Understanding medical aid increases

By: Jeremy Yatt, Principal Officer of Fedhealth Medical Scheme

It’s almost that time of year when South Africans await (with a certain amount of trepidation) the announcement from their medical schemes as to what their contribution increase for the following year will be. With this in mind, here are some insights to help medical aid members understand what medical schemes have to consider when determining increases for the next year.

Many people are concerned about how much medical aid contributions increase by every year, not quite understanding why it’s so much more than inflation, and why schemes feel the need to implement annual increases. Firstly, it’s important to understand that medical schemes are not-for-profit entities, so any increase implemented is the bare minimum schemes believe they require. There is absolutely no merit in making medical aid members pay more than they absolutely have to. Schemes do, however, need to stay commercially viable or solvent. If they keep losing money, they will ultimately go into liquidation and their members will be left high and dry. When determining the annual medical aid increase, schemes mainly consider two factors: age and medical inflation.

As we age, we tend to require more healthcare. For example, older people need certain health screenings like mammograms or prostate checkups, and procedures when our bodies start failing us, such as hip replacements. Medical schemes look at how their membership ages, and if they cannot attract enough younger members to balance out the higher healthcare needs of their older members, this can drive contribution increases.

Another consideration is medical inflation. Many modern medical treatments and procedures increase in cost at a rate higher than the Consumer Price Index (CPI). This is driven in part by the rand/dollar exchange rate, as well as the high cost of new medical technology. New laparoscopic hernia repairs, for instance, have done away with the need for surgery – which generally means faster recovery, but are more expensive than older methods. This drives costs for medical schemes, and helps to determine the increase for the following year. A team of actuaries analyses the costs incurred by schemes, and calculates what the increase should be for the scheme to cover claims in the following year should the trends continue. Understanding the factors behind medical aid increases goes a long way towards choosing the perfect fit medical aid cover that’s customisable to your unique health needs and budget. More than ever, it pays to do your homework.

Visiting fedhealth.co.za is a good place to start!

Exciting new chapter for Fedhealth and Sanlam

It was recently announced that Fedhealth Medical Scheme will become an integrated, Sanlam-endorsed open medical scheme. This collaboration will enable Fedhealth to develop an improved value proposition, which will unlock new opportunities for the scheme, our members and all our broker partners. As such, we look to the future with great excitement, and we cannot wait to embark on this journey in 2025!