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The Medical Schemes Industry in 2020

The number of beneficiaries covered by medical schemes has remained stagnant in the past decade, not surpassing the nine million mark.

The only significant increase in the environment was with the introduction of GEMS in 2006. The impact and effects of COVID-19 also seem to have negatively impacted the number of lives covered.

How many medical schemes are in South Africa?

The number of medical schemes decreased from 144 in 2000 to 76 in 2020.

Voluntary amalgamations mainly drive the trend in the consolidation of medical schemes.

The overall number of schemes in 2020 was 76, consisting of 18 open schemes and 58 restricted schemes.

How many medical scheme members in South Africa?

The proportions of beneficiaries covered by medical schemes expressed as a proportion of the population in the country declined from 16% in 2000 to 14.78% in 2020.

The number of beneficiaries covered by restricted schemes grew by 45 525 beneficiaries, and the number of beneficiaries covered by open schemes declined by 148 752 beneficiaries between 2019 and 2020.

How many medical scheme members in each province?

  1. Gauteng – 39%
  2.  Western Cape – 16%
  3. KwaZulu Natal – 15%
  4. Eastern Cape – 7%
  5. Mpumalanga – 6%
  6.  North West – 5%
  7. Limpopo – 5%
  8. Free State – 4%
  9. Northern Cape – 2%

Comparing open and restricted schemes

Open schemes are bigger

Open schemes accounted for more than half of the medical scheme’s population (54.35%), while restricted schemes accounted for the balance (45.65%) in 2020.

Restricted schemes showed growth

Year-on-year increases in terms of beneficiaries were only notable in three schemes, which grew by more than 5% over the period:

  1. Makoti Medical Scheme (20.3%)
  2. LA-Health (7.1%)
  3. Building & Construction Industry Medical Aid Fund (5.9%)

The Government Employees Medical Scheme (GEMS) contributed to the increase in restricted schemes and registered 71 463 beneficiaries, with less than 5% year-on-year growth (3.8%).

Open schemes lost members

Open schemes generally saw a decline in the number of beneficiaries covered in 2020 compared to 2019.

  1. Discovery Health Medical Scheme, which accounted for the lion’s share of open scheme market, registered a loss of nearly 50 000 beneficiaries (49 770 beneficiaries)
  2. Fedhealth (13 015)
  3. Bonitas (12 858).

COVID-19 undoubtedly negatively impacted the exposure data, with many individuals being laid off or losing their jobs, resulting in many members being unable to afford private health care.

To read more on this, download the CMS Industry Report 2020

Utilisations Trends

The COVID-19 pandemic has had a notable impact on two areas in the medical schemes industry.

Although there was an increase in the demand for Pathology related services, likely due to COVID-19 tests, there was an overall decline in benefits paid. The COVID-19 lockdowns and restrictions resulted in low utilisation of health services, however, increase in the length of stay (LOS). This could be an early indication outcome of delayed health seeking behaviour or other attributes that will need to be investigated further which potentially lead to complexity and high severity of illness.

For medial schemes, the lower utilisation of health benefits provides an opportunity for more enriched benefits for  members.

In addition, COVID-19 provides key learning for reprioritising primary health care and preventative care, vaccines and importance thereof.

Possible Supply Induced Demand (SID)

Because of the demand of unique pathology services, there is potential for supplies to exploit patients, thus encouraging unnecessary utilisation of services.  The current system operate on a fee-for-service payment, thus advocating for more services especially in instances where it’s not clinically appropriate may create an incentive for a provider and potential lead to waste. We have not seen most of these but it is certainly an area to investigate further. Especially where COVID-19 tests are concerned.

On the other hand, the impact of COVID-19 on health outcomes will be realised over time. Delayed elective care, could result in the need for costlier interventions over time.

In 2020, there were more beneficiaries between the ages of 5 and 9 years, and fewer beneficiaries aged 85 years and above.

Average age in 2020: 33.4 years

The average age of female beneficiaries was higher than that of male beneficiaries from 2016 to 2020.

The proportion of pensioners (beneficiaries aged 65 and above) increased to 8.9% in 2020 from 8.6% in 2019. This implies an ageing profile of members of the medical schemes and that there were more pensioners compared to the previous year, this also a contributing factor or considerations for pricing and benefit design, coupled with utilisation and increasing chronicity and tariffs.

What does this mean?

For all the years, the pension ratio and the average age for females was higher than that of male beneficiaries.

The average age of 35.3 years in open schemes was higher than the industry average of 33.4 years in 2020, while restricted schemes had a lower average age of 31.2 years.

Expenditure on prescribed minimum benefits (PMBs) is mainly driven by beneficiary profile, prevalence of chronic conditions and expenditure of treatment.

The term ‘beneficiary profile’ refers to the level of cross subsidisation between the young and old, as well as the sick and healthy. To remain sustainable, medical schemes need membership grown in young and healthier populations.

Expenditure generally increases with age, particularly beyond the ages of 40 – 44 years, while the membership growth beyond this point drops rapidly. Conversely, expenditure increases significantly from the age of 59 years.

In 2020, expenditure for the ages between 45 and 64 were slightly higher than beneficiaries 69 years and older. 

The average PMB expenditure in 2020 was R866.02 per average beneficiary per month.

PMB expenditure (risk + savings) which amounted to R94.8 billion in 2019. The PMB expenditure as a percentage of total benefit paid accounted for 51% of benefits paid in 2019 up from 50.9% in 2018.

