Lifestyle Medical Cover Options (June 5 2022)

THE BEST WAY FORWARD TO NATIONAL HEALTH INSURANCE

SPONSORSHIP

Until the challenges within the public healthcare sector have been addressed it makes more sense to ensure more people are covered by private healthcare insurance

In 2019 the government published a draft National Health Insurance (NHI) Bill that proposed a system of universal healthcare for all South Africans based on pooled funds to provide access to quality and affordable healthcare to all of the country’s citizens irrespective of their socioeconomic status. Among the big questions that remain unanswered is how the country will afford to fund the NHI, how it will avoid the funds being subjected to fraud and corruption and the government’s poor track record when it comes to the management of state-owned entities.

Civil society organisations, including the South African Human Rights Council, the Helen Suzman Foundation, Treatment Action Campaign, the Health Funders Association and the Institute of Race Relations (IRR), among others, have all expressed concerns regarding the proposed NHI and the lack of clarity around it.

“The fact that universal healthcare is desperately needed in SA is not being debated. Clearly, it is not sustainable to have only around 16% of the population on private medical aid while the rest of the population relies on the public sector for healthcare. However, what is concerning is the lack of clarity around the implementation of this national health blueprint,” says Lee Callakoppen, principal officer at Bonitas Medical Fund.

within the health system in accordance with the needs of users”

Medical schemes will provide what it calls “complementary cover”, defined as third-party payment for personal healthcare service benefits not reimbursed by the fund, including any top-up cover offered by medical schemes or any other private health insurance fund. While the bill states that NHI is the single purchaser and single payer of healthcare services in other words there can be no other legal entity that can purchase and pay for healthcare services it does not distinguish between complementary and duplicate services.

“In essence, what this means is that it would be illegal for medical schemes or health insurance firms to exist, even in a complementary form, which contradicts other sections of the bill,” says Callakoppen.

An ageing membership base with a higher disease burden pushes the price of medical scheme membership higher, making it an unsustainable model

When NHI was first presented, the government anticipated that the cost of rolling it out in 2026 would be R256bn but provided no explanation for how it came to this figure. The IRR says it is more likely to cost around R700bn a year when it is fully operational and that the increased tax burden will fall particularly heavily on the 700,000-odd individual taxpayers who currently pay about twothirds of all personal income tax and a hefty chunk of VAT. In its current format the proposed bill provides very little detail about exactly what NHI will offer.

The bill defines “comprehensive healthcare services as healthcare services that are managed to ensure a continuum of health promotion, disease prevention, diagnosis, treatment and management, rehabilitation and palliative care services across the different levels and sites of care

“Bonitas does not agree or support the proposed amendments to the Medical Schemes Act (MSA) as set out in the bill as we believe that allowing medical schemes to provide only complementary cover is unconstitutional. However, we do support the healthcare reforms as recommended by the Health Market Enquiry.”

Callakoppen points out that the right of access to healthcare is much wider than the right to obtain healthcare through the public sector and includes the right to purchase healthcare from the private sector if one can afford it.

“The purchasing power of the consumer is a legitimate means of access to healthcare and consumers must have the right to apply their purchasing power as they deem fit. However, the bill, in its current form, makes it unlawful for people to purchase healthcare services not covered by NHI.”

He says the proposed bill is also fraught with illegalities and in direct conflict with the Medical Schemes Act and existing regulations.

Damien McHugh, executive head of marketing at Momentum Health Solutions, agrees that all citizens need better access to quality healthcare but says the proposed NHI model is not ideal. In particular, he does not believe a single-funder model is the best solution. Instead, he says there is space for the public and private health sectors to work together. Any proposed system should not jeopardise the private sector’s ability to deliver healthcare services or threaten the

expertise currently available in SA.

“Until the challenges within the public healthcare sector have been addressed it makes more sense to ensure more people are covered by private healthcare insurance and alleviate pressure on the struggling public healthcare system.”

Ironically, what SA spends on healthcare as a percentage of GDP is in line with First World economies rather than emerging economies.

The problem is that a greater proportion of this spend goes towards private healthcare, which caters to fewer people, rather than public healthcare. The private health sector, while far from perfect, has built the capability to reduce fraud and corruption.

“What SA cannot afford is any leakage in the form of waste, fraud and corruption when it comes to healthcare budgets either in the form of poor administration or collusion between healthcare providers. What we also can’t afford to do is jeopardise or destroy any current areas of excellence,” says McHugh.

