The Council for Medical Schemes, which regulates the medical scheme industry, released its 2014 Annual Report on all medical schemes in South Africa, and our comments are as follows:
The trend in the reduction of the number of medical schemes continues in South Africa. There are currently a total of 83 medical schemes, comprising 23 open and 60 closed schemes, with a combined total of 8.81 million members in December 2014. This is a year-on-year increase of 0.4% from December 2013. This increase is of concern as the number of people joining medical schemes appears to be decreasing. This could be owing to the ever-increasing premiums and the burden it creates on household incomes.
In an attempt to advance access to quality and affordable healthcare, the CMS has developed a proposal to introduce low-cost benefit options to those who can’t afford to belong to a medical scheme. There has been support from government and industry for this proposal and the Council has approved the LCBOs framework, allowing medical schemes to apply for registration.
Both the average age of beneficiaries and the pensioner ratios have increased since 2013, and this is a constant challenge for medical schemes in South Africa, given that they are based on a community rating system. This means premiums are standard and not determined by risk; as a result, medical schemes are constantly trying to bring on young and healthy members to offset the cost of older and high-risk members. There is a concerning increase in the amount paid by medical schemes for specialist benefits between 2013 and 2014. The increase was 12%, and this could indicate that medical scheme members are getting sicker or that providers are increasing their rates.
In our view, it could also be a unique trend among South Africans, who are tending to go straight to a specialist for treatment instead of first seeing a GP, who would then refer them to a specialist. Considering the decline in the number of new members joining medical schemes, this will only add to the challenges that medical schemes are faced with.
On a positive note, there was an increase in the number of claims for prescribed minimum benefits (PMBs) from 2013, possibly indicating an increase in awareness about PMBs by consumers.
The increases in non-healthcare expenditure (that is, administration fees, managed care fees, broker fees, and so on) rose by 7.1%, and because of the high increases on non-healthcare expenditure in previous years, the CMS has been keeping a close eye on medical schemes. Although there have been some decreases in non-healthcare expenditure, there are components, such as advertising and marketing, consulting and legal fees and trustee remuneration of non-healthcare expenditure that are increasing and require attention. The CMS works in the interest of members and will ensure that any expenditure adds value to its members and the medical scheme.