It’s that time of year again, when South African medical schemes have announced their annual member contribution increases for 2024. The weighted average increases vary among schemes – for example, Bonitas has increased by 6.9%, Discovery by 7.5%, Momentum by 9.6% and Fedhealth by 10.8%. But while on paper it may seem that the smallest increase means the better medical aid option, this isn’t the whole story. Why? Well, in order to compare apples with apples, it’s important to look at what you’re getting as a whole from the scheme in question, including things like benefits and day-to-day savings, as well as what you’re paying for your monthly contributions.
Let’s unpack these in more detail.
Your savings benefit
Your gross contribution each month (the monthly amount you pay for your medical aid plan) is actually made up of two parts:
- Your Risk contribution – this covers hospital admissions, such as if you’re in an accident or need emergency treatment.
- Your Savings contribution – this is a Rand for Rand amount used to cover every day medical costs such as GP consultations, medication and dentistry. This is part of your monthly contribution – i.e. your money – that your medical scheme holds on to, which you access when you need it.
What you may not realise about the latest increase announcements is that some medical schemes are also going to be cutting Part 2 – your monthly savings – and this is what enables them to announce lower premium increases to their members.
But not all medical aids are taking this approach. “This method of slashing savings, in some cases by 5%, is simply a mechanism to hide how large your increases actually are,” says Fedhealth Principal Officer Jeremy Yatt. If, for example, your medical savings have been slashed by 5%, but your premiums are ‘only’ going up by 7.5%, then in fact the risk factor of your contributions has actually gone up by 11.5%.
Yatt says that while Fedhealth’s average weighted contributions increase for 2024 is on the upper end compared to other medical schemes, they have not reduced benefits or members’ savings in any way. Other schemes, in comparison, have reduced day-to-day savings to compensate for a smaller contribution increase – which means members could run out of savings far earlier in the year than before.
Scheme sustainability
Recently, the Council for Medical Schemes (CMS) advised that schemes should try to keep their 2024 contribution increases at around 5%, in line with inflation and in light of the current challenges within South Africa’s economy. But this is simply not possible without cutting benefits, says Yatt, given the increased costs of hospital admissions, the rising costs of drugs and the cost of various technologies (among other factors).
Many consumers consider a medical aid scheme to be an insurance company that aims to make a profit, and they think that annual increases are about greed. But medical schemes actually belong to the members themselves – they’re not owned by shareholders, and they operate on a not-for-profit basis.
“What’s most important is that your medical aid scheme stays financially sustainable so that it’s able to meet your medical costs now and well into the future,” comments Yatt. For this reason, the CMS stipulates a solvency ratio of at least 25% for all South African medical schemes.
Remaining sustainable at this level requires a certain level of prudency, which some medical aid schemes didn’t achieve during the Covid-19 pandemic. While many schemes announced very low increases during the pandemic due to the drop off in elective procedures, these schemes are now needing to recoup funds so that they can maintain their solvency ratio – which means bigger increases than before.
Average age
Medical schemes function optimally when there is a broad mix of ages of their members, but young people tend to typically wait until they’re older or sick before they sign up to become members. As a result, medical schemes are under pressure from having a higher number of older members, who tend to have higher value claims. This makes schemes less sustainable, which is one reason that medical aids are now creating products specifically aimed at younger people, in order to attract them to the scheme.
All in all, it’s clear that the annual escalation percentage is not the only number you should focus on when reviewing your medical aid value for 2024. In addition to your monthly contributions, also look at the benefits and savings you’re currently getting, plus if or how these will change for the upcoming year. Don’t be fooled by the high-level numbers alone: read the fine print and make informed decisions that will safeguard you and your family’s health.
