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Discovery announces long-deferred medical aid increases

Discovery Health has announced its finalised contribution increases for the Discovery Health Medical Scheme (DHMS) for 2022. These will only be in effect from October to December. The changes were to take effect from May, but Discovery said it would defer them to October.

The country’s largest medical aid provider originally told members in October last year, that contributions for 2022 would increase by 7.9%, but that this would only be effective from 1 May.

It said this “was to maintain short-term affordability for all our members”.

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DHMS says its contribution increase, effective 1 October 2022, will remain at May’s planned level, “to make sure that contributions remain on par with future medical inflation while giving [members] financial relief through a delayed contribution increase”.

It sent communication to members last week, informing them that details on contribution changes would be made available soon.

Because the increase is only in place for three months – a quarter of the year – the annualised increase across the whole of 2022 is effectively around 1.98%.

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The actual effective ‘annual’ increase for members was 2.9% last year because Discovery deferred increases to mid-year.

Read: Discovery defers medical aid increases for a third time

The average increase (unweighted) from October across all its plans is 7.94%, right on the edge of what would not be an 8% increase (ie. 7.95%).

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The increases on DHMS’s various plans range from 7.85% to 7.98%, as seen in the table below.

Last October, Discovery said its estimate for medical inflation for this year of 7.9% was made up of a 4.4% increase in the cost of healthcare services (tariff inflation), an increase in claims of 1.5% (utilisation changes) and 3% due to changes in the demographic profile of the scheme (demographic risk). Discovery said this was unaffected by Covid-19.

ALSO READ: Looking for a medical aid scheme? Here’s how to choose the best one for your needs

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Medical inflation

Projected medical inflation for 2022 totalled 8.9%. This was then offset by a 1% reduction in expected future claims in “benefits derived from risk management and Vitality”.

It is able to pass on the savings from incentivising members to be healthier.

This year was the third time DHMS had delayed its contribution increases since the onset of the Covid-19 pandemic. In 2021, it deferred increases to July and originally deferred planned contribution increases for 2022 to May, which then became October.

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In February, Discovery said the deferral in 2021 “has protected DHMS members in real terms, cumulatively saving members approximately R2 billion during 2021″.

It added that this concurrently ensured “that DHMS is correctly priced for forecast medical inflation”.

“DHMS capital reserves have increased to an unaudited solvency level of 38%, pursuant to the reduction in non-Covid-19 healthcare utilisation, assuring members of robust financial strength.”

In communication to clients earlier this year, it said that since the original pricing announcement for 2022, the claims and investment experience of DHMS had been better than anticipated and allowed the scheme “to defer the 2022 contribution increase by another five months.”

Including the closed schemes it administers, Discovery has in excess of 3.7 million lives under administration. DHMS itself has 2.78 million members.

It noted in February at the release of its interim results that healthcare utilisation was increasing following a drop in the latter half of 2021. It said high levels of utilisation seen towards the end of last year was indicative of what to expect this year. Some of this anticipated demand did not materialise.

Health impact of the pandemic

It further highlighted in February that population health had worsened and the overall disease burden had increased since the beginning of the pandemic.

It also said there were initial signs that the pandemic was impacting overall morbidity, particularly with regard to diabetes and cardiac conditions.

In October last year, Discovery Health CEO Dr Ryan Noach said: “The claims experience of DHMS provides guidance on the expected future cost of healthcare claims between Covid-19 waves and once Covid-19 becomes endemic.

“The trends imply that medical inflation has persisted at a rate of 3% to 4% above consumer price inflation since 1 January 2020, and that DHMS will be well positioned with contributions at the level of anticipated claims before considering contribution increases for 2023.”

This article first appeared on Moneyweb and was republished with permission. Read the original article here.

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By Roy Cokayne
Read more on these topics: discovery healthinflation