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Financial Planning

Making medical aid choices in uncertain times

By: Lee Callakoppen, Principal Officer of Bonitas Medical Fund

2020 has been marred by uncertainty across the globe, with the impact of the Covid-19 affecting many industries – a trend which is expected to continue well into 2021.

With healthcare and medical aid placed firmly in the spotlight, as medical schemes continue to announce their increases for the year ahead, what does this mean for consumers?

We have to caution consumers against comparing percentage increases in isolation without taking a holistic view of the situation.

We know that consumers have been faced with several challenges this year, at economic, social and psychological levels, especially in light of the Covid-19 pandemic. We therefore considered various scenariosand factors when arriving at our 2021 product offering. At the heart of our process was looking for ways to balance affordability of contributions for members while ensuring that the Scheme remains sustainable. In this way we can continue to provide our members with access to quality healthcare.

In previous years, The Council for Medical Schemes (CMS) made the recommendation that medical aids accommodate standard inflation plus an additional 3%. However, for 2021 the recommendation was to curtail increases as far as possible.

Increases for 2021, lower than or equal to inflation would be a win for cash strapped consumers in the short-term but the impact of this could be far reaching. Especially as we are yet to see the real impact from Covid-19 on medical schemes as elective surgeries and normal claiming patterns resume. We opted to take a long-term view, taking into account all factors, to ensure that our members would not have to pay the price in coming years through significantly higher increases.

Since the outbreak of the pandemic locally, we experienced lower claims as elective procedures were deferred to make way for Covid-19 related hospitalisation.However, little has been said around healthcare inflation which has been a concern across the sector for the past decade – usually outpacing general inflation by around 3% to 5%.


We know that costs are increasing across the board on a daily basis and the healthcare eco-system has not escaped this. Costs related to healthcare professionals, medicine, technology and supply chain optimisation all have to be taken into account. There is also uncertainty around the vaccine for Covid-19 and the associated costs. In such uncertain times, it would be remiss of us to place further uncertainty on our members by not clearly articulating our increase for the year or doing the due diligence, It is for that reason we announced our lowest increase in our history and managed to keep one plan with 0% increase.

What is of concern is the emphasis placed on the increases announced by all medical schemes without analysis of what these increases include. Comparing the average percentage increase in isolation for a scheme in a particular year is not an indicator of the value for money provided by a scheme, since it does not take into account the basis on which the increase applies.

It is important to compare the actual benefits and contributions after the contribution increase, rather than the percentage increase in isolation. To take a simplisticexample, two schemes offer the same benefits but Scheme A costs R100 pm while Scheme B costs R110pm. If Scheme A announces a 10% increase (R 110pm) and Scheme B announces a 7% increase (R117.70pm) and neither changes their benefits, then Scheme A still provides the same benefits at a lower cost even though it announced a higher contribution increase.

Schemes with a growing membership base will require additional loadings in their contribution increases to increase their reserves in order to meet the statutory solvency requirement of 25%. This is a legislative requirement and does not imply the scheme is performing poorly – in fact the opposite is true in this context. A scheme with a growing membership will see temporarily reduced reserves.

It has been a challenging few years for the medical aid industry with economic pressures, runaway healthcare costs, an ageing membership base and an increased prevalence of fraud, wastage and abuse, causing healthcare prices to rise at an alarming rate. Schemes with an ageing membership base generally experience anincrease in claims cost in excess of inflation on account of higher usage of benefits. We estimate that members tend to claim approximately 2% more every year they grow older.

But it isn’t all doom and gloom for the industry. One of the positive developments of the pandemic and the subsequent lockdown has been the industry’s ability to adapt to the new normal by swiftly embracing innovative diagnostic platforms. The use of virtual care consultations with doctors and nurses has increased as did the adoption of telemedicine. In addition, we have been forced to become more innovative around how we interact with our members which remains a core focus for us.

We will continue to build on these successes and provide South Africans with affordable, quality healthcare.

This article appeared in the November edition of COVER magazine.

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