24 March 2009

Consumers hold onto medical insurance

In spite of the economic crisis, consumers are holding onto their medical insurance.

In spite of the economic crisis, consumers are holding onto their medical insurance.

The national pool of people belonging to medical schemes has not yet started contracting and remains relatively stable at just more than seven million members.

“In general, medical cover is a necessity that consumers don’t give up easily. A first step would usually be to scale down to a more affordable benefit option before cover is given up entirely, says Mr Anton Rijnen, chief executive of Medihelp.

He expects that first-time members of a medical fund will rather focus on more affordable options.

Mr Emile Stipp, Discovery's chief healthcare actuary, says this group has been surprised by the increase in its membership notwithstanding the heavier burden on consumers' personal finances.

The members of South Africa's largest open scheme grew by 4% in January this year compared with a year ago and 97% of the members have kept the same option. The other 3% have switched mainly to more comprehensive and expensive options and not to cheaper plans.

Discovery's Key Care option has also grown by 17% to more than 200 000 members.

Mr Dries la Grange, chief executive of Bestmed, says members have switched to more affordable options.

“However, these members could exhaust their savings accounts more quickly and will then have to start paying for additional services themselves. People switch to a cheaper option but then personally have to carry the extra risk."

Mr Willem Claasen, senior and consulting actuary for Medscheme, says he has also checked whether there has been a drop in membership.

In the open schemes administered by Medscheme – such as Bonitas, Medshield and Fedhealth – there has been growth.

“I suspect that in these difficult times people prefer to cancel other payments such as insurance policies and retirement provision.

"It seems they want to hold onto medical cover for longer and not run the risk of losing it, particularly under difficult conditions.”

Mr Faan Louw, head of Umed, holds the same view.

“We have also noticed that people hold onto their medical scheme in difficult economic times.

“As medical expenses are so high and they are not sure of how the cover of other options will work out, the people who do switch will mainly do so only if they receive the same benefits at a lower price."

Rijnen says job losses could change the picture, however, and retrenchments in the mining, car and manufacturing industries are therefore expected to have a negative impact on the membership of some medical schemes with substantial exposure to these employers or members.

Stipp says Discovery has also looked at how retrenchments by companies could affect their business later.

“I expect the effect of the economic crisis on medical schemes to become visible only in a few months' time.”

However, it will be difficult to determine how severely retrenchments will affect the membership of schemes, as employees are usually given the option of remaining members of a scheme if they are retrenched.

Ms Aleksandra Serwa, spokesperson of the Medical Schemes Council, says there are smaller schemes that are considering mergers owing to financial pressure.

“These are voluntary mergers and are not necessarily due to the economic situation."

(Letitia Watson, Sake Rapport, March 2009)


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