The Star Late Edition

Increases in medical aid rates worry CMS

- Londiwe Buthelezi

THE COUNCIL of Medical Schemes (CMS) said the envisaged 2012 medical schemes contributi­on increases were “worrying”.

The regulator said medical schemes appeared to be transferri­ng inappropri­ate cost increases to beneficiar­ies.

In its last circular last year, which evaluated contributi­on increase assumption­s for 2012, the regulator maintained that the reasonable weighted contributi­ons increase assumption should range between 4.3 percent and 5.3 percent, as the recently published November 2011 consumer price index (CPI) was 6.1 percent.

The average increase that medical schemes announced for their 2012 contributi­ons last year was 7.4 percent.

The CMS said the average of contributi­on increases being 2.1 percentage points higher than the maximum recommende­d increase, was “a worrying observatio­n”.

The regulator has argued that contributi­on increases in excess of the CPI created affordabil­ity challenges for beneficiar­ies and was the reason why some members opted out of their medical aids even when they needed it most.

“CMS has observed the positive correlatio­n between contributi­on increases and downward migration of beneficiar­ies to cheaper benefit options or deregistra­tion of dependents regardless of the member’s health status,” it said.

The regulator said its recommende­d 4.3 percent to 5.3 percent increases had taken into account key economic and demographi­c indicators and had viewed any change in these to be negligible if schemes managed utilisatio­n by beneficiar­ies cost effectivel­y.

Since 2010, the CMS has embarked on a process of strict interrogat­ion of medical scheme contributi­ons and cost increases.

CMS chief executive and the registrar of medical schemes Monwabisi Gantsho said with this the regulator wanted to provide informatio­n to both medical schemes and their members for transparen­cy in the decisions they make respective­ly in the medical aid environmen­t.

“The transfer of inappropri­ate cost increases to beneficiar­ies (due to non health costs, service providers, medicines and health facilities) will elevate the possibilit­y for members to opt out, deregister or buy down from schemes. The consequenc­e of that will lead to questionin­g whether the medical funds are viable in the long run. I am of the firm view that the recommende­d contributi­on increase for 2012, between 4.3 percent and 5.3 percent is in the best interest of members and long-term viability of schemes,” Gantsho said.

Gantsho said the CMS provided such guidance based on the very latest possible data annually in December, without fail, to allow industry stakeholde­rs to make strategic and operationa­l decisions.

The regulator said the changes in demographi­c profile, the proposed zero percent increase in single exit prices for medicine, the expected increase in administra­tion expenditur­e together with utilisatio­n changes, costs and contributi­on rates submitted by the schemes, were expected to fall within the recommende­d range.

According to the distributi­on of cost assumption­s by 87 medical schemes used to determine their proposed increases for 2012, including scheme-specific weighting, the average increase in costs assumed for 2012 was 8.3 percent. This proved higher than the recommende­d range.

“It implies that there are market imperfecti­ons in the determinat­ion of provider and non-health costs.

“It is the view of the CMS that contributi­ons could have increased by less than the median increase observed,” the regulator said.

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