Explaining that the healthcare system is massively complex and requires careful management and administration, McHugh says the government still needs to explain how private healthcare providers and facilities will be contracted by NHI. Alan Fritz, acting principal officer of Medshield Medical Scheme, agrees that SA needs a health system in which the public and private sectors can co-exist.

“The fact that just 9.5-million people have private healthcare cover out of a potential population of 75-million is a recipe for a serious societal conflict,” he says, adding that SA needs a healthcare system that provides everybody with quality healthcare.

SPONSORSHIP

However, given all the unanswered questions around the proposed NHI model, he advises caution. “Countries where the principle of universal health coverage works are typically more developed economies with a large tax base such as the UK, Australia, Canada, France and Germany,” he says. “What we don’t want to see is another drain of our medical practitioners to Canada, Australia, the UK and the Netherlands. In fact, our universities should be capacitated to produce far more doctors just to meet our domestic needs for both the public and private sectors rather than criticising the private healthcare sector, which has very good capacity. Increasing the private sector risk pool should contribute to lower private healthcare costs.

“Many uncovered people will benefit a great deal from an affordable private sector. Not only will this alleviate pressure on the public health sector but it will also serve to ensure that private medical scheme cover becomes more affordable with a larger, healthier risk pool. The challenge for medical schemes is that they are not attracting younger members. The result is that an ageing membership base with a higher disease burden pushes the price of medical scheme membership higher, making it an unsustainable model. The reality is that many people are paying more for private healthcare cover than they are for household expenditure and education,” he says.

“However, as the cost of living increases, the priorities of households will be to keep a roof over their heads and paying for transport, education and food. Of necessity, healthcare will shift lower in the order of priorities.”

While the notion of NHI is commendable, the devil is in the detail detail which is yet to be unpacked and specified. Sound corporate governance is of critical importance in preventing the mismanagement of assets, corruption, inefficiency, unethical conduct and abuse of the fund’s resources.

He believes the Medical Schemes Act needs to be amended to address prescribed minimum benefits (PMBs) and the cost of healthcare, which is typically above headline inflation.

“Too many costs need to be better regulated in terms of pricing. PMBs are a licence for specialists to charge exorbitant and unsustainable rates,” he says. “The entire healthcare value chain probably needs to be reviewed to focus on how to make the sector more accessible and affordable to the younger market.”

SA needs to focus on both a curative healthcare environment and a preventative environment in order to avoid the evergrowing burden of disease, says Fritz.

“We need to be teaching children to be active, and give sport a bigger share of the national budget. While the notion of NHI is commendable, the devil is in the detail detail which is yet to be unpacked and specified,” says Callakoppen. “Sound corporate governance is of critical importance in preventing the mismanagement of assets, corruption, inefficiency, unethical conduct and abuse of the fund’s resources.”

He believes the only way for the healthcare system to evolve is through interdependent relationships. He also believes medical schemes should be allowed to assist the NHI administratively and take over some of the risk and burden which would lie with the fund in respect of the members of medical schemes. This would ensure that the funds deployed in the procurement of healthcare services are not unnecessarily exploited through duplication of services and functions.

Generic drugs make healthcare affordable, more accessible

Substituting more expensive medicines for generics doesn’t compromise efficacy

Amid the rapidly escalating cost of living, the rising cost of healthcare is eroding what is already limited household income. However, the pharmacy sector says rising costs are not attributable to the pricing of pharmaceuticals because these, as well as the professional dispensing fee, are regulated by the department of health.

Similarly, manufacturers may not increase their product price by more than the legislated increase, says Rachel Wrigglesworth, chief healthcare officer at Clicks. “On average, the pharmaceutical price increase is lower than the consumer price index (CPI). This year’s maximum allowed pharmaceutical price increase was 3.5%,” she says.

This increase applies to all pharmaceutical products, including generics, although some manufacturers choose not to take the full increase while some will decrease their prices when new generics enter the market, says Wrigglesworth. To make healthcare services more affordable and therefore more accessible Wrigglesworth says Clicks drives generic substitution of medicines wherever possible. “Our pharmacists are encouraged to comply with their legal and moral obligation to offer generic alternatives to patients.”

Over the past few years South African consumers have increased their utilisation

Our pharmacists are encouraged to comply with their legal and moral obligation to offer generic alternatives to patients

of generics, she says. This is being driven by medical aid funding and at the point of dispensing where a pharmacist will provide customers with the relevant details of available generics and their pricing.

Many South African consumers seem to be under the impression that generics are inferior products. This is not the case, says Alan Fritz, acting principal officer of Medshield Medical Scheme. “Ethical drugs are expensive and generics, which deliver the same outcomes, need to be encouraged to make healthcare more affordable. There is no question that we should be pushing for more generics in medical scheme protocols.”

