Navigating annual medical scheme increases: Why understanding them is crucial

Gary Feldman
4 October 2023
6 min read

Every year, South African medical schemes undergo a rigorous process of calculating and implementing annual contribution increases. These increases can significantly impact your financial well-being and the adequacy of your healthcare coverage. We delve into the importance of understanding how these annual medical scheme increases impact you and why they occur.

Financial preparedness

One of the primary reasons to grasp the intricacies of annual medical scheme increases is financial preparedness. These increases are not arbitrary; they are meticulously calculated based on various factors. Understanding when and how much your contributions will rise allows you to plan your budget accordingly. This foresight prevents the shock of higher premiums and ensures that you can continue to afford your healthcare coverage without facing financial distress.

Plan evaluation

Annual medical scheme increases offer an excellent opportunity to evaluate the suitability of your current medical scheme and plan for your healthcare needs. By comprehending the reasons behind these increases, you can assess whether you are receiving value for your money. It's essential to ask yourself whether your current plan adequately covers your needs, especially in light of the rising healthcare costs. If you find that your current plan no longer aligns with your requirements, you can consider switching to a more appropriate plan.

Cost optimisation

Understanding the factors contributing to annual medical scheme increases, such as aging membership profiles, increasing healthcare costs, and technological advancements, empowers you to optimise your costs. As the demographic makeup of a medical scheme's membership evolves, so does the frequency of claims. When a scheme has a higher proportion of older members who tend to claim more frequently, it can lead to increased premiums. Armed with this knowledge, you can explore alternative plans or supplementary gap cover to ensure you maintain adequate coverage without overspending.

Long-term planning

Annual medical scheme increases should not be viewed in isolation. Instead, they are part of a broader healthcare landscape that impacts your financial security and well-being over the long term. Understanding the challenges faced by medical schemes, such as rising healthcare costs and changing demographics, allows you to make decisions that align with your future healthcare needs. It enables you to plan for your healthcare coverage not only for the current year but for years to come, ensuring the sustainability of your healthcare security.

Armed with a comprehensive understanding of how medical scheme increases impact you, you gain the ability to advocate for your rights as a medical scheme member. You can actively engage with your scheme, ask pertinent questions about the increase, and seek clarification on how they intend to mitigate the impact on members.

Comprehending how annual medical scheme increases affect you is paramount for your financial stability, healthcare coverage, and the overall sustainability of the healthcare sector in South Africa. It empowers you to make informed choices that align with your health and financial goals. As these annual increases are a complex interplay of various factors, including healthcare costs, regulatory guidelines, and demographic shifts, taking the time to understand them can be a valuable investment in your future well-being.

Why do annual medical scheme increases occur?

To understand the importance of comprehending annual medical scheme increases, it's essential to delve into the reasons why these increases occur. These are multifaceted and reflect the dynamic nature of the healthcare landscape in South Africa.

Prevalence of chronic disease

One of the driving forces behind annual medical scheme increases is the increasing prevalence of chronic diseases. Data collected over the years indicates a steady rise in the number of medical scheme members diagnosed with chronic conditions. In 2014, approximately 13% of members had a chronic disease, but by 2020, this percentage had increased to approximately 16%. The treatment and management of chronic diseases place significant financial pressure on medical schemes, contributing to the need for annual increases.

Regulatory framework

The Council for Medical Schemes (CMS) plays a crucial role in overseeing and regulating private health financing in South Africa. The CMS is responsible for ensuring that medical schemes operate within a regulatory framework that promotes affordability and accessibility to quality healthcare. Without regulatory limits on annual increases, there is a risk that premiums could become unaffordable for a significant portion of the population. By imposing restrictions on increases, the CMS aims to strike a balance between maintaining the sustainability of medical schemes and ensuring affordability for members.

Inflation and economic conditions

The broader economic landscape also influences annual medical scheme increases. Inflation, as measured by the Consumer Price Index (CPI), is a key benchmark used by the CMS to assess the affordability of annual increases. Economic conditions, including interest rates, inflation rates, and overall economic growth, can impact the financial constraints faced by the majority of the population. These conditions, when unfavourable, further highlight the need for controlled increases to prevent additional financial burdens on members.

Factors impacting increases beyond CPI

  • Aging membership profiles: A shift towards an older membership base, which tends to make more claims, can drive up costs.
  • Rising healthcare costs: The general cost of healthcare is increasing both locally and globally, affecting medical scheme expenses.
  • Technological advancements: Keeping up with innovations in healthcare often requires costly equipment, treatments, and procedures.
  • Demand for medical services: Introduction of more affordable plans can lead to increased demand for medical services.
  • Lack of beneficiary growth: A lack of growth in younger, healthier members can disrupt the balance of cross-subsidisation between age groups.
  • Declining health status: The increase in chronic conditions leads to more claims and a heavier financial burden.

Challenges faced by medical schemes

Medical schemes face a challenging balancing act. They must manage the cost of claims, driven by their unique membership profile, while also dealing with the escalating costs of medical services in the healthcare sector. Factors such as fraudulent claims, coverage of Prescribed Minimum Benefits (PMB), and the adoption of new technology further add to the complexity. Moreover, in an environment marked by high inflation, record-high fuel prices, and high unemployment rates, South Africans are exploring alternative healthcare funding options, affecting the profile of medical scheme memberships.

Communicating with members

Medical schemes are required to communicate annual increases to their members transparently and well in advance. These communications must be in plain, simple language and provided within a fair timeframe, allowing members ample time to prepare for the increase.

T&Cs apply. NMG Consultants and Actuaries (Pty) LTD is an authorised financial services provider FSP 12968


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