Proposal to cap medical aid price increases for 2023

The Council for Medical Schemes (CMS) recommends that increases in medical aid contributions for 2023 remain at or below inflation (5.7%).

The association’s latest circular found that in the context of the current economic climate – characterized by runaway inflation and rising interest rates – dues increases above inflation are simply unaffordable for most members. medical diets.

The proposed increase of 5.7% follows a recommendation of 4.2% for 2022.

The CMS is a statutory body established by South African law. It provides fixed requirements that must be met by medical plans when determining annual medical plan premium increases and benefit changes for the 2023 benefit year.

To estimate price increases in the health sector, the CMS relies on the Consumer Price Index (CPI), as South Africa does not have an official medical price index, a indicated the CMS.

According to the latest SARB inflation forecast, as outlined in the July Monetary Policy Statement (MPC), headline inflation is expected to average 5.7% in 2023 before moderating to 4, 7% in 2024.

“While CMS encourages the industry to implement affordable dues increases for members, CMS is also aware that due to unique industry-specific cost-push factors such as the impact of the rate exchange rate of the weaker rand, disease burden, etc. , some plans may require contribution increases in excess of inflation,” the CMS said.

The CMS requires plans to go to the board for approval. If an increase greater than 5.7% is proposed by a plan, then the board should be informed of the reason.

The CMS added that all pricing models for the 2023 benefit year must be data-driven and subject to an independent actuarial review.

For plans that are financially well-off, the board recommended that they could provide additional financial relief to their customers by implementing contribution increases that are less than the recommended CPI-related increase.

According to the CMS, medical plan premium increases have consistently exceeded the CPI, except in 2021 during the Covid-19 pandemic, when it was the first time in more than a decade that the industry implemented a contribution increase lower than the CPI.

Price change

Medical schemes are considering deferred payments or simply pass-through of costs, which is driving a change in traditional pricing for medical aids in South Africa, says Lee Callakoppen, senior director of Bonitas Medical Fund.

As a result of Covid-19, medical plans have changed how they apply fee increases; new trends include:

  • Postponement of increases;
  • Dip into reserves to reduce increases and;
  • Announce delayed increases above the CPI.

Bonitas has used R600 million of its reserves this year to help limit dues increases below CPI for around 82% of its members, Callakoppen said.

Changes in the way medical plans manage contribution increases to accommodate members during difficult times have had unintended consequences, such as when plans choose to defer increases – they typically see members pay more than the industry average.

“For example, a plan that offered a contribution deferral for the first six months of 2021, but then applied a contribution increase of 5.9%, when the industry average was 4.6%.

Callakoppen said the contribution increase percentages could not be looked at in isolation without looking at the rand value of the contribution.

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