An unexpected side-effect of lockdown has been smaller-than-usual annual medical aid premium increases.

Despite fears that the outbreak of COVID-19 would result in high claims from medical scheme members, and a resultant increase in the cost of healthcare, the opposite has proven to be true.

Since the outbreak of the pandemic locally, schemes have built up surpluses due to lower claims as elective procedures were deferred to make way for COVID-19 related hospitalisation.

There were also fewer emergency admissions due to fewer car accidents under lockdown and the impact of the alcohol ban. These have resulted in savings for medical schemes which they are able to pass on to their members in the form of lower premium increases.

Discovery Health announced a zero increase in premiums for the first six months of the year and Momentum Health announced a 3.9% premium increase for 2021, a sharp drop on the 8.1% premium increase in 2020. Other schemes that have announced their increases include Bestmed at 4%, Bonitas at 4.6% with MedShield the only one over 5% at 5.9%.

The guidelines for medical inflation are normally around consumer price inflation (CPI) plus 3 percentage points, so this represents a significant reduction in premium increases.

The actual premium increase per member will depend on their specific plan, because more comprehensive plans tend to experience higher claims and therefore carry the highest premium increases. For example, although Bonitas had an average increase of 4.6%, this ranged from 0% on entry-level plans up to 7.1% for fully comprehensive plans.

“These increases, whilst unexpected, are very welcomed,” says Jill Larkan, head of Healthcare Consulting at financial advisory firm GTC.

Larkan says that while each scheme ascribes their low increases to different reasons, it all comes down to the trend that they see in usage of their benefits, and their assumption of usage into the future.

“The usage patterns definitely indicated quite a dip in the early stages of the lockdown and a gradual increase from about July onwards. With COVID itself not matching the feared heights expected, many schemes were left ‘under-spending’.”

A medical scheme needs to match the medical premiums collected with expected claims for the year. If the scheme experiences a high rate of claims one year and believes these claims to continue into the following year, then it will increase its premiums to cover those claims. Hospitalisation is the biggest driver of medical inflation.

Reduced overall healthcare utilisation

“While we have seen increased demand for healthcare services related to COVID-19, there has been a concomitant marked reduction in health-seeking behaviour for non-COVID related healthcare needs,” explains Dr Ryan Noach of Discovery Health Medical Scheme.

“This is reflected in 20-40% reductions in usual healthcare-utilisation patterns, driven predominantly by cancellations of elective surgeries, marked reductions in discretionary medical admissions, cancellations of preventative healthcare and wellness checks, and reductions in infectious diseases typical of the winter months.

“The net effect of this utilisation discontinuity has been to reduce the total claims received by DHMS during the period, resulting in a marked increase in scheme reserves.”

Dr Noach adds that the scheme expects an increase in non-COVID healthcare demand by mid-2021, at which point Discovery Health will review their premiums.

“We currently project an increase reflective of medical inflation at no more than 5.9% (i.e. CPI + 2%), across all plans for the second half of 2021. This translates to a weighted annual increase of less than 3% for all DHMS members on all plan options in 2021 and balances the need for affordability and scheme sustainability.”

Damian McHugh, Head of Growth and Marketing at Momentum Health Solutions, says that the lower-than-expected level of claims this year has made it possible to keep premium increases as low as possible. Another contributing factor to the lower premium increases is the lower average age of Momentum Health members than those of most other schemes.

“We are very aware of the financial pressures faced by members so we wanted to pass on these savings through lower premium increases,” says McHugh who explains that they do still expect some catch-up on claims, as some elective procedures may have simply been delayed and those will be caught up later this year or early next year.

Healthier winter season

However, there have been real savings with lower trauma admissions, as well as a far healthier winter season. Due to lockdown many of the typical winter illnesses were reduced, with a significant drop in the number of people seeing their GP. In April and May the scheme saw a 50% drop in claims for GP visits. They also saw a significant decrease in prescribed medications from pharmacies.

“We had the coldest winter since 2012 and yet haven’t experienced the winter transferable illnesses like colds and flu,” says McHugh who adds that we can learn a great deal from this experience. Hopefully in the future, people who are showing symptoms of a cold or flu and who would normally still go to work, will now work from home.

Even a general increase in hygiene, handwashing and not shaking hands could result in improved health over winter.
McHugh says they hope to see lifestyle improvements, as COVID-19 drew attention to many lifestyle health issues such as obesity and hypertension. McHugh notes that people’s overall health played an important role in the severity of COVID-19.

By tracking the claim statistics of members on their HealthReturns rewards programme, they were able to conclude members with a healthy heart score and who exercised frequently suffered much milder COVID-19 symptoms, while those with poor general health statistics experienced far more severe symptoms and hospitalization.

One of the greatest lessons we can learn from COVID-19 is that looking after our health not only prevents illness, but it saves us money. If overall member health improves and claims reduce, so would our annual premium increases.

This article first appeared in City Press.