Discovery Health has announced the final contribution increases for Discovery Health Medical Scheme (DHMS) for 2022. They will be valid only from October to December. The changes were due to take effect from May, but Discovery said it would delay them until October.
The nation’s largest health care provider initially told members last October that premiums for 2022 would increase by 7.9%, but that would not take effect until May 1.
It said it “preserves short-term availability for all of our members.”
DHMS says its premium increases effective Oct. 1, 2022, will remain at the level planned in May “to ensure that premiums remain in line with future medical inflation while providing [members] financial relief through deferred contribution increases.’
It sent out a message to members last week saying details of the fee changes would be available shortly.
Since the increase is only valid for three months – a quarter of a year – the annual increase for the whole of 2022 is actually about 1.98%.
The actual effective “annual” increase in members was 2.9% last year because Discovery delayed the increase until mid-year.
Read: Discovery delays health care increase for third time
The average increase (unweighted) since October across all of his plans is 7.94%, right on the edge of what wouldn’t be an 8% increase (ie 7.95%).
The increase of various DHMS plans ranges from 7.85% to 7.98% as seen in the table below.
Last October, Discovery said its 7.9% estimate of medical inflation for this year was made up of a 4.4% increase in the cost of medical services (rate inflation), a 1.5% increase in claims (changes in utilization) and a 3% repayment to changes in the demographic profile of the scheme (demographic risk). Discovery said it was unaffected by Covid-19.
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Projected medical inflation for 2022 was 8.9 percent. This was then offset by a 1% reduction in expected future claims in “benefits derived from risk management and Vitality”.
It is able to pass on savings from encouraging participants to be healthy.
This year, DHMS has postponed its contribution increase for the third time since the start of the Covid-19 pandemic. In 2021, he delayed the increase to July, and initially delayed the planned 2022 dues increase to May, which then became October.
Discovery said in February that the 2021 postponement “protected DHMS members in real terms, collectively saving members around R2 billion over the course of 2021”.
He added that this also ensures that “DHMS has the correct prices for the forecast of medical inflation”.
“DHMS capital reserves have increased to an untested solvency level of 38% in line with the reduction in non-Covid-19 health care utilization, ensuring members have sound financial strength.”
It said in a note to clients earlier this year that since the original 2022 pricing announcement, DHMS’s claims and investment experience had been better than expected and had allowed the scheme to “delay the 2022 contribution increase for a further five months”.
Including the closed schemes it manages, Discovery has more than 3.7 million lives under management. DHMS itself has 2.78 million members.
In February, when the interim results were released, it was noted that health care use was rising after falling in the second half of 2021. The high level of usage seen at the end of last year was said to be an indication of what to expect this year. Some of this expected demand did not materialize.
Impact of the pandemic on health
In addition, it was highlighted in February that public health has deteriorated and the overall burden of disease has increased since the start of the pandemic.
It also said there are early signs that the pandemic is affecting overall morbidity, particularly in relation to diabetes and heart disease.
In October last year, Discovery Health CEO Dr Ryan Knoch said: “DHMS’s claims experience provides guidance on the expected future costs of medical claims between the waves of Covid-19 and after Covid-19 becomes endemic.
“Trends indicate that medical inflation remains at 3% to 4% above consumer prices as of January 1, 2020, and that DHMS will be well positioned with premiums at the level of expected claims before considering a premium increase for 2023 “.
This article first appeared on Moneyweb and has been republished with permission. Read the original article here.