2012 medical tariffs: watch out!

The scope that medical schemes have to alter the contribution, cover, content or the qualifying criteria of their various schemes makes it difficult for the regulator, let alone the consumer, to reach an informed assessment of whether each year’s benefit and contribution increases improve or impair their overall medical cover.

A solution to the annual confusion that typifies South Africa’s medical tariff increases would be for the regulator to standardise the variables offered by all medical schemes so that direct comparisons could be drawn by the consumer. For the meantime, while  “understanding the implications of each year’s increases remains a complex game permitting few accurate generalisations, it does provide consumers an opportunity to interrogate their own schemes” says Butsi Tladi, Head: Health Inland region, Alexander Forbes Health.

What is clear from the host of different data, contribution increases, cover limitations, content changes, and qualifying criteria alterations is that, overall, there is a need for price correction for top-end and entry-level options which have generally been running operating losses. And what this means is that “medium benefit and cost options are subsidising both high end and low end options” says Tladi.

Given that legislation requires options to be self-sustaining, it also explains why top-end schemes have, generally, experienced an above average increase in contributions. Similarly, members on low cost options based on income could experience bracket creep if income brackets are not increased in line with contribution increases.

From an individual consumers’ perspective, however, things to watch out for include:

Changes to scheme rules

Medical schemes often alter the definitions in their rules, often with significant ramifications. For example, changing the definition of a ‘dependent adult’ to only refer to spouses and exclude adult children and parents “will result in the scheme collecting a more than average increase from affected families” explains Tladi.

Red herring announcements of increased cover

Often, an increase in contribution for a scheme might appear manageable, though not if this is accompanied by an even larger decrease in cover. Though it is never expressed like this, consumers often end up in a situation where they have had an increase in costs and a decrease in cover. In such cases the real increase would be higher than the increase announced.

Tladi advises each consumer to unpack their medical tariff increases each year to ensure that that they understand in detail what they are getting. If consumers don’t understand their schedule they should call their medical aid provider and ask for an explanation.  This is the only way that consumers can ensure that “they actually get the right cover for their needs and pocket without finding out too late that they are not sufficiently covered” says Tladi.

Bracket creep

Lower income earners in cheaper schemes that cover less, could find themselves automatically moved to either a higher paying scheme or a lower coverage scheme when their schemes alter the earning brackets or other qualifying criteria of the scheme.

Access to ancillary products

This is a positive development for consumers. In short, medical schemes linked to insurance companies are able to provide access to other products and services at reduced rates. Subsidised gym access or store discount cards are the most common examples. “Consumers should, nevertheless, quantify the value of ancillary offerings, deducting any savings achieved from the overall cost of their medical aid before they decide that a particular linked product is actually offering them value” advises Tladi. Consumers too often assume that because they have access to a number of  discounts that it must be a good deal. Often, however, there are strict rules that need to be adhered to before these benefits can be enjoyed and members should be sure that they can fulfil these criteria before signing up. 

Rate of cover

Schemes which covered members up to 300% of medical aid tariff have moved to reduce this to 200% of medical aid tariff. Policy holders are often happy to accept this, especially if it means no increase in costs, but are then “horrified to find that a significant number of medical practitioners still charge in excess of 200% of medical aid tariff and they are stuck forking out the difference - or having to purchase additional gap cover to make up” warns Tladi.

In conclusion Tladi has tabulated 16 South African schemes’ 2011 headline increases. Consumers should, nonetheless, “bear in mind that the devil lies in the detail of the content and cover offered and, as such, headline increases as stand-alone indicators actually reveal very little” concludes Tladi.

(Press release, Alexander Forbes, October 2011)