Increases in medical aid rates worry CMS
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.