Council wants med aid premium hikes capped, but this would limit benefits also


| The Money Show interviews Alexander Forbes’ Paresh Prema and Profmed CEO Craig Comrie.

– The Council for Medical Schemes has recommended that increases in medical aid scheme contributions be capped at 5.7% for 2023

– Medical inflation typically runs higher than consumer price inflation, currently at 7.4%

– Bruce Whitfield gets input from Alexander Forbes’ Paresh Prema and Profmed CEO Craig Comrie


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The Council for Medical Schemes (CMS) has recommended that hikes in medical aid scheme contributions be capped at 5.7% for 2023.

The number is below consumer price inflation (CPI) which is currently at 7.4%, and medical inflation typically runs higher in the first place.

The proposed increase is based on the level of CPI forecast for 2023 by the SA Reserve Bank.

RELATED: Inflation jumps to 5-year high, breaks through Reserve Bank target range

It’s a balancing act that has to consider both inflation and affordability, writes Alexander Forbes’ Paresh Prema in an article for Bizcommunity.

Bruce Whitfield discusses the conundrum with Profmed CEO Craig Comrie and Prema, who is Branch Head of Technical and Actuarial Consulting Solutions at Alexander Forbes.

Prema explains that the regulator provides guidance every year as to what contribution increases should be limited to.

Obviously there are many other factors that contribute to what medical schemes need to increase their contributions by, which are outside of that control as well.

Paresh Prema, Branch Head: Technical and Actuarial Consulting Solutions – Alexander Forbes

He says capping increases for 2023 would have serious consequences.

All medical schemes need to hold sufficient amounts of reserves and also to collect contributions at the level that will be enough to pay for benefits. Those benefits are based on what the providers are increasing their charges by and also paying for prescribed minimum benefits, which schemes **cannot** cap – they have to be paid for in full.

Paresh Prema, Branch Head: Technical and Actuarial Consulting Solutions – Alexander Forbes

Medical schemes are somehow caught in the middle by having to increase contributions by not enough to pay for the benefits that would come through in the following year.

Paresh Prema, Branch Head: Technical and Actuarial Consulting Solutions – Alexander Forbes

Prema says the circular from the CMS acknowledges that there are elements outside of schemes’ control that need to be taken into account like the exchange rate which affects equipment, the cost of staff and the cost of running a business.

These are all things driven by CPI, and at a higher rate.

n CPI if you look at CPI currently at 7.4%, those numbers usually come into negotiations with providers at the end of the year.

If we’re looking at what the MPC is projecting for the end of the year at around 7%, we’ll have to see what schemes are able to negotiate with their providers to bring down these contribution increases… But the other benefits could suffer, like your savings account and your day to day benefits.

Paresh Prema, Branch Head: Technical and Actuarial Consulting Solutions – Alexander Forbes

Profmed’s Craig Comrie says the CMS is being “quite reasonable” while trying to put pressure on schemes and maybe even providers in the industry to cap their increases.

However the fact that healthcare inflation has always been about 4% higher than CPI presents a problem.

…if your costs run at that, your premiums usually have to mimic that otherwise you’re eating into reserves, and the sustainability of schemes will then come into question. The Council has said that if you are struggling they will actually accept motivations for higher increases.

Craig Comrie, CEO – Profmed

Going forward everything seems to be normalised [after claims dropped off during pandemic], and unfortunately that normal is the higher health inflationary projection…

Craig Comrie, CEO – Profmed

…so we do see that those premium increases cannot be different to between 8% and 10%, unfortunately for the next 5 or 10 years. That’s what the premiums have to be.”

Craig Comrie, CEO – Profmed

Scroll to the top of the article to listen to the interviews

This article first appeared on CapeTalk : Council wants med aid premium hikes capped, but this would limit benefits also

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