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Don’t be caught out by delayed premium increases

Dec 1, 2021

Don't be caught out by delayed premium increasesAs medical schemes announce their pricing and benefits for next year, most have delayed their premium increases until later in 2022.

The ability of medical schemes not to push through these increases in January is due to the significant surpluses they built up in 2021.

Jill Larkan, head of Health Care Consulting at wealth advisory business GTC explains that the higher surpluses have been a direct result of lockdown.

While Covid hospitalisations increased costs for medical schemes, these were more than offset by a decrease in trauma admissions as well as a significant fall in elective surgery.

Lower utilisation of services is not to be confused with the cost of medical care which has still increased at a rate above inflation.

As Larkan explains, premium increases are driven by medical inflation which is currently around 7.6% per annum. This is the price increases from medical service providers including doctors, specialists and hospitals.

Ultimately schemes must pass on these cost increases to the consumer in order to remain solvent. However, if members are claiming less than expected, then the scheme is collecting a surplus and it is this surplus that will be used to offset medical price increases for the first few months of next year.

Fedhealth announced that its rate increase will be moved to April, Discovery Health will be postponing its increase to July, and Momentum Health is only increasing in September 2022.

According to Momentum Health, the delay of its 6% price rise will result in a R212 million reduction in premium collection and will give members an effective increase of only 2% for the whole of 2022.

Make sure you budget for the increase

The challenge for members, however, is to remember that premium increases are still coming ‒ and to budget for them.

Damian McHugh, head of marketing at Momentum Health, says the scheme is hoping that by September the economy will have recovered sufficiently, and hopefully salaries will have normalised.

McHugh says Momentum will review their 2023 premium increases based on their claim experience in 2022. The scheme is concerned that with the arrival of a fourth wave, Covid-related hospitalisations may rise, but government may avoid further lockdowns.

This would mean an increase in trauma and elective procedures on top of higher Covid hospitalisations -driving up the number of claims.

If, however, claims remain subdued, the scheme hopes to provide further relief by delaying the increases to a later period in 2023.

“It would be great to see a trend where schemes give back to members when they experience surpluses. This would hopefully encourage members not to over-utilise their medical schemes and to be more cost conscious,” says Larkan.

This article first appeared in City Press.

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Maya Fisher-French author of Money Questions Answered

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