Average beneficiary age, claims ratio: What you should ask your medical scheme and why

Do you know how much your claims cost your medical scheme last year? On average, R23,060 was paid per beneficiary, up from R20,017 in 2020.

Expenditure peaked for beneficiaries aged 80 to 84 at an average R75,811.

The recently released Council for Medical Schemes’ (CMS) annual report for the 2021/22 financial year is packed with statistics revealing the state of South Africa’s 72 medical schemes from its perspective as industry regulator.

Healthcare expenditure on benefits paid in 2021 increased to R205.3bn, or 15.32%, up from the 2020 reported amount of R178.1bn. That’s mainly due to claims dropping dramatically during Covid-related lockdowns in the 2020 financial year.

Risk benefits, including prescribed minimum (PMBs) and in- and out-of-hospital benefits, consume 90% of benefits paid.

Other facts and stats in the voluminous report

Of the 73 schemes in 2021, 16 were open and 57 restricted, meaning they cater only for certain industries, professionals or unions.

In 2000, 16% of the population was covered by a medical scheme. That dropped to 14,86% in 2021.

Covid-19 had a detrimental impact on private healthcare in 2020, with a decline in membership due to job losses and salary cuts, which affected members’ ability to pay monthly premiums.

In 2021 there was a significant drop in Covid-19 cases after the introduction of vaccines. With the easing of restrictions and the economy reopening, some were again able to afford private healthcare.

The report revealed 35.7% of healthcare expenditure was on hospital services, 26% on specialists and 16.1% on dispensed medicine.

Hospital expenditure increased by 18.68% between 2020 and 2021, from R62.6bn to R74.3bn.

Just more than 92% of expenditure towards hospitals was paid to private facilities.

Expenditure on hospital services paid on a fee-for-service basis — a payment model in which doctors, hospitals and medical practices charge separately for each service they perform — amounted to R57.34bn in 2021, a significant increase of 21.55% from R47.17bn in 2020. Most of that was for ward and theatre fees, and consumables (about 64.4%), with medicines spend comprising only 9.20%.

The most significant year-on-year increase in benefits paid for dispensed medicines was for blood transfusion services, at a leap of 55.93%.

The average expenditure per visit increased significantly for all medical disciplines in 2021, with the most significant increases recorded for pathology (6.5%) and medical (6.4%) and surgical specialists (8.6%).

Expenditure per event for in-hospital services outstripped expenditure for out-of-hospital services across all disciplines, with the widest gap for anaesthetists and surgical and dental specialists, who were paid R2,090, R3,515 and R2,543 more for in-hospital services respectively.

Restricted schemes paid 11.3% more for out-of-hospital services and 6.7% more for in-hospital services per visit than open schemes

Beneficiaries aged 65 and older make up 8.96% of the medical schemes’ population on average, but consumed 26.17% of healthcare benefits in 2021. Beneficiaries aged between 45 and 64, who comprise 23.53% of that population, consumed 35.96% of healthcare benefits in 2021.

That means 33% of medical schemes’ population consumed slightly more than 62% of healthcare benefits provided in 2021, demonstrating the cross-subsidisation between young and healthy and older, sicklier beneficiaries, and the justification for late-joiner penalties.

The biggest out-of-pocket payments — the difference between the claimed amount and the amount paid from the medical scheme risk, which must be paid by the member — was for medicines dispensed. It made up 35.4% of out-of-pocket payments in 2021.

Out-of-pocket payments paid to specialists was 25.9%.

Top 10 out-of-hospital monthly spend (average) in 2021 on chronic conditions:

• Haemophilia: R36,382;
• Multiple sclerosis: R5,446;
• Chronic renal disease: R5,010;
• Crohn’s disease: R2,134;
• Ulcerative colitis: R979;
• Diabetes insipidus: R733;
• Schizophrenia: R692;
• Rheumatoid arthritis: R580;
• Parkinson’s disease: R560; and
• Bipolar mood disease: R486.

Hypertension (high blood pressure), hyperlipidemia (high cholesterol) and diabetes mellitus type 2 remain the most prevalent chronic conditions covered by medical schemes.

Open and restricted schemes follow the same general trend: an increase in claims in the first quarter of the year as members gain access to new benefits, increases in claims over the winter months and a downward trend in the last quarter of the year.

Medical schemes with solvency rates of less than the prescribed 25% — in other words, schemes in major financial trouble — in 2021:

• Health Squared — 6.04% (that plunged to 2.15% by the end of July 2022); and
• Transmed Medical Fund — 19.72%.

According to CMS: “Both Health Squared Medical Scheme and Transmed Medical Fund have poorer demographic profiles than the industry averages. In open schemes, the average beneficiary age is 35.51, with a pensioner ratio of 10.98%, and restricted schemes have an average age of 31.58 among beneficiaries and a pensioner ratio of 6.80%.

“Schemes with higher demographic profiles are at particular risk of the ‘death spiral’, where adjusting their prices to be appropriate for their age profile might result in the unaffordability of contributions and the subsequent loss of their younger members, thereby exacerbating the effect.”

Highest claims ratios among open schemes in 2021, with average age of beneficiaries in brackets

• Health Squared (47);
• Cape Medical Plan (41);
• Hosmed Medical Aid Scheme (34);
• Compcare Wellness Medical Scheme (42);
• Fedhealth Medical Scheme (40);
• Suremed Health (40);
• Sizwe Hosmed Medical Fund (32);
• Medihelp (37);
• Bestmed Medical Scheme (37); and
• Discovery Health (35).

In 2021 Health Squared had the highest admin expenditure and among the highest governance-related expenditure. The scheme shocked its members and the industry by announcing in August it intended to apply for liquidation and that its members’ benefits would cease at the end of that month.

Solvency

The average 2021 industry solvency ratio was 46.73%, far exceeding the legal minimum requirement of 25%. It was 39.61% in the case of open schemes, compared with the restricted schemes’ 56.15%.

Solvency levels increased significantly in 2020 in both industries due to higher net surpluses incurred as result of the reduced use of benefits because of lockdowns.

• GET IN TOUCH: You can contact Wendy Knowler for advice with your consumer issues via e-mail: consumer@knowler.co.za or on Twitter: @wendyknowler.

Support independent journalism by subscribing to the Sunday Times. Just R20 for the first month.