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Why medical scheme increases are so high

High healthcare service costs and cost pressure from members are the main drivers of contribution increases.

A collective groan went up after medical scheme members received their recent premium increase announcements for 2017.

Loudest were probably Discovery Health Medical Schemes’ (DHMS) members who, as the largest group, are apt to make the most noise.

Consumers are under financial stress, burdened by sloth-like economic growth. To see medical premiums increase annually by more than consumer price inflation, is not easily accepted.

Household budgets are already stretched to limits and medical scheme membership makes up a significant part of monthly expenses.

As a medical scheme member myself, I am part of the group that sighs yearly when premium increases are announced.

Whatever scheme you belong to, you are not alone. Some of the open schemes that have announced their increase averages are for instance DHMS at 10.20%; Bonitas 11,90%; Momentum at 11.00%; Fedhealth at 12.70% and Medihelp at 10.90%. (See table below for more 2017 increases). 


Examples of premium increases for 2017:

Keep in mind that the average increase doesn’t mean it is the same increase on all options – it is the median over all the options. Bonitas and Medihelp are probably the only funds that have the same percentage increase on their upper and lower range options.

Usually the increases on options differ subject to how different cost factors affect each option, such as usage and tariffs of services.

In the Discovery stable for instance the Executive (11.9%), Comprehensive (11.9%) and Coastal Core (14.9%) plans saw the highest increases because of higher usage and service costs on these plans specifically.

Why so high

Medical scheme increases are generally higher than CPI, which stood at 6.1% for September 2016, because it is linked to medical inflation.

The general rule of thumb is that medical care and health expenses inflation is approximately 2% to 3% higher than CPI, according to the Alexander Forbes Health Diagnosis 2015/2016. This is a global trend and not limited to South Africa.

The following graph gives an indication of the average headline contribution increases announced by medical schemes since 2006 and compares this to average CPI:



Source: Alexander Forbes Health Diagnosis 2015/2016 (An arithmetic average was taken for illustrative purposes and only included the medical schemes where this information is available. These increases are based on the headline increases announced by individual schemes and the method of calculation may vary. It does, however, provide some useful information about real contribution increases faced by members.)


This higher medical inflation is mainly due to high increases in healthcare service provider fees; a rising burden of disease; increasing utilisation of benefits; new medical technology; new medicine; the requirement to maintain reserves of 25%; and benefit enhancements. 

Basically it means that healthcare service costs (so-called supply-side inflation) are higher and the main driver of contribution increases, but there is also cost pressure from members, which medical schemes calls “demand-side inflation”.

Compared to a decade ago, schemes in general treat more people with diseases such as cancer, diabetes and chronic illnesses.  And each year, more members use more of the benefits available to them, which increases healthcare costs for the scheme. 

DHMS says this is mainly due to the impact of adverse selection. This means more members tend to join and remain on the scheme because they have an immediate need for the benefits, as opposed to joining the scheme without claiming. 

Remember that schemes work on the concept of risk pooling, where the risk contribution charged to members is based on a combination of expected medical and non-healthcare expenses; as well as the returns expected from the scheme’s assets.

On the supply-side schemes can negotiate costs for instance with network providers to lower fees for certain services. They are not able to negotiate costs of medicine though, as these are regulated.

If schemes can’t fund the increased expenses out their investment income, they have to increase contributions to carry the costs. 

The role of reserves

The Medical Schemes Act requires that medical schemes have a solvency level of 25%. This is usually maintained through a combination of investment return on existing reserves and an extra increase in contributions.

The extra contribution increase required to maintain solvency differs among schemes, depending on their level of investment income and solvency rate.

To stay or not to stay

Medical scheme membership can form a substantial part of a family’s monthly expenses and premium increases are not taken to kindly. And maybe because schemes announce their increases towards the end of the year, at a time when you realise that the December holiday expenses are coming, it’s even worse.

Don’t change to another scheme or plan just because the premium increase of it is lower than your current option. To get the best value for your money, compare the benefits, exclusions, added value and service delivery and how it will cover for your specific needs.

Maybe even more than with other “insurance grudge purchases”, medical cover can be quite a lifesaver if you need proper medical care.

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Don’t believe the reasons given are the real reasons. The SA medical profession is hell bent on charging on everything needed or not in an inefficient time wasting environment, to mention but one; why do they still insist for the completion of their stupid forms when everybody else is computerised, why can a patient complete their form before arriving together with the ability to upload the required supporting documentation e.g. ID conformation of address etc.
The medical aids also bring this on themselves; if one has a healthy year, you earn interest on your “medical savings account” only to be taxed on the interest by SARS, surely this is the most stupid idea ever, now, if that the case, just spend it needed or not. Surely these illustrious clever Medical aid owners can come up with something more innovative. The real reason way things are the way they are is self-imposed like the rest of our fantastic country!

Never increase YOUR OWN intake beyond that which the host can tolerate.
In short, sadly the ANC’s lunatic scheme for National Health Insurance just got a massive boost in public interest.
Oh, and this is for those same parasites: Eventually we all sit down to a banquet of CONSEQUENCES.

