The Council for Medical Schemes (CMS) has recommended that contribution increases for 2023 should be limited to 5.7%, in line with the South African Reserve Bank’s projected average inflation rate for next year.
The regulator said that in an economic climate characterised by surging inflation and rising interest rates, most medical scheme members could not afford above-inflation contribution increases.
The recommendation is contained in CMS Circular 44 of 2002, “Guidance on benefit changes and contribution increases for 2023”, which was published at the end of July.
Medical schemes have until 1 October to submit their 2023 contribution increases and benefit changes to the CMS.
The CMS uses the Consumer Price Index (CPI) to estimate price increases in the healthcare sector and as a proxy to measure the affordability of contribution increases.
In July, the SARB’s Monetary Policy Committee (MPC) said headline inflation was expected to average 5.7% next year and 4.7% in 2024.
The CMS said that to provide further financial relief to members, where a medical scheme is in a strong financial position, trustees may implement contribution increases lower than the recommended CPI-linked increase. However, such pricing models must comply with Advisory Practice Note 303 on the adequacy of contribution increases, published by the Actuarial Society of South Africa.
The circular went on to state that although the CMS encouraged the industry to implement contribution increases that were affordable to members, it acknowledged that some schemes might require above-inflation increases because of “unique industry-specific cost-push factors”, such as the impact of the weaker rand and the burden of diseases.
“Accordingly, all pricing models for the 2023 benefit year must be data dependent and subject to independent actuarial evaluation.”
Recommended cap for 2022 was 4.2%
In 2021, the CMS recommended that contribution increases be limited to 4.2% in 2022, based on the MPC’s forecast that headline inflation would average 4.2% this year. However, year-on-year CPI rose to 7.4% in June 2022, and in July, the MPC said it expected CPI to average 6.5% this year.
Most medical schemes announced 2022 contribution increases that were above the CMS’s recommended limit of 4.2%. One exception was Bestmed, with an average contribution increase of 3.9%.
Some schemes deferred implementing their 2022 increases until later in the year. For example, Discovery Health deferred its average increase of 7.9% to 1 May and then to 1 October, while Momentum Medical Scheme gave its members a reprieve to 1 September on its average contribution increase of 6%.
The 2022 average increases for other large open schemes were 4.8% for Bonitas members and 5.5% for Fedhealth members.
The CMS noted that the 2021 benefit year was the first time in more than a decade that the medical schemes industry implemented contributions increase below CPI.
“This was mainly a collaborative effort between the CMS and the industry aimed at providing financial relief to members grappling with the adverse economic climate induced by the Covid-19 pandemic,” it said.
5.7% contribution increases is a joke as far as POLMED is concerned.
By keeping income brackets unchanged for 2020, 2022 and now 2023 it means present income brackets for 2023 are the same as they were for 2021 and 2022 .
NO ALLOWANCE WAS MADE FOR INFLATION !
In each case some members found themselves in the next bracket for that year resulting in a CONTRIBUTION INCREASE IN THE REGION OF 20+%.
I am one of those affected during the year 2022 with the monthly POLMED contribution alone absorbing approximately 60% of my net pension increase after tax.
This put me back to relative disposable income being drastically reduced not to mention the cost of living increases (food/rates/fuel etc etc).
The same will now apply to the next group of POLMED pensioners during 2023.
The widows/ers (especially the older) who receive 50% of their spouse’s pension are particularly hardest hit.
It is regrettable that POLMED did not heed your request to keep contribution increases in the region of 5 to 6% .
In most cases the annual increase in benefits has been in the region of 2%.
Thank you.
Robert Lawlor