Tough time for players as the recession bites

7/15/2010 1:00:03 PM

MEDICAL schemes have been through tough times during the recession as some members have withdrawn and others have selected lower-cost options in an effort to conserve funds.

Lee-Ann du Toit, chief marketing officer at Momentum Medical Scheme Administrators, says it has been a challenging time across the industry.

“Last year, especially, a number of schemes were under strain, while other schemes managed to maintain relatively sound financial health.”

She says during a recession members typically claim more as their health takes a knock due to the additional stresses they face.

In addition, schemes faced spiralling medical costs as the young and healthy that would otherwise subsidise older members left schemes in larger numbers due to affordability issues.

“Two years ago the average member age was about 42, but it is about 44 now. This increases claims by about 3% above normal medical inflation.”

The signs in 2010 are more positive but thus far the industry has not experienced a significant increase in scheme membership. An exception has been the Government Employee Medical Scheme (Gems).

Du Toit says Gems is showing the way when it comes to bringing more people into the private healthcare net.

“Government has a strong subsidy policy in place and this shows other employers what can be achieved.

“The lower-income market is growing but not as much as was hoped. Much of the present growth in lower cost options is due to existing members buying down.”

She says increased use of lower-cost options is changing perceptions and helping people to realise that while full medical cover is one choice there are alternatives that may suit their circumstances and needs better.

“People are focusing more on what they really need. They are considering options such as making co-payments or using facilities and medical service providers that belong to their scheme’s network to reduce costs.”

She says people often have different priorities when selecting their options. For example, many lower-income members opt for cover that pays day-to day medical expenses, while higher income bands may choose to pay everyday medical costs and have full hospital cover.

Dr James Arens, clinical operations executive of Pro Sano Medical Scheme, says there has been a significant change in the usual claims patterns, with claims on the increase.

“We have noted a significant hike in serious ailments requiring hospitalisation, such as cardiovascular illness, hypertension, strokes, heart attacks, and conditions such as depression,” says Arens.

“These stress-related conditions could well be linked to the stress factors caused by the recession.”

He says that there has been a rise in fraudulent claims as well as an increase in the number of people joining a scheme undergoing expensive hospital procedures and then cancelling their medical aid membership soon afterwards.

“When the total value of claims exceeds the members’ combined contribution for the year, the scheme is forced to go into its reserves. This reduces the scheme’s solvency ratio, which should be higher than the legislated 25%,” Arens says.

However, while medical schemes have been stung by the global recession, administrators of medical schemes have not necessarily been affected as they have predetermined contracts with schemes based on a fixed charge for a member a month.

“Another option for medical schemes is the self-administration model,” Arens says.