I changed mine from Bestmed simply because I have had enough of competent Case Managers who displayed Attitude and Poor Client Service and when one points out to them that they have made a mistake , one is then referred to their Client Service Centre , who sends a pre-loaded message of exclusions that don’t apply to the problem anyway .

Keminsky9, which med aid savings accounts generate interest? I’ve never heard of that – never mind Sars taxing it? As far as I know MSAs are just voluntary options which just effectively upfront to you a portion of your own future monthly contributions for the year for spending?

I seriously doubt that MSAs are a major cause of medical cost inflation.

It’s time now for medical schemes to start increasing our premiums based on how much we make use of them. Just like in short term insurance where there is a penalty or loading for those who keep claiming, I recommend that medical schemes start increasing the premiums in the same way. That will ensure a lower level of claims, and will also ensure that those of us who keep ourselves healthy and do not claim, are not penalized by those who claim on a regular basis.

Kirsty, medical schemes are legally barred from individual pricing by the Medical Schemes Act 1998. They may also not exclude anyone who applies for membership.

These two factors are particularly important in understanding all of this.

It depends how you read this . I recently switched Med Aids and the Law allow penalties to be applied to applicants . The Older you are the heavier they are ( Age Discrimination ??? ) Therefor an Individual pays an Individual Premium based on the Penalty . Surely that relates to Individual Pricing ?? Just saying

B James, the penalties are because of waiting until you are of an age when you start having major medical problems in order to join a medical aid. In other words, you have not been contributing the risk pool and expect to rely on the funds in that pool that others have accumulated over the years. They are Late Joiner Penalties.

Hi Bjames, Med Aids may apply Late Joiner Penalties (LJPs), which are regulated, if applicants have not been on a SA med aid for x years previously. Age is only factor as far as that time period may be related. If you have moved from another med aid and had LJPs there then yes they would transfer with you. What they have likely done with you is given you a 3 month general waiting period and 12 month condition specific waiting period which they are entitled to do (and which the existing members would most certainly want them to be applying!)

I think one of the reason is that people have the attitude, if I have to pay so much might as well use it as much as possible. My ideal medical scheme would be a large patient payable excess per illness, like car insurance. This would discourage people from running to the doctor and specialists with any small problem. If I had to pay 5-10000 Rand for an illness and the insurance company would pick up the rest it would discourage me from excessive use but it would still provide enough cover that a serious illness would not bankrupt me. If a person does not want or incapable to save for such cases he could stay with the current arrangement and pay through the nose. I am sure the cost of such insurance would be lower than the current hospital insurance.

The benefits of Medshield’s high reserves coming through there….happy with increase compared to the others….

One day I am gonna open up my own medical Aid!!!

The REAL reason for exorbitant % increases is the unscrupulous Doctors always referring you to another Doctor / Specialist. This is because they earn from your visit and then earn a commission from the person you are referred to!
A recent example
Referred by Doctor to radiologist. Radiologist back to Doctor. Doctor to another Doctor. 2nd Doctor to Pathologist for blood. Pathologist back to Doctor for results only to find out nothing is wrong!
Every different visit earned the originator commission/ income!

I have read many’s comments on here and I get a wiff of what I am increasingly getting worried of – blaming the service provider (read doctor)
Now, up front, my wife is a doctor, so there full disclosure, but I recently had my fair share of co-paayment shock due to the brith of my daughter

My biggest gripe is – the WHAT you pay, and the HOW you pay gets so intertwined that no one knows anymore. And therein, I believe lies the problem – lack of transparency

Why should the first question be when asking about fees “What fund are you on”. Firstly I should not ask, you should proudly display your fees. Doctors should quote, without asking which medical aid you are on. And it should be so clear simple and comparable between doctors. Force that – not the regulation of the fee. I will then choose which I can afford.

Then, funds stop your “We pay x% of fund rates” when you talk to mee. Your rates all differ, and 1000% of R10 is not very much. Funds should be forced to quote hard and fast Rand numbers.

I still wonder why Discovery will not require of me to use their credit card, back the facility with my medical aid credits, and allow me to pay cash at the providor and settle the credit with my fund. I have been doing this for the last here (pay cash rates and claim back) and I have saved the fund in excess of R10 000 for the year. No imagine everyone on Discvovery saved that for the year.

When we force transparrency into the process, market forces will take care of the rest. But we must remember, over regulate and fix the doctor’s fee will lead to mass a exodus. It is unfortunately a very mobile skill in global terms.

Relevant points: First one, where are the details from these medical schemes so-called CEO’s as to what COST CUTTING MEASURES they are implementing? Such as STAFF REDUCTIONS, rigorous follow-ups as to unnecessary and frivolous claims? Also, how many cases of outright FRAUD by both doctors and members have resulted in convictions and people getting exemplary prison sentences?
I have asked my Bestmed CEO for this type of info and so far have received a big fat obese NOTHINGNESS in reply.
Just for professional interest sake my personal contribution for 2017 at Bestmed has ROCKETED up by 17.8%, they are effectively now wanting to charge me THREE times the official inflation rate. YIKES!

End of comments.





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