Is it time for Plan B?

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It is widely recognised that inflation of medical costs outstrips overall consumer inflation and, after many years of medical aid premiums doing exactly this, it could eventually be time for medical aid members to re-evaluate their options.  

Jill Larkan, Head: Healthcare Consulting at leading financial and wealth advisory business, GTC, cautions members that, following the publishing of recommended maximum price increases for 2020 by the Council for Medical Schemes’ (CMS) earlier this month on 9 July 2019, medical aid members could expect an average increase of around 8.8% in their premiums for the year ahead. 

The CMS has published its annual set of guidelines for each medical aid, considering macro-economic factors such as key economic indicators, employment statistics, household consumption and statistical trends illustrating how medical aids have tended to increase their premiums. 

Based on this information, the CMS has also published its guideline premium increases of 5.4% going into 2020.  The CMS circular also cautions medical aid schemes not to exceed this proposed increase. 

“However, medical aids routinely exceed these guidelines by an annual average of 3.4%,” says Jill Larkan.  “According to CMS data, an ever-growing portion of the increase is attributable to differences observed in medical aid utilisation, which reflects members’ usage patterns of different service providers annually.”

Acknowledging that medical aids have to deal with fraud and wastage, the CMS has asked medical aid schemes to submit a detailed analysis of these factors when motivating their increases for 2020, as it has noted that increase assumptions submitted by the medical aids seldom correlate with worsening or improving demographic or disease profiles within medical aid schemes.

“Whether or not the medical aids can substantiate their proposed increases, the CMS has ultimately recommended a 5.4% price guideline going into 2020 and we can expect that with an additional 3.4% excess as evidenced in previous years, premium increases are likely to average 8.8% – probably a little higher, given the effect of the increased utilisation pattern previously mentioned – across all schemes and plans,” says Jill Larkan.

On this basis, Larkan advises both companies and individual medical aid members to carefully consider their plan types for 2020. 

“We recommend employers – as well as individuals who do not form part of an employer group – begin their annual assessments with regards the choice of schemes and plans offered, as a priority. Salary increase percentages into 2020 are unlikely to match an 8.8% increase in medical aid premiums, so we’d like to see employers assess the best value-for-money options available to employees, who are no doubt under increasing financial pressure,” she says.