Why does my medical insurance go up every year?

Every year, particularly towards year-end, you may or not become familiar with the fact that your medical aid premiums increase, regardless of your health status. If you’re wondering how this occurs, here’s your opportunity to get clued up. Moneybags writer, Alina Hardcastle explores this matter, as well as what can be done to reduce these costs.

Before diving into the reason for healthcare premium increases, you need to understand who determines healthcare inflation. According to independent healthcare communication consultant, Heidi Kruger, the Council of Medical Scheme (CMS) regulates the increases, which medical schemes can impose. She says: “For the past few years, the CMS has not allowed schemes to increase premiums by more than CPI plus 3% unless there are good reasons, such as significant changes to the benefit.”

What determines medical scheme premium increases?

 Many have queried why medical inflation outstrips normal inflation. Kruger explains this is the result of numerous factors such as an ageing population, new technology, new and costlier medicine etc.

“In South Africa, not only do we contend with the aforementioned factors, but we have a number of other factors which are peculiar to our health system. For instance, membership to a scheme is not mandatory (except where it’s a condition of employment). This means as the costs rise, so the young and healthy opt for lower options or out of the system altogether. And since medical schemes are based on a system of cross subsidization between young and healthy, and elderly and sick, the fewer young people there are in the system, the more expensive premiums will be.”

The ageing population

The private sector has also experienced an increase in utilization over the years, Damian McHugh, head of marketing and sales at Momentum Health, chats about the ageing medical scheme members. He explains that the older members get, the likeliness of illnesses occurring increases, especially the risk of chronic diseases such as cancer, diabetes and hypertension disorder. He says: “We are seeing more sickness and chronic illness occurring than what we did 20 – 30 years ago.”

Kruger adds that a study published in the medical journal Lancet predicts that South Africa could see a 78% increase in the number of cancer cases by 2030.

New and costlier treatments

 With the increase in chronic illnesses, advancements in treatment are required. However this comes at a high cost. McHugh says that not only is this equipment expensive to start with, but the current economic climate increases this cost further.

Supply induced demand

Another reason for the increase in utilization is “supply induced demand”, meaning that if a new hospital is built in an area, it will result in a sharp increase in admission rates, according to Kruger.

Tips to lower the cost of your insurance premiums?

In regards to lowering your healthcare premium, there’s no one size fits all solution. However, Discovery Health Medical Scheme (DHMS) principal officer, Dr Nozipho Sangweni, provides a few general tips to help maximise your benefits:

  • Choose the best plan option to suit your family’s medical needs and household budget. In doing so, it’s important to ensure that you get professional advice from an accredited advisor.
  • If your plan has a savings account, decide carefully on how to utilise your funds. Don’t make use of unnecessary healthcare services. A careful approach can assist in your savings account going a long way and can cover your family’s really healthcare needs for the entire year.
  • Ensure that you understand the rules of your medical scheme to avoid unnecessary co-payments. Schemes have networks of designated services providers with whom claims are paid in full.