June 18, 2024
The Council for Medical Schemes (CMS), has recently announced guidelines for medical schemes for the 2023/2024 medical aid increases. They are proposing that due to the economic pressure that most South Africans face every month, scheme’s should aim to increase below CPI by 5% plus any utilisation margin to keep the product sustainable.
How do medical aids determine the price of a product?
It’s important to understand that firstly, all medical aids – regardless of whether the product is a hospital or comprehensive plan, must include a prescribed set of minimum benefits. These benefits come at a starting cost of approximately R700. Once that’s done, the level of additional benefits and access to facilities, further influences the price. Medical aids also include co-payments and benefit limitations on common cost drivers like scopes and scans which helps manage the price of the product, but this isn’t good news for members, as co-payments hurt your pocket. There are also non-healthcare costs that are included in the monthly contributions. These costs go towards administration, advisor and marketing efforts and are also monitored by the CMS.
It’s not just about the structure of the product, it’s also about the scheme’s ability to attract young, healthy lives as this market has a lower claims experience than an ageing one. For 2024, the CMS makes provision for schemes to increase by 5% plus utilisation. Utilisation is the claims activity of the membership profile actively using the product so in a younger population, a lower claims experience will result in a lower utilisation profile. In a recent CMS circular, the average utilisation increase component is expected at 3.2% for 2023/2024 renewal period. CPI at 6%, also plays a key role in influencing price.
All medical aids submit their proposed benefit and price changes to the CMS every year for approval. Product changes must be approved by the Council before schemes make them available to consumers.
How do I know what’s reasonable?
Don’t be fooled by average percentage increases. Rather check the increase in rand terms as this is the real impact on your pocket. Then make sure you have access to an easy-to-understand year on year benefit change report. This should give you a clear indication of whether key benefits have either been increased in your favour or decreased to your detriment. A reduction in benefits and increases in co-payments are simply a mechanism of passing costs on to members. So, if your benefits are reducing instead of going up, you’re technically in for more than the stated percentage increase.
You’ll only know what’s reasonable if you’re able to compare products. By comparing you can check if you’re getting the best benefits at the lowest price. From October to December each year, all medical aids are announcing changes for the forthcoming year. This is the time to give your medical aid a check-up as you can change options within your scheme without any penalties.
If you think your plan is too “light” think twice before upgrading
Running out of “medical savings” that covers out of hospital expenses often spurs consumers to want to upgrade their plan. However, the cost of upgrading your product is often not worth the additional “savings” benefit you’ll get. It’s Important to remember that the money in the “savings” account is your money that you’re giving to the medical scheme to pay for your out of hospital costs so it’s often best to rather self-fund any additional out of hospital expenses from your own pocket than upgrade your plan. An upgrade is worthwhile considering if there are major medical expense or hospitalisation benefit limitations on your existing plan that don’t accommodate a health condition.
Is the increase just too much and makes you want to cancel your medical aid?
Many South Africans are feeling the pinch and are struggling to stay insured. However, being caught without medical aid can be life threatening. Before cancelling, always check if you can downgrade your medical aid plan to the cheapest your scheme has to offer. This might mean co-payments on certain in-hospital procedures and other limitations, but you could consider Gap cover to boost these shortfalls. Gap cover is an inexpensive product that supplements the shortfalls in your medical aid product. It often enhances in-hospital cover even more than an option upgrade so check the numbers on down-grading your plan and adding Gap cover before cancelling.
This piece was written by Alexia Graham, a Director of Hippo Advisory Services who focus on employee benefit solutions, including health and wellness, retirement and group risk solutions, for large companies.
