Covid-19 has helped medical schemes save money

First published in Daily Maverick 168

This has been an exceptional year for medical schemes in that the Covid-19 pandemic led to many clients choosing not to have screening tests and elective procedures. This means schemes have spent less than they would in a normal year.

However, Covid-19 has not run its course yet, and schemes have to walk a careful path between restricting increases in recognition of members’ financial distress and keeping enough reserves to manage a potential increase in claims next year.

The Council for Medical Schemes (CMS) issued a circular earlier this year encouraging schemes to keep their contribution increases flat or in line with inflation.

“In cases where schemes are unable to freeze their contribution increase for 2021, CMS recommends that schemes should limit their increases to 3.9% in line with the CPI [consumer price index],” says Dr Sipho Kabane, the council’s CEO and registrar.

Only medical schemes that were already in financial distress before Covid-19 may seek increases higher than the recommended 3.9%, the CMS says.

“Such schemes must provide the CMS with a detailed motivation for such an increase.”

However, only two schemes seem to have toed the line on the CMS recommendation. Momentum Health announced an average contribution increase of 3.9%. The country’s largest medical scheme, Discovery Health, has frozen all contribution increases until July next year with the promise that the average increase at that stage will not exceed 5.9%.

This means that if contributions are averaged out over 12 months, the Discovery Health increase comes in at 2.95%. It also has the bonus of giving members some sorely needed stability and relief for the next six months.

Discovery Health CEO Ryan Noach says he expects claims to increase in the second half of next year, on the back of elective care that was deferred this year, the availability of a Covid-19 vaccine and the potential resurgence of Covid-19 infections.

For the year to date, Discovery Health reports a 20% to 40% decrease in the usual claim pattern, mainly due to cancellations of elective surgeries, a marked reduction in discretionary medical admissions, cancellations of preventative healthcare and wellness checks and a reduction in typical winter infectious diseases.

Jeremy Yatt, the principal officer of Fedhealth, concurs. “There have been a number of interesting developments from this lockdown. One is that pharmaceutical companies have reported selling less cold and flu meds this winter than they would normally because people aren’t socialising as much and getting sick,” he says.

Yatt defends Fedhealth’s decision to bring in an average weighted contribution increase of 8.8%. “Cutting benefits is not an option in times like these,” he says.

“Dipping into reserves is also not sustainable as it would have a knock-on effect every year going forward. This, together with the resurgence of elective surgeries, will ultimately result in exponentially larger increases year-on-year until it becomes unaffordable, along with interim increases.”

Yatt says Fedhealth’s reserves equate to four months of claims.

Jill Larkan, head of healthcare consulting at GTC, observes: “The power lies with members. If you use your medical scheme less, your contribution increases the following year will be less and 2020 is proof of that. Usage of medical services went down as people observed the strict lockdown, with the result that schemes are in a healthy financial position.” DM/BM