Medical scheme 2024 membership contribution hikes are a bitter pill to swallow
It’s that time of year again, when medical schemes start announcing their membership contribution increases for 2024. And, as usual, many schemes are engaging in smoke and mirrors as they jostle for your business.
More than a month ago, the Council for Medical Schemes (CMS) “advised” that schemes should keep their 2024 contribution increases at 5%, in line with inflation and in light of the current economic environment.
However, this “advice” seems fairly hollow given that, over the past decade, medical scheme contribution increases have consistently exceeded the Consumer Price Index (CPI), except for 2021 and 2022.
Medical scheme contribution increases vs inflation
Mfana Maswanganyi, executive of regulation at the CMS, says the lower-than-CPI contribution increases in those two years were mainly due to a collaborative effort between the CMS and the industry aimed at insulating members of medical schemes against the adverse economic climate in the aftermath of the pandemic.
“Against the backdrop of the current adverse macroeconomic conditions characterised by multiyear higher interest rates due to stubbornly higher inflation rate, volatile domestic currency and surging energy prices and overall lacklustre economic growth, it is evident that most household budgets will remain constrained for the foreseeable future, leaving most consumers in a precarious financial position,” he says.
Maswanganyi asked medical schemes to limit their increases in contributions to 5% to cushion consumers against further financial distress and the probable risk of losing their health insurance cover due to affordability constraints.
However, Gary Feldman, executive head of healthcare consulting at NMG Benefits, says limiting medical scheme increases could affect the sustainability of the entire healthcare ecosystem, including patients, healthcare providers and funders.
“The bigger challenge is that private healthcare is not sustainable in its current format. There is clear overservicing in many areas. It’s essential that the industry finds ways to manage rising healthcare costs, but restricting contributions to medical aid schemes is a blunt response to a complex and nuanced situation,” he says.
Feldman observes that during the Covid years, medical schemes changed the way they implemented contribution increases, going so far as to defer increases and dip into scheme reserves when required. However, these are not sustainable solutions.
“In general, medical inflation is around 3% higher than the consumer price index. What that means is that we can expect to see increases of at least CPI plus 3%, if not more.
“In fact, we will potentially see several medical aids putting through double-digit contributions in the coming months to stay abreast of rising costs and claim levels,” he says.
And he has been proven right.
Schemes have announced weighted average contribution increases ranging from 7.5% to 10.8%. Remember, those are the weighted average contribution increases, so your contribution increase may vary on either side of the number being publicised by your scheme, and will depend on which benefit option you are on and how many dependants you have registered.
Discovery Health Medical Scheme has announced a weighted average contribution increase across all benefit plans of 7.5% for 2024 and has also made much of the point that its contributions are, on average, 12.3% more affordable than those of comparable medical schemes.
However, the true test comes when you look at the benefit changes and then relate that to the contribution increase you are being asked to pay.
In most cases, the medical scheme model over the years has relied on the reduction of benefits while asking for an increase in contributions.
This may take the form of a smaller medical savings account or day-to-day benefits, which technically are paid out of your monthly contributions; or you may find yourself on the receiving end of higher co-payments.
At least 34% of Discovery Health Medical Scheme (DHMS) members will absorb a contribution increase of 5% to 10%. As per Discovery itself, at least 27% of its members will have contribution increases higher than 10%, peaking at 12.9%.
Dr Ryan Noach, chief executive officer of Discovery Health (the administrator of DHMS), says the 2024 increases for DHMS members, off a very strong current performance and market position, will ensure that contributions keep pace with medical inflation, while “maintaining value and affordability for members of the scheme”.
Lee Callakoppen, principal officer of Bonitas Medical Fund, says the contribution increase calculation is a “delicate balancing act”.
“The percentage increase required is methodically worked out by our team of actuaries who determine the minimum increase against ensuring the financial sustainability of the scheme while meeting the regulatory guidelines and requirements,” he says.
The weighted average 2024 contribution increase for Bonitas members is 6.9%, starting at a low 2.7% and going up to 9.6%.
Damian McHugh, chief marketing officer for Momentum Health Solutions, says claims costs have been increasing to higher than pre-Covid levels, while inflation has also meant a notable increase in the average cost per claim.
“What you don’t want to see is increasing contributions coupled with reduced benefits, as we have recently seen a few examples of,” he says.
Having enhanced benefit limits by around 5.5%, in line with medical inflation, Momentum Medical Scheme’s weighted average increase for 2024 will be 9.6%. Fedhealth came in with the highest weighted average contribution increase of 10.8%. However, principal officer Jeremy Yatt pointed out that benefits had not been reduced as with several other schemes.
“What members need to watch out for is a slow erosion of benefits with seemingly minor changes like not paying in full for the chronic medication you have always used and suddenly requiring a co-payment,” he warns. DM