The following Healthcare Newsletter was issued by ACA Employee Benefits - 2019
The latest Annual Report 2017/2018 of the Council for Medical Schemes (CMS) highlights a number of interesting statistics regarding the medical schemes industry. Apart from providing membership statistics, including the number of beneficiaries on medical schemes in 2017 – which incidentally decreased from 8 878 081 in 2016 to 8 872 036 in 2017 (0.07%), the Report provides the number of beneficiaries per age group.
This provides for interesting reading:
Should a medical scheme’s membership remain exactly the same as in the previous year, the average age of the membership should increase by exactly one year. This is obviously not the case. Older members pass away, babies are born, members resign from schemes and others join schemes for the first time. For every year that the beneficiaries of a medical scheme become older, the claims increase by 2-3 percent. It is for this reason that every medical scheme wants its membership to remain as young as possible in order to keep claims and related costs under control. Schemes have specific strategies to attract young members. In South Africa, where compulsory scheme membership has not been implemented, young and healthy members’ membership is needed to cross-subsidise the cost of healthcare of older members.
It is quite interesting to therefore observe that the average age of the total medical scheme population increased from 32.5 in 2016 to 33.2 in 2017- an increase of 0.7 years. The pensioner ratio within medical schemes also increased from 7.9% to 8.4%. Obviously this contributes to the contribution increases with which we are confronted year on year.
The CMS Report 2017/2018 also provides some interesting facts about how members claim – specifically the increase in certain tests:
An interesting trend reported in the CMS Report is the increase in Efficiency Discounted Options (EDOs). These mirror image alternatives to normal benefit options, which provide discounted contributions to members in exchange for using strict networks of hospitals, are becoming increasingly popular as members seek solutions for the ever increasing contributions. Twelve schemes offered a total of 51 EDOs in 2017. Interestingly, EDOs were responsible for 32,3% of the total surplus reported by all medical schemes, yet represented only 20,4% of the membership. The average age of members on EDOs was 30,7 as opposed to 34,9 years of non-EDO membership. This shows that these options can provide a solution in terms of affordability, specifically to younger, healthier members. It is therefore not surprising that it has been proposed in the Medical Schemes Amendment Bill that EDOs should be entrenched in the Medical Schemes Act.
The White Paper on National Health Insurance (NHI) has suggested consolidation of medical scheme options (and even medical schemes) by 2026 as part of NHI implementation. As a result, the CMS has initiated engagement with schemes on the issue of scheme and benefit option consolidation. Discussions were also held with the panel of the Health Market Inquiry to explore possible ways to address consolidation in anticipation of amendments to the Medical Schemes Act and the establishment of the NHI Fund. The proposed consolidation process will focus on options with fewer than 2500 members that experienced operating deficits and are offered by schemes with lower than the 25% required reserve level, amongst other identified risk factors. Affected schemes have been cautioned to submit detailed turnaround strategies. Our assessment of the CMS Report indicates that there are a number of options falling within this category. The recent amalgamation of Spectramed and Resolution Health, both schemes with low membership options, is a case in point.