Medical cover for lower-income families gets a shot in the arm
Access to private health care is getting a major shakeup with the launch of a number of products aimed at people who cannot afford medical aid premiums.
Retailer Dis-Chem and digital financial services company TymeBank have entered the medical insurance market, which is slowly gaining momentum given the high costs of medical aid schemes and increased demand for quality health care.
According to Dis-Chem, only 2% of South Africans are covered by medical insurance mostly through employer-linked benefits and 15.2% have access to medical aid. This leaves an estimated 10-million employed yet uninsured individuals wanting access to affordable and quality private health care.
“The conundrum is that these people don’t know that there is a good and cost-effective alternative to traditional private medical coverage,” Dis-Chem said.
The average cost of medical aid is just over R2,000 a month per beneficiary.
TymeBank CEO Tauriq Keraan said that out of a population of just over 60-million, just one in seven have access to medical aid. “Most people cannot afford private health care,” he said.
Dis-Chem CFO Rui Morais said demand for affordable medical cover continues to grow as more people cannot afford the traditional model but still need an alternative to the struggling public health service.
Jan Meintjes, portfolio manager at Denker Capital, said the medical aid membership base has been stagnant for a number of years, mainly due to employment not growing. Customers are looking for better value for their money and as such they are “buying down”. This is why the only real growth in the health protection market is in the entry-level area, he said.
“The state of public health care also plays a role as consumers look for an affordable way to access the private sector health system, where service levels are much higher and access much easier. This is a growing market as opposed to the broader market that is not growing,” he said.
Morais said the “stagnation in medical aid membership has been driven by an increasingly constrained consumer” who faces premiums that have been rising much faster than inflation for the past two decades. This has resulted in more people downgrading to cheaper medical aid plans or cancelling their medical cover altogether.
Last week TymeBank, in partnership with National HealthCare Group, introduced three options that it said would assist those who want access to private health care but cannot afford the high premiums of traditional medical aid schemes.
Dr Reinder Nauta, executive chair of National HealthCare Group, in which African Rainbow Capital (ARC) has an investment, said: “Until such time as the private healthcare sector does its part to remove this very real hurdle [of costly medical cover], accessibility to private health care will remain but a pipe dream for many individuals.”
ARC also has a stake in TymeBank, which has 4.5-million customers.
Meintjes said given that the new packages are insurance products, a different set of rules are applied and they are also less complex to manage and administer. “This makes them more competitive by design,” he said.
Medical insurance products provide access to services such as general practitioners, optometrists and dentists, as well as medication. Some options also cover accidents and hospital emergencies. Hospital admissions and specialists are generally catered for by medical aid schemes.
Said Meintjes: “I do not think that these products threaten medical aids in the middle market and affluent market but they seem to provide a low-cost solution to a section of the market that is excluded because of affordability. It is fair to say that they are growing the market rather than taking market share from medical aids.”
Nauta said TymeHealth will open up a new market that could see employers, such as those who hire domestic workers, buying cover for their staff.
Discovery is also reportedly offering primary care for about R350 a month, giving customers access to a network of doctors, emergency procedures and treatment for chronic conditions, including HIV.
Dis-Chem’s health insurance options start at R431 per month, and TymeHealth’s start at R139.
Commenting on the crossover of services between sectors, Meintjes said “intense” competition in financial services was getting even fiercer. “The economy is not growing fast enough in real terms to keep up with population growth. This means we are seeing more insurance business being done by the banks (FNB, Capitec and Standard Bank are good examples in recent years) and we are seeing more credit business being done by insurance companies (Old Mutual and Sanlam have substantial credit businesses) and we are seeing transactional banking business models as well.”
Financial services businesses are trying to optimise the relationship they have with customers by selling more products to the same customer because the pool of viable customers is not growing.