The cost of PMBs is mainly driven by a combination of the factors:

  • Beneficiary profile which is based on the level of cross-subsidisation between the young and the old; the sick and the healthy.
  • Prevalence of chronic conditions and disease burden.
  • Expenditure on treatment, which is strongly linked to contracting between schemes and providers.

What are out of pocket payments? 

Out-of-pocket payments (OOPs) are calculated as the difference between the claimed amount and the amount that was paid by the medical scheme. This is an understatement of the true OOPs that members incur as it is likely that medical schemes do not fully capture and submit all costs associated with seeking healthcare.

OOPs in 2020 

The largest component of OOPs are medicines dispensed, which constituted 36% of OOPs in 2020 which is 3% higher than the 2019 with 33%.

There was a slight decrease in the portion of OOPs paid to specialists which is consistent with the decrease in total benefits paid to specialists for 2020.

Anaesthetics, surgical specialists and hospitals constitute the largest proportions of OOP expenditure paid by members while GPs, pathology, supplementary and allied works constitute the largest expenditure from Medical Savings Accounts.

Generally, OOPs are lower in restricted schemes which, by design, tend to be more comprehensive. The total OOP over the past five years (2016 – 2020) increased by 10% from R29.9 billion in 2016 to R32.8 billion in 2020.

Note: the decline between 2019 and 2020 from R35.2 billion to R32.8 billion which may be attributed to general lower claims experience, possibly due to COVID-19.

Reducing OOPs in the medical schemes industry is the responsibility of all role players.

Medical scheme members need to be educated on benefit utilisation and health seeking behaviour in order to avoid paying out-of-pocket payments.

Members need to understand what benefits they are entitled to by:

o   reading their scheme rules annually

o   understanding Prescribed Minimum Benefits

understanding their Designated Service Providers (DSPs) and networks

what their scheme exclusions and/or limitations are within the entitlements; and

o   how to avoid paying co-payments in the context of their medical scheme.

To sufficiently protect members of schemes against this financial burden, there is a need for improved member education, proper coordination of care such as managed care, patient channelling especially within options requiring use of DSPs and networks.

The use of penalties by schemes to manage utilisation and/or channel members to DSPs/networks should not be too aggressive to the point of creating a heavy burden for patients. It is recommended that such penalties should seek to conform to international standards whereby OOP is often capped at 15% of the household budget.

 In 2020, medical scheme members visited their GPs more.

The proportion of GP consultations in the in-hospital setting decreased to 9.71% in 2020 from 10.84% in 2019, while out-of-hospital consultations increased by 1.26%.

The number of medical scheme beneficiaries visiting a GP at least once a year reduced by 9.41% from 7.2 million in 2019 to 6.5 million in 2020.

The change between 2019 and 2020 was mainly driven by a significant decrease (11.71%) in GP visits by beneficiaries covered by open schemes.

In 2020 more beneficiaries covered by restricted schemes (814.84 per 1 000) visited a GP compared to open schemes (677.92 per 1 000).

The average number of patients per 1 000 beneficiaries visiting GPs declined by 9.47%. 

The average annual number of consultations per patient decreased by 4.54% (3.20 to 3.05 visits) between 2019 and 2020. The average amount claimed for GP visits increased by 4.95% between 2019 and 2020 (475.21 to 498.71).

Cost of a GP visit for a medical scheme member in 2020

Risk benefits paid per patient to GPs increased by 4.36% from R333.19 in 2019 to R347.73 in 2020, and the average expenditure from medical savings accounts increased by 2.87% to R111.38.

The increase in the average amount paid from the risk account was higher for restricted (3.66%) than open schemes (2.93%).

The average amount paid to GPs from medical savings accounts was higher in open schemes (R173.05) when compared to restricted schemes (R58.55) for the year 2020. Similar trends were observed in 2019. Beneficiaries in open schemes rely more on medical savings accounts than beneficiaries in restricted schemes to fund GP consultations. This explains the richness and the design of benefit plans offered by open and restricted schemes.

Overall, OOP expenditure for GPs increased by 17.37% between 2019 and 2020.

Pathology was the biggest winner in 2020.

Expenditure on pathology services amounted to R10.52 billion or 5.69% of healthcare benefits paid while expenditure on surgical specialists and radiology services amounted to R10.67 billion and R8.57 billion, respectively.

This increase may be attributed to the COVID-19 tests which are a Prescribed Minimum Benefit.

On the other hand, there was an overall decline in benefits paid to:

  • Specialists: 26%,
  • Hospitals: 8.83%
  • General practitioners: 10.07%
  • Dentists: 7.19%
  • Dental specialists: 5.52%.

This is attributed to the varying levels of lockdowns and cancellation of elective procedures and services during 2020 due to the COVID-19 pandemic.

C-sections increasingly seem to be a go-to option among medical-scheme members even in low-risk, non-emergency deliveries leading to South Africa seeing an increased rate of 7.30% from 651.83 in 2019 699.40 in 2020 for open schemes.

While C-sections account for more than 74.6% in 2020, making the C-section rate among South African medical scheme members the highest rate globally.

The overall increase was 3.92% from 613.18 in 2019 to 637.24 in 2020; the rates were relatively different in open and restricted schemes but consistently higher in open schemes.

Indicating access to medical services hasn’t just increased the overall rate of c-sections in the medical scheme sector; it has also created hot spots.

For all the latest updates regarding the coronavirus pandemic in South Africa, please visit the SA Coronavirus Website.

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