By Phumelele Makatini
The 2024 medical scheme contribution increases are a bitter pill for family finances to swallow following several years of cost containment in the industry and a rebound in claims following the pandemic.
It's crucial to recognise that escalating claims and rising medical costs are not the sole culprits behind the increasing costs associated with membership of a non-profit medical scheme. In order to ensure long-term viability, it is imperative to establish a robust equilibrium between contributions and the cost of covering healthcare expenses for the enrolled population.
So, what are some of the factors that could help bring down the costs, making private healthcare cover affordable for more South Africans?
- Employers investing in health cover
South Africa has 16.3 million formally employed individuals, and only 8.9 million medical scheme members. The productivity benefit to employers of ensuring staff have reliable access to quality healthcare when it is needed would make this mutually beneficial. If basic health cover were a standard employment benefit, this would help to mitigate financial risk through improving the age profile of the pool of contributors, thereby reducing the cost of membership for all.
2. Join when you’re young
The majority of healthcare costs are incurred in the final years of life, yet you never know when you may be involved in a life-threatening accident or develop complications from illness unexpectedly, like many young people did in the early stages of Covid-19.
Medical schemes provide financial peace of mind for a range of pre-set healthcare needs, including these prescribed minimum benefits, paid for in predictable monthly contribution fees. The cost of cover is not calculated according to the member’s risk profile, even though it increases with age, although late joiner penalties can be applied for people who wait until they are older to join.
3. No hokey-pokey
Medical scheme membership is like marriage in that it is a partnership of trust, in sickness and in health. The risk for all members increases when people decide to join a medical scheme or add dependants only when they need expensive healthcare interventions.
Opting in and out of medical scheme membership like this is known as anti-selection, and it significantly drives up the cost of contributions for all. The value of healthcare is incalculable, and if funding is contributed to and used responsibly as intended, it can be more affordable.
4. Regulatory completeness
The incomplete regulatory framework medical schemes operate within is driving up costs. Implementation of regulations to help establish membership for all working people and a risk-equalisation mechanism would enhance the viability of medical scheme risk pools by increasing young, healthy membership.
5. All for one and one for all
The principles of social solidarity are the basis for medical scheme sustainability. Everyone’s monthly contributions enable the scheme to pay for your medical claims, just as your contributions are part of funding other members' claims. From another perspective, you pay smaller amounts monthly towards covering your future health claims – which could be much more than what you paid in terms of contributions.
As individuals, we can only enjoy the financial security of private healthcare funding if we put in what we expect to get out. For medical schemes to provide the necessary protection to members, it is also essential to build reserves as a safety net in case of unforeseen health costs, such as pandemics and natural disasters.
Addressing these five factors with mandatory cover and other reforms could reduce the minimum benefit package costs by an estimated 17% to 23%, bringing affordable private healthcare to many more South Africans relatively quickly with existing resources, thereby helping to alleviate pressure on overburdened state facilities.
In a rapidly evolving healthcare landscape, it is clear that the sustainability of non-profit medical schemes hinges on the delicate interplay between appropriately controlling costs, ensuring equitable contributions, and maintaining high-quality healthcare services. As we navigate these challenges, let us remember that our collective commitment to striking this balance is not just a financial endeavour but a testament to our dedication to providing accessible, reliable healthcare for all.
By embracing innovation and fostering collaboration, while staying true to our not-for-profit ethos, we can continue to shape a healthcare future where affordability and quality healthcare are not just aspirations but realities for every member of our society.
* Phumelele Makatini is the chief executive officer of the Health Funders Association.
PERSONAL FINANCE