Wrigglesworth adds that competitive dispensing fees and additional savings through promotional pricing on over-thecounter medicines help to ensure that Clicks is playing its part in providing affordable healthcare.

Medical aid membership has stagnated in recent years due to growing financial pressure on consumers. As a result more people are downgrading to cheaper plans or cancelling their cover and turning to medical insurance policies that offer a variety of day-to-day healthcare benefits.

One company taking advantage of this trend is Dis-Chem, which has launched a suite of health insurance offerings aimed at providing universal access to affordable and quality private primary healthcare. DisChem’s insurance offerings are administered by Kaelo Risk and underwritten by Centriq Insurance.

Primary healthcare, says Rui Morais, CFO at Dis-Chem, is fundamental to a healthcare system in that it improves health outcomes to as broad a base of the population as possible. “With primary healthcare gaining widespread recognition as being the ‘front door’ of the healthcare system, pharmacies are ideally positioned as a fundamental entry point to the primary healthcare ecosystem.”

Dis-Chem’s Core plan is a standard primary healthcare insurance option that provides cover for a broad spectrum of health needs while its more comprehensive option, Plus plan, also includes unlimited access to doctors and virtual consultations, specialist visits and chronic medication for 27 conditions. Accidental cover is available as a stand-alone or additional cover.

These are medical insurance products rather than a medical scheme and don’t offer the same benefits as a medical scheme, nor are they a substitute for a medical scheme, says Morais. However, they are a good option for those who cannot afford medical aid membership. The company has also introduced a gap cover

AT THE 'FRONT DOOR' OF HEALTH CARE

With medical aid memberships pricing out many consumers, alternative healthcare benefits are being sought

option to members of any medical aid to cover medical cover payment shortfalls. A key differentiator of its gap cover product is that premiums are priced according to age, and on a per person basis, rather than a fixed cost per family unit, which ensures premiums are more affordable, easy to understand and transparent, he says.

Medical expense shortfall, or gap cover as it is more commonly known, plays a

critically important role in paying out for shortfalls in medical cover when specialists charge over the medical aid rates for certain procedures and where co-payments are required or certain thresholds are reached, says Tony Singleton, CEO of Turnberry Management Risk Solutions.

“Certain treatment protocols, such as for cancer, are very expensive and costs can quickly escalate, even for patients who are

With primary healthcare gaining widespread recognition as being the ‘front door’ of the healthcare system, pharmacies are ideally positioned as a fundamental entry point to the primary healthcare ecosystem

on a medical aid. Shortfalls on surgeries and other hospitalisations is another area where the costs really mount. Gap cover comes in when medical aid cover has reached its limit, ensuring that your treatment does not become a financial disaster.”

He says it’s always advisable to consult with a broker to ensure that your medical aid and gap cover are aligned to your family’s financial position.

SPONSORSHIP

Medical aid schemes have traditionally implemented fee increases at the start of each year. As a result of the pandemic a new trend has emerged which has seen medical schemes deferring these annual increases, dipping into their reserves to reduce increases and then announcing delayed increases above the consumer price index (CPI). There is no question that deferred increases have been with the best of intentions. In the wake of the economic devastation resulting from lockdowns during the pandemic, consumers are feeling the pinch.

Unemployment is at a record high and most salary increases have been below CPI. Medical schemes agree that it has been a delicate balancing act between maintaining the sustainability of schemes while still providing members with much-needed financial relief during a challenging period.

Bonitas Medical Fund principal officer Lee Callakoppen points out that last year it was the only scheme to announce no increase on one of its plans, the BonFit option, followed by the industry s first reduction in a premium of 7.9% on its BonStart Plan for 2022. We opted to use around 3.2% or R600m of the scheme s reserves to help limit contribution increases to below CPI for around 82% of our members for 2022.

ARE DEFERRED CONTRIBUTIONS SAVING YOU MONEY?

It’s almost impossible to switch plans if you choose a scheme offering a deferred increase, says industry insider

Contribution increases would have been closer to the pre-pandemic levels of CPI plus 4% if we had opted not to use some of our reserves,” he says. The decision to defer increases was in line with the Council for Medical Schemes’ (CMS) recommendation in 2021 that schemes use their reserves to cushion members against increasing costs.

Several schemes opted to defer increases from January to later in the year. One of those was Momentum Medical Scheme, which deferred its annual increase

to September. Damian McHugh, executive head of marketing at Momentum Health Solutions, explains that the reserves increased during the pandemic because members were not utilising healthcare services as much as they were pre-pandemic, even though the cost of healthcare continued to rise. When deciding on increases, medical schemes

have needed to factor in the likelihood that healthcare utilisation will revert to prepandemic levels while at the same time allowing for medical inflation, which is typically 2% to 3% higher than CPI, says McHugh.

