Medical schemes
that burden members with steep contribution increases that are unsustainable “are
ill-suited to the conditions of a post-COVID economy”, the Council for Medical
Schemes (CMS) has warned in its “Guidance on benefit changes and contribution
increases for 2022” (Circular 42 of 2021) distributed late last week.

To this end the
council has recommended that the contribution increase for the 2022 benefit
year should be limited to 4.2% in line with the National Treasury-projected CPI
increase.

“Despite the
country intensifying its vaccination roll-out in recent weeks, waves of
infection are likely to continue until the population has developed sufficient
herd immunity to curb transmission. This, together with social economic issues
are threats to the speed of economic recovery.

“As such,” the
CMS continues in its guidance circular, “household income is likely to remain
under pressure for the foreseeable future, as consumers continue to bear the
brunt of the COVID-19 economic contagion. As was the case with the 2021 benefit
pricing cycle, the CMS would like to stress to trustees to continue to adapt
their pricing strategies, aimed at providing financial support to members, as
the economy recovers from the pandemic.”

In instances
where it is economically feasible to implement a lower contribution increase
than the CMS recommended CPI-linked rate, it adds, trustees are encouraged to
adopt innovative pricing models, subject to an independent actuarial
evaluation: “The CMS is also cognisant of the heightened uncertainty regarding the
impact of the pandemic on healthcare claims costs, as well as how quickly
member’s health seeking behaviour will normalise. As such, pricing decisions
for the 2022 benefit year should be largely data dependent and sensitive to the
demographic risk profile and financial position of each scheme.

“Medical
schemes that were already in financial distress pre-COVID-19,” the council
acknowledges, “may require contribution increases higher than the recommended
4.2%. Such schemes must provide the CMS with a detailed motivation for such an increase.”

Concluding the
point, schemes, the council suggests nonetheless, must revise their current business plans
– considering the shock of the pandemic – and demonstrate their long-term
viability:
 “It is CMS’
considered view that in an economic climate ravaged by a pandemic, with lower
corporate earnings, higher government debt, rising unemployment and shrinking
household earnings, medical schemes that burden members with steep contribution
increases that are unsustainable, are ill-suited to the conditions of a
post-COVID economy.”

SOURCE: CMS
Circular 42 of 2021