GTC Healthcare Consulting has warned that inflation is likely to follow the increase in deferred contributions to health schemes in South Africa in January 2023.

The financial advisory firm, which specializes in the administration of pension funds, noted the recent wave of increases in the prices of deferred health investments and expects further growth that exceeds inflation in 2023.

Traditionally, medical care schemes have had their fees rise every year from 1 January. However, new trends have emerged over the past two years due to the Covid-19 pandemic.

These include delaying increases, dipping into reserves to reduce increases and announcing deferred increases above the CPI, noted Lee Kalakoppen, chief executive officer of Bonitas Health Foundation.

Reduced requirements during the Covid-19 pandemic, together with a desire to maintain affordability for members amid low inflation, has led to many schemes delaying increases until 2022, with the largest open health scheme – Discovery – initially delaying increases from January to May 2022. , and then again until October.

Although the January 2023 increase has not yet been announced,Discovery confirmed 7.9% growth in October 2022. which will last until December. Various other schemes increased their contributions at the start of the year, although many were also delayed after January.

The increase in October 2022 will almost certainly be followed by a planned increase in January 2023, according to the GTC. “Interim increases are administratively expensive and disruptive and we suspect that schemes will revert to the traditional January increase date from next year,” said Jill Larkan, head of health consultancy at GTC.

In a circular issued in July (Circular 44 of 2022: Guidelines for Income Changes and Contribution Increases for 2023), the Council on Medicare Programs (CMS) recommended that contribution increases in 2023 not exceed 5.7%, “ in line with the South African Reserve Bank’s 2023 Consumer Price Inflation (CPI) forecast’, but that ‘due to unique industry-driven cost drivers … some schemes may require premiums to increase above inflation’.

“In previous years, medical schemes have typically exceeded the CMS increase guidance by around 4%, as evidenced by information provided to CMS in their circular,” Larkan said.

On this basis, taking into account the expected ‘return to normalcy’ occurring within the patterns of medical care claims currently reported by the schemes, the GTC expects the increase in 2023 to be in the CPI range (5.7% , forecast by the SARB in their July Monetary Policy Statement) plus 4% (the overall average above-inflation increase provided by CMS), bringing average growth to between 8% and 10% p.a. in January 2023 – if nothing else will not change significantly.

The CMS circular itself notes that “… the rates of increase in health scheme contributions have consistently exceeded the CPI, except in 2021… [which was] for the first time in more than a decade, the industry has introduced a contribution increase below the CPI.’

“The lower-than-expected growth in 2021 was due to the financial difficulties faced by South African consumers on the one hand, and the under-utilisation of healthcare benefits, which led to record health scheme reserves, on the other,” Larkan said. .

Lower-than-usual take-up of health scheme benefits among members fearing doctor visits and hospitalization in the context of the Covid-19 pandemic has seen the health scheme’s total reserves rise to a record 73.29 billion rand in 2021.

“If the schemes do not at least maintain growth in line with medical inflation year on year, recognizing that medical inflation has always been ahead of CPI, there will come a time when their members will have to withstand a sudden adjustment to ensure that contribution rates are in line with the expected year-over-year increase in medical inflation,” Larkan said.

“And in our current economic environment, no member wants to suffer the pain of ‘catch-up’ after a ‘budget’ financially rich period of delayed or non-existent annual raises.”

Larkan advises all members that the personal budgets relief – granted by delaying the increase until October 2022 – is fast coming to an end. These October increases, along with the expected return to normal levels in January, just four months away, will further tighten many families’ budgets.

Read: Stop trying to implement the NHI – fix what we have: an expert

Source by [author_name]

Previous articleBiden Forgives Millions in Student Loans; critics fear inflation – SABC News
Next articleMokotjo open to join Chiefs – SABC Sport