Deferment of medical aid contributions could have detrimental impact on long-term financial wellness.
Deferment of medical aid contributions could have detrimental impact on long-term financial wellness, writes Damian McHugh
The turbulent economic conditions the world currently finds itself in have seen the economic growth of many countries decline. In developing countries such as ours, the impact of the COVID-19 pandemic, stagnant economic growth, and most recently, the Russia-Ukraine war, which has resulted in steep price increases in basic commodities such as fuel and food, has put further strain on already embattled consumers.
This has, in turn, forced some consumers to make difficult decisions to cut down on what they perceive to be unnecessary expenses, including medical insurance. Temporary cancellation, or deferment in contributing to one’s medical aid could, however, have a detrimental impact not only on one’s health but also on one’s long-term financial wellness.
And in the short run could, in fact, cost more in the event of, for instance an emergency surgical procedure or a car accident that compels a person to pay medical expenses out of pocket. This could run into hundreds of thousands of Rands, compelling some to take out loans, which could in turn have long-lasting negative financial effects.
Momentum Medical Schemes understands what the South African consumer is going through and foresaw the economic impact of the pandemic on an already beleaguered consumer. The Scheme also understands the importance of holding on to one’s medical aid, and it’s against this backdrop that it took the decision to defer members’ contribution increases from January to September this year. The deferment in increases was enabled by the fact that medical schemes saw a decrease in overall benefit utilisation, as the demand for certain healthcare procedures reduced during lockdown periods, ultimately positively impacting the solvency of schemes.
By deferring member contribution increases until September, the Scheme put more than R210 million back in members’ pockets, providing them with an opportunity to increase their income and/or, recover from the pandemic setback to accommodate the forthcoming increase in their medical scheme contributions.
In addition