 10 per­cent, but on some op­tions as high as 17 per­cent – as a re­sult of a huge in­crease in claims for med­i­cal ser­vices this year (see “Some mem­bers will pay 17 per­cent more for health cover” on page 2).

While the reg­u­la­tor of med­i­cal schemes, the Coun­cil for Med­i­cal Schemes, said at a brief­ing yes­ter­day that there was a marked in­crease in claims be­tween last year and this year, some of the trends that re­sult in schemes mak­ing op­er­at­ing losses and run­ning down their re­serves were al­ready ev­i­dent last year, ac­cord­ing to the lat­est an­nual re­port from the Coun­cil for Med­i­cal Schemes, re­leased this week.

Last year, schemes were al­ready ex­pe­ri­enc­ing higher claims, a higher pro­por­tion of older, sicker mem­bers and an in­creas­ing preva­lence of chronic ill­nesses.

The coun­cil’s an­nual re­port notes that, on av­er­age, mem­bers faced an­nual c on­tri­bu­tion in­creases of 8.8 per­cent from 2014 to 2015. The av­er­age for open schemes was higher at nine per­cent, while the av­er­age for re­stricted schemes (for em­ployee groups) was 8.6 per­cent.

The in­crease in con­tri­bu­tions from this year to next is likely to be sig­nif­i­cantly higher.

The coun­cil’s an­nual re­port also notes that for the 15 years to 2015, con­tri­bu­tion in­creases have av­er­aged al­most four per­cent­age points above in­fla­tion, which is lead­ing to scheme mem­ber­ship be­com­ing in­creas­ingly un­af­ford­able.

The re­port gives the fol­low­ing in­sights into why the in­creases you are fac­ing for next year are again so much higher than in­fla­tion, which is 5.9 per­cent.

CLAIMS ARE UP

✦ The claims we sub­mit to our med­i­cal schemes in­creased by 8.9 per­cent from R127.6 bil­lion in 2014 to R138.9 bil­lion in 2015.

When claims are cal­cu­lated as an av­er­age claim per ben­e­fi­ciary (mem­bers and their de­pen­dants) per month, they are up by nine per­cent, from R1 210 in 2014 to R1 319 last year.

The re­port also shows that our claims against our med­i­cal sav­ings ac­counts in­creased by 13.4 per­cent over the amount spent in 2014: from R116.90 per ben­e­fi­ciary per month to R155 per ben­e­fi­ciary per month.

In ad­di­tion, the con­tri­bu­tions we make to med­i­cal sav­ings ac­counts in­creased by, on av­er­age, 12.1 per­cent across all schemes.

The re­port says these in­creases sug­gest that schemes have changed ben­e­fit op­tions so that a greater pro­por­tion of ben­e­fits now need to be funded from med­i­cal sav­ings ac­counts.

The re­port also notes a sharp in­crease in the ra­tio of claims paid rel­a­tive to the con­tri­bu­tions schemes col­lect. The ra­tio has risen from about 86 or 87 per­cent over the four years to 2013 to over 90 per­cent over the past two years. If schemes’ ad­min­is­tra­tion costs, bro­ker fees, bad debts and other non-health­care ex­penses amount to more than 10 per­cent, schemes will be­gin to de­plete their re­serves, and will typ­i­cally in­crease your con­tri­bu­tions.

The largest pro­por­tion of claims paid is for hos­pi­tal ex­penses. The amount paid to pri­vate hos­pi­tals in­creased 9.36 per­cent, from R46.8 bil­lion in 2014 to R51.1 bil­lion last year.

SCHEME MEM­BERS ARE GET­TING OLDER

✦ The av­er­age age of ben­e­fi­cia­ries in­creased from 32.1 to 32.3 years be­tween 2014 and 2015. This may not seem like a lot, but claims rise as the av­er­age age of ben­e­fi­cia­ries in­creases, and schemes face these in­creases each year.

The reg­u­la­tor’s an­nual re­port shows the change in ben­e­fi­ciary numbers in dif­fer­ent age groups be­tween 2005 and 2015. There were fewer ben­e­fi­cia­ries in the younger age bands last year than in 2005 and more in the older age bands.The re­port notes that the shift to­wards older age groups is more pro­nounced in open med­i­cal schemes and has a “sig­nif­i­cant im­pact” on claims.

Schemes are also fac­ing the costs of fund­ing the claims of an in­creas­ing pro­por­tion of pen­sioner mem­bers. The num­ber of pen­sion­ers on med­i­cal schemes in­creased from 7.1 per­cent of all lives cov­ered in 2013, to 7.3 per­cent in 2014, to 7.7 per­cent in 2015.

In the re­port, the act­ing reg­is­trar of med­i­cal schemes, Daniel Le­hutjo, says that the im­pact of mem­bers us­ing more ben­e­fits and the lives cov­ered get­ting older ac­counts for 3.05 per­cent­age points of the an­nual in­crease in con­tri­bu­tions.

WE ARE GET­TING SICKER

✦ The Coun­cil for Med­i­cal Schemes an­nual re­port for 2015/16 re­ports on a study it con­ducted last year on changes in the preva­lence of chronic ill­nesses among med­i­cal scheme mem­bers and their de­pen­dants. It found a “sus­tained up­ward trend in di­ag­no­sis and treat­ment of many con­di­tions on the chronic dis­ease list”. These are the com­mon chronic ill­nesses that fall un­der the pre­scribed min­i­mum ben­e­fits (PMBs). Schemes are obliged by law to pay for the di­ag­no­sis, treat­ment and care of PMB con­di­tions.

