Medical schemes, already under fire by the industry's regulator for imposing above-inflation contribution increases, may be forced to implement further hikes this year and above-average increases in 2012.
This hinges on whether schemes will be legally obliged to cover the full costs of prescribed minimum benefits, or PMBs. These include emergency medical conditions as well as 26 chronic diseases such as diabetes and asthma.
Schemes are for now ignoring a directive from the regulator to pay "in full" medical cover of PMBs. Full cover would mean that service providers such as hospitals, doctors and other providers can charge what they want for their service and schemes would be legally obliged to cover the costs.
The medical scheme industry is in a legal battle with the regulator, hospitals and other healthcare providers over this obligation. The schemes are waiting for clarity from the High Court on a ruling about what "at cost" means.
"If the court rules that the registrar is correct, the impact will be disastrous for medical schemes," said Medscheme CEO Andre Meyer.
Schemes would have to increase contributions by between 10% and 20% in the short term, he added.
The impact will be threefold: interim increases, the impact on schemes' reserves and above-average increases in 2012.
Medscheme administers 26 schemes in SA.
"If you put through that type of pricing structure in medical schemes it won't be sustainable and schemes will be at risk," said Meyer.
This battle is one of several indicators that the industry and its new regulator are likely to remain at loggerheads.
In December, the chief executive and regulator at the Council for Medical Schemes, Monwabisi Gantsho, criticised schemes for annual price increases that far outstrip inflation.
Historically, medical inflation has been several percentage points higher than general inflation because of the increasing prevalence of chronic conditions and new technology, which is expensive.
"It is the view of the registrar that contributions could have increased by no more than 3.6%," said Gantsho.
Meyer said it was unrealistic to believe that medical increases would be in line with inflation rates anywhere in the world. The burden of disease in the medical scheme population is increasing. And new technologies, drugs, and the increased use of specialists add an additional 1.5% or more.
Without the government employee medical scheme, Gems, the membership age profile is staying the same, or getting older. As it worsens, utilisation increases, so does cost pressure, Meyer said.
He expects fewer, but larger, schemes in future. "Smaller schemes will struggle to survive and there will be an amalgamation. Maybe one or two schemes will be placed under curatorship."
Another challenge for schemes is the uncertainty surrounding the planned National Health Insurance, or NHI.
The country's largest open medical scheme, Discovery Health, put forward increased contributions averaging 7.9% for this year. Bonitas's annual increase is 9.6%, while Medihelp, the country's third-largest open scheme (which has a high pensioner ratio), averages 15.5%. Liberty Medical's average increase is 13.7%, while that for Fedhealth and Momentum Health is 9.7% each.
Industry players say it is important not to look only at price, but also at benefits; lower price increases could mean reduced benefits.