As the year kicks off and many of us perforce review our budgets, here’s a helpful guide to open medical aid schemes whose bewildering array of offers can easily have us making arbitrary, cost-ineffective choices. Like home-security, it might be a grudge purchase but it’s all about reducing risk, and with medical aids under unprecedented financial and legislative pressure, premiums won’t get any cheaper. It’s all about ensuring maximum bang for your buck and spreading your safety net as widely as financially possible. Medical inflation, driven mainly by unnecessary hospital admissions, pathology services and over-medication, is a harsh reality in South Africa, a country desperately and clumsily trying to address gross healthcare inequity via a National Health Insurance scheme. The entitled cynics among us will argue that the politically-driven enquiry into the healthcare industry, (findings due in the second half of this year), will confirm every tenet upon which universal healthcare is premised. There’s still some doubt as to whether medical aids will be allowed to fully supplement an NHI or not, but an NHI salary-imposed tax is a certainty – so a double-whammy is almost certain. Private doctors and hospitals are not the main drivers of medical inflation. Yes, doctors collude with patients to admit those on hospital plans, (instead of getting us just as effectively treated by GP’s) – and many hospitals operate as glorified hotels, cynically expanding their networks in spite of a dire healthcare staffing shortage (service levels vary, but let your own recent hospitalisation experience inform your evaluation of this low-quality-caring assertion.) Our quadruple burden of disease (including burgeoning Non-Communicable-Diseases, otherwise known as ‘diseases of lifestyle’) is not going away and is also driving your upwardly mobile medical aid premiums. So, what’s the answer? Take responsibility – for your best bang-for-buck medical aid and plan, and more importantly, your own lifestyle! – Chris Bateman
By Susan Erasmus
Cape Town – How much do you really know about the inner workings of your medical scheme? Here are some quick facts on open medical schemes in SA.
Whereas each scheme will readily provide you with the facts on themselves, not everyone has the time or the patience to go and do a comparative study. Fortunately, Alexander Forbes Health has done it for you in their Diagnosis 2016/2017. Some additional information comes from the Council of Medical Schemes.
Find out here what the facts are on open medical schemes in South Africa:
- Since the year 2000 to the present, the number of open schemes in South Africa has decreased by 24 from 47. There are now 23 open medical schemes in SA, to which anyone can belong. Many smaller schemes have amalgamated, making them less prone to market volatility. The bigger the scheme, generally, the more financially stable. A small open scheme can be derailed by a couple of large claims, but that doesn’t happen so easily to a bigger scheme.
- During 2016, Bonitas Medical Fund merged with Liberty Medical Scheme – the only amalgamation recorded during that year.
- Almost 59% of principal members covered on medical schemes, belong to open schemes. The other 41% are on restricted schemes. The numbers of dependants on medical schemes in general have decreased, pointing to financial pressure being experienced by principal members. This also indicates that members are most likely to add only family members who need medical attention – this could increase the financial pressure on all schemes.
- is the biggest open scheme in the country and had just over 1.2 million principal members and just over 1.4 million dependants.
- The top ten medical schemes, according to membership figures, are (in order): Discovery Health, Bonitas, Bestmed, Medihelp, Medshield, Fedhealth, Liberty (now merged with Bonitas), Sizwe and Keyhealth. Hosmed and Topmed come in at numbers 11 and 12 respectively.
- Six open schemes had a positive growth in membership numbers during 2015.
- The average annual increase in medical scheme contributions over the last 16 years has been 7.6%. Average CPI inflation has been 5.7%. Medical care and health expenses have gone up by average 7.7% per year during the last 16 years. Medical scheme contribution exceeds CPI by at least 1.9% on an annual basis.
- During 2015, open schemes had an overall risk claims ratio of 88.7%. This is proportion of contributions used to fund claims. The generally accepted benchmark for a claims ration is 85%. Excess funds are used to build reserves and pay for non-healthcare expenses, such as administration.
- The open scheme that had the highest claims ration in 2015, was Keyhealth (90%), followed by Fedhealth (86%). Discovery Health had a claims ratio of 77%.
- Open schemes spent an average of 10.4% of their contribution income on non-healthcare expenditure. Cost increases of non-healthcare expenditure increases with CPI. Non-healthcare expenditure includes administration expenses, broker commission and marketing fees, and bad debts.
- The open scheme with the highest non-healthcare expenditure was Sizwe (just over 16%), followed by Medihelp (just over 15%). The open scheme with the lowest non-healthcare expenditure was Medshield with just over 11%. Discovery Health spent just over 13% of its contribution income on non-healthcare expenses. On average (both open and restricted schemes) the industry spent 11% on average on these expenses – about R275 per member per month.
- Open schemes recorded an operating deficit of R565.63m in 2015. This was down from an operating surplus achieved in 2013 of R626.54m. In 2015 only 8 of the 23 open schemes achieved an operating surplus. When there is an operating deficit, schemes have to rely on investment income to break even.
- Open schemes have 45.8% of their assets held in cash. Schemes may not hold more than 40% in equities (stocks and shares) and the limit on property-related investments is 10%. There is a preference for cash investment, often driven by a need to have access to liquid assets.
- Schemes are required by law to have 25% of their assets in a reserve fund. By the end of 2015, open schemes had just under 30% of their contributions in reserve, as opposed to just under 40% held by restricted schemes.
- Of the open schemes, Medshield has a solvency level of just over 50%, Sizwe of just under 50%, Fedhealth about 35%, Keyhealth just over 30%, and Discovery and Bonitas very close to the legal requirement of 25%. – Fin24
(Sources: Alexander Forbes Health Diagnosis 2016/2017; The Council for Medical Schemes)