The coun­cil says the in­crease in the preva­lence of these ill­nesses is partly a re­sult of schemes col­lect­ing bet­ter data and mem­bers be­ing more aware of their right to claim for these con­di­tions, but also caused by mem­bers get­ting older and sicker.

THE NUM­BER OF LIVES COV­ERED IS DOWN

✦ The num­ber of lives cov­ered by med­i­cal schemes de­clined slightly from 8.814 mil­lion in 2014 to 8.809 mil­lion (a 0.06-per­cent de­cline) last year. Although the de­cline seems small, it is the first since 2004, and if the trend con­tin­ues, it could cause higher con­tri­bu­tion in­creases.

A lot of mem­ber­ship growth since 2006 has been a re­sult of the Gov­ern­ment Em­ploy­ees Med­i­cal Scheme (Gems), which launched that year. The an­nual re­port notes that the num­ber of mem­bers and de­pen­dants on the scheme de­creased by 3.6 per­cent, from 1 837 809 in 2014 to 1 771 786 at the end of last year.

If schemes do not grow their mem­ber­ship, mem­bers just get older and sicker and claim more ben­e­fits. Schemes need young and healthy mem­bers to sub­sidise the costs of older, sicker mem­bers.

PMB COSTS ARE UP

✦ The cost to schemes of pay­ing for the PMBs has risen sig­nif­i­cantly, the an­nual re­port shows.

The av­er­age cost of pro­vid­ing the PMBs to mem­bers across all schemes rose 9.4 per­cent from R556 per ben­e­fi­ciary per month in 2014 to R608 per month in 2015.

The cost of pro­vid­ing the PMBs has a sig­nif­i­cant im­pact on the cost of claims the scheme faces, as PMBs ac­count for 51 per­cent of all claims. In­creases in claims, in turn, af­fect your con­tri­bu­tions. The cost across schemes ranges from R200 per ben­e­fi­ciary per month to R1 200 per ben­e­fi­ciary per month, but it gen­er­ally costs schemes more to pro­vide the PMBs to mem­bers over the age of 45.

A wor­ry­ing trend iden­ti­fied in the re­port is that the num­ber of mem­bers and de­pen­dants over this age in­creased by al­most 39 000, while the num­ber of mem­bers and de­pen­dants un­der the age of 45 de­clined by about 45 000 be­tween 2014 and 2015. This un­favourable change in the pro­file of scheme ben­e­fi­cia­ries has con­trib­uted to the es­ca­la­tion in what schemes spend on PMBs, the re­port says.

The re­port notes that open schemes tend to have lower PMB costs, with only 25 per­cent of them hav­ing PMB costs within the top quar­tile when schemes PMB costs are ranked from high­est to low­est.

The PMBs cover all med­i­cal emer­gen­cies, 270 con­di­tions that if left un­treated could be life threat­en­ing and 25 com­mon chronic con­di­tions. Schemes must pay the costs in full un­less you fail to use a des­ig­nated ser­vice provider ap­pointed by the scheme (ex­cept in cer­tain cases, such as emer­gen­cies).

OP­ER­AT­ING LOSSES ARE UP

✦ In the face of claims in­creas­ing by more than con­tri­bu­tion in­come, schemes pre­dictably made op­er­at­ing losses to­talling R1.2 bil­lion last year. This is al­most three times higher than their op­er­at­ing losses in 2014 (R456 mil­lion). For­tu­nately, many schemes have good re­serve lev­els (money set aside for times when schemes face high claims) and their in­vest­ment in­come re­sulted in them mak­ing a net sur­plus of R2.5 bil­lion at the end of last year, the coun­cil’s an­nual re­port shows. The re­port also shows that, of the 276 ben­e­fit op­tions, 150 (or 54.7 per­cent) made op­er­at­ing losses last year. Schemes are re­quired by law to en­sure that each op­tion is fi­nan­cially vi­able – con­tri­bu­tions col­lected must cover the claims and non-health­care costs.

SOL­VENCY RA­TIOS ARE DOWN

✦ Schemes are re­quired by law to hold re­serves equal to 25 per­cent of the con­tri­bu­tions they col­lect, which is known as their sol­vency ra­tio.

On av­er­age, schemes had sol­vency ra­tios of 33.2 per­cent at the end of 2014 and by the end of last year this had de­clined by 1.8 per­cent­age points to 32.6 per­cent. This is still on av­er­age above the re­quired level of 25 per­cent, but schemes need to en­sure re­serves are main­tained.

Seven schemes have re­serves be­low the re­quired sol­vency ra­tio and are un­der mon­i­tor­ing by the Coun­cil for Med­i­cal Schemes, its an­nual re­port notes.

If you are a mem­ber of one of these schemes, you can ex­pect higher in­creases aimed at build­ing the re­serves to the legally re­quired limit. The seven schemes are: Lib­erty Med­i­cal Scheme, Thebe­med, Com­mu­nity Med­i­cal Aid Scheme, Plat­inum Health, Res­o­lu­tion Health Med­i­cal Scheme, Gems and Transmed Med­i­cal Fund.

The sol­vency ra­tio of Gems, the coun­try’s sec­ond largest med­i­cal scheme, de­clined from 10 per­cent at the end of 2015 to 9.5 per­cent at the end of last year.

The sol­vency ra­tio of Transmed de­clined dra­mat­i­cally from 22 per­cent in 2014 to 14.1 per­cent at the end of last year.

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