“The decision to defer the increase was made to pass on some of the savings the scheme had made during the pandemic and provide members with some temporary relief, but without threatening the sustainability of the scheme in four or five years’ time.”

The challenge with no increase

or a very small increase this year is that the scheme potentially requires a larger than average increase in years to come to account for the compound impact of inflation, he explains. In general, schemes need to keep their contribution increases as close to the rate at which the cost of providing healthcare escalates. The challenge is that most healthcare costs in SA are not regulated, which means providers are free to charge as they see fit. The consumer bears the brunt.

Traditionally, members have been free to switch plans or even schemes during an open period. However, when a deferred increase arises, this open period does not always correspond with it. This complicates matters for companies which allow their staff to choose between various medical schemes. If an employee chooses to stay with a scheme offering a deferred increase, it is difficult sometimes even impossible to switch to another plan. This is compounded by the fact that when these deferred increases do eventually take place, they are often above CPI and don t always include an increase in benefits, says Callakoppen, adding that what this means is that members are then effectively paying more for less. By announcing Bonitas contribution increases in January, members know what they will be paying for their medical aid from the outset of the year, he

The decision to defer the increase was made to pass on some of the savings the scheme had made during the pandemic and provide members with some temporary relief

says, which allows them to plan and, if necessary, adjust their options to suit their healthcare needs and budgets. When it comes to deferred increases, his advice is for companies to consider a midyear open period to allow employees to change schemes or options to benefit already cash-strapped employees.

“Deferred increases may not, however, be leaving consumer’s better off than they would have been had an increase been implemented from the start of the year.

”

Callakoppen says the past year has shown that the actual contribution increases experienced by members, after the deferment period, is typically higher than the

industry average.

“An example is a scheme that offered a contribution deferment for the first six months of 2021 but then applied a 5.9% contribution increase, when the industry average was 4.6%,” he says, adding that contribution increase percentages cannot be looked at in isolation without looking at the rand value of the contribution.

“Based on our analysis, we feel that a deferment strategy is not ideal. It merely utilises scheme reserves to provide a short-term contribution relief to members who subsequently experience an above-market-related contribution increase. This results in members being worse off compared to the scheme that applied a lower, market-related contribution increase from the beginning of the year. Schemes implementing a contribution deferment are already applying above-marketaverage increases.

Callakoppen says that no matter whether a scheme has chosen to increase contributions or defer them, South Africans need to make sure they get the healthcare cover they need. No two people or families are alike. Medical needs differ, as do finances, which is why you need to get cover that suits your health needs and budget. It s important to understand what is covered and any added benefits being offered which won t impact your savings, before finalising your decision.

SPONSORSHIP

MEDICAL COVER OPTIONS

What to consider when choosing a medical scheme

Constrained household finances in the wake of the pandemic have resulted in many medical scheme members downgrading their plans. There are a number of things to consider when deciding on an appropriate medical scheme plan, says Madelein Barkhuizen, Bestmed’s sales and marketing executive.

Bestmed is the largest selfadministered medical scheme in SA. When you want to gauge whether your medical aid cover is sufficient to address your family s medical needs, consider whether your option s benefits last the full year. If you have found that your benefits are depleted before the year ends and you are unable to cover day-to-day medical expenses, you could consider upgrading your benefit options, she says.

It could also be time to change your plan if you have a newborn baby or an elderly family member now in your care, she says. In this case, consider a medical scheme option that calculates benefit limits per family, regardless of the number of dependants added over time.

If you or a dependant is diagnosed with a chronic condition or specific illness, it s best to ensure that your benefit option covers the costs of your specialised needs or offers additional benefits to address these needs, she says.

It s also important to ensure you have sufficient cover for planned procedures and treatments such as

orthodontic braces, back surgery or corrective eye surgery. Paying extra every month for a benefit option with a robust and comprehensive benefit for the period during which you expect to have the procedure done is far better than paying for a benefit option with insufficient cover requiring that you pay extra to cover a high hospital bill,” says Barkhuizen. Ultimately, whenever you experience a life-changing event it’s important to re-evaluate your medical needs to ensure that you and your family are still sufficiently covered. If you have any doubts regarding the adequacy of your cover, it may be a good idea to do a benefit comparison, she says.

If you have any doubts regarding the adequacy of your cover, it may be a good idea to do a benefit comparison

SAFEGUARDING