Business

Discovery defers medical aid increases for a third time

Discovery Health Medical Scheme (DHMS) will defer its planned contribution increases for a further five months, meaning the 2022 changes that were to take effect in May will now only be effective in October. This is the third time that it has delayed contribution increases since the onset of the Covid-19 pandemic.

In a communication to clients, it says that since its original pricing announcement for this year, its “claims and investment experience” was better than anticipated, which “allows the scheme to defer the 2022 contribution increase by another five months”.

The country’s largest medical aid told members in October 2021 that contributions for 2022 would increase by 7.9%, but that this would only be effective from May 1. It said this “was to maintain short-term affordability for all our members”.

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In October last year, it said its 7.9% estimate for medical inflation this year was comprised of a 4.4% increase in the cost of healthcare services (tariff inflation), a 1.5% increase in claims (utilisation changes) and 3% because of changes in the demographic profile of the medical scheme (demographic risk). Discovery said this was unaffected by Covid-19.

Projected medical inflation for the year therefore totalled 8.9% and would be offset by a 1% reduction in expected future claims in “benefits derived from risk management and Vitality”.

‘Trend of lower healthcare utilisation’

Discovery Health CEO Dr Ryan Noach said at the time that the trend of lower healthcare utilisation “has strengthened the scheme’s reserve position relative to regulated solvency requirements”.

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DHMS says its contribution increase effective October 1 will remain at the 7.9% level.

This is “to make sure that contributions remain on par with future medical inflation while giving [members] financial relief through a delayed contribution increase”.

Last year, it deferred increases for 2021 by six months, meaning that members only paid higher contributions from July.

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Because of the delays in implementing contribution changes in both 2021 and this year, the actual effective ‘annual’ increase for members was 2.9% last year and will be 1.98% this year (given that the 7.9% increase will only be in place for three months).

Noach said in October that “overall, DHMS ensures that the contribution increase effectively balances short-term affordability and long-term sustainability, by appropriately allowing for the expected medical inflation trends in 2022 and leveraging the scheme’s financial strength to defer the increase”.

Its claims experience in 2021 showed that healthcare claims between Covid-19 waves were higher than pre-pandemic levels.

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For example, between waves of Covid-19 infection, elective surgical admissions such as major joint replacements and cataract surgery have increased to 113% and 120% of pre-Covid-19 levels (respectively).

‘Healthcare utilisation’ now increasing

It noted in February that healthcare utilisation was increasing following a drop in the latter half of 2021. It highlighted 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 is impacting overall morbidity.

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At the end of 2021, DHMS reported that it covered 2.78 million lives, holding an estimated 57.5% share of the open scheme market. The scheme’s solvency ratio was at 38.6% and it had reserves of R30.8 billion (both unaudited).

In October last year, 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.”

NOW READ: Discovery moves for mandatory vaccinations in their workplaces

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By Moneyweb
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