Simeka Health continuously monitors the top medical schemes’ risk profile data to understand the schemes’ ability to provide sustainable solutions to our client base and to guide our consultants in terms of advice to clients.
The table below specifically indicates this key information for the period 2019 to 2022, to show how COVID-19 impacted the schemes.
|
Bestmeds |
Bonitas |
Discovery |
Fedhealth |
Sizwe Hosmed |
Momentum |
| Average age 2019 |
37.40 |
33.77 |
34.40 |
39.37
|
33.07
|
33.28
|
| Average age 2021 |
37.28 |
34.38 |
35.25 |
40.86 |
32.64
|
33.93
|
| Average age 2022* |
36.90 |
35.50 |
36.60 |
42.30 |
32.60
|
34.30
|
| Members 2019 |
95 044 |
338 751 |
1 351 720 |
79 815 |
46 935
|
156 723
|
| Members 2021 |
100 689 |
340 119 |
1 353 012 |
67 549 |
65 485
|
156 439
|
| Members 2022* |
111 316 |
353 763 |
1 375 544 |
62 824 |
62 247
|
158 412
|
| Reserves 2019 |
35.43% |
24.85% |
27.50% |
43.43% |
36.34%
|
25.86%
|
| Reserves 2021 |
45.70% |
36.50% |
38.01% |
42.80% |
49.15%
|
38.20%
|
| Reserves 2022* |
41.70% |
41.30% |
35.10% |
43.40% |
25.00%
|
34.90%
|
Source: CMS Annual Report 2021/2 *unaudited and provided by scheme representatives
Reserves
By now, it is common knowledge that schemes generally had lower claims during the pandemic due to the decrease in planned procedures and preventative screenings, resulting in fewer hospital procedures. Generally, with people staying at home and wearing masks, lower claims on the typical winter flu treatments were also evident. Most schemes had an increase in reserves due to these factors.
During this period, some schemes opted to pass on the additional reserves to members through deferred contributions increases, at similar percentages to pre-pandemic levels. Other schemes opted to pass on the additional reserves to members through lower annual increases. There were also a number of schemes which followed a hybrid approach – lower increases and some deferral.
The industry is quite divided in terms of which approach will turn out to be the correct one. Those in favour of the deferral of (higher) increases argue that members benefitted from paying the lower contributions for longer. They argue that claims are bound to return to pre-COVID levels and the level from which increases can be applied going forward will be from the correct base. This will prevent them from having to do “corrections” and have exorbitant increases to catch up.
The lower increase proponents, on the other hand, argue that members should benefit from lower year-on-year increases, and they will deal with claims returning to pre-COVID levels through a combination of contribution increases, reserve redistribution and benefit reviews where required. These schemes typically benefitted from member growth during the time when they had low increases and offered very competitive benefits.
Average age
The table shows that most schemes had an increase in the average age of their membership over the three years. This is expected in an industry where membership is stagnant as the current members all become older every year. The exception was Bestmed (due to good growth in young members) and Sizwe Hosmed (due to a merger between Sizwe and Hosmed, who had a slightly lower age profile).
Membership and reserves correlation
There is normally a direct correlation between membership and reserves. With everything else being equal, reserves should drop when membership increases, with the converse also being applicable. The red warning lights should start flashing when both membership and reserves drop – as was the case with Sizwe Hosmed. We are concerned about Sizwe Hosmed’s sustainability, also given the further drop in reserves in 2023, necessitating an interim increase in May.
Bestmed, Bonitas, Discovery and Momentum had growth in membership and in reserves. This is an excellent and healthy trend. Fedhealth reported a drop in membership, while reserves remained stable (at a high 43%).
High reserve levels, far more than the regulatory requirement of 25% – as is evident across a number of schemes, can rightly be questioned, arguing that these reserves could have been used to subsidise increases and offer relief to members. We do expect more schemes to budget for a negative nett healthcare result during 2023/4, thereby using some of the excess reserves to fund the losses.
Increases for 2024
The Council for Medical Schemes (CMS) has issued a guideline for schemes to limit their increases for 2024 to 5%. The CMS also ordered schemes to return to the annual increases in line with the calendar (January). Please find below, the increases of the largest schemes over the last four years. Clearly, the return of claims to pre-COVID levels is forcing the schemes to increase contributions in line with the expected claims and medical inflation.
Medical scheme increases
Disclaimer