Deadline looms for swapping of medical schemes

Medical Scheme beneficiaries have until Friday 30 November 2018 to change their options by either swapping, buying up or down in their schemes. Beneficiaries can only change their benefits options once a year.

Beneficiaries are faced with above inflation increases in their annual subscriptions. Several schemes have already announced annual increases for 2019. According to Statistics South Africa, inflation or the Consumer Price Index (CPI) in South Africa currently stands at 4,9% while healthcare inflation is even higher at an estimated 5,4%. Medical schemes typically add 3% to this inflation figure (CPI) as part of the process to determine their annual contribution increases.

The Board of Healthcare Funders of Southern Africa’s Head of Research, Charlton Murove said: “The annual increases announced by schemes are varied and most are in excess of CPI. This means in real terms medical scheme contributions will take a bigger portion of household income”.

Healthcare cost drivers

The cost drivers for medical schemes in 2018 are spread across different aspects.

Dr Vusi Memela, the Principal officer of Hosmed Medical Scheme, broke down some of the cost drivers.

“Hospital admissions account for 41% of Scheme claim costs, Management of Chronic disease and surgical operations by Specialists for in and out of hospital constitute 13% of claim costs; 15% of claims is Medicines costs, which is made up by dispensing costs and single exit price.  Auxiliary services make up another 4%,” Dr  Memela said.

Additional expenses by way of out of pockets payments to cover some of the healthcare costs are often necessary as benefits run out before the new cycle.

Government Employee Medical Fund (GEMS) Principal Officer Dr Guni Goolab said to avoid additional out-of-pocket payments members should try to obtain services  within the same network of doctors and hospitals – where such networks are part of the benefit options.

“An additional point, which is relevant in 2019, is the VAT increase experienced on 1 April 2018. The cost of healthcare increased once the VAT increase became effective, but medical schemes were not allowed to adjust their contributions during 2018 to allow for this,” Dr Guni Goolab said.

Dr Goolab adds that the Medical Schemes Act provides some protection against co-payments on Prescribed Minimum Benefits, but schemes often have restrictive designated service providers offering lower cost options.

Impact of member mobility between schemes

The movement of members between schemes or benefit options can destabilise a scheme’s financial position. Dr Memela said changes can also lead to membership losses and increase the risk of anti-selection – where schemes have subscribers with a risk profile higher than what their premiums cover.

“To mitigate against this risk, the scheme may elect to apply existing underwriting policy and impose waiting periods, either generally or condition specific, and late joiner penalties where applicable,” Dr Memela advised.

Options for schemes and beneficiaries

Board of Healthcare Funders (BHF) of Southern Africa understands that given the complex economic environment the most natural temptation for many beneficiaries is to select a benefit option that matches their budget. Many also opt for benefit options that cover hospitalization only, commonly referred to as hospital plans.

Murove said selecting benefit options is made harder by the large number of options and how schemes design benefits: “Caution must be exercised as the decision should not only consider the finances. The health needs of the family must also be considered. If in doubt it is best to speak to a knowledgeable broker.”

Dr Guni Goolab said the scheme and option selection process can be made smoother by a free flow of information.

“Members should be aware of differences in benefits between medical schemes; including any subsidy benefits that may be offered on restricted schemes. Members should also contact the scheme to see if they would be underwritten after changing to another scheme.”

He said schemes should provide information like price differences between options and schemes, potential waiting periods and the benefits available for the members and their beneficiaries.

Medical Schemes are also required to issue membership certificates to members within 30 days of the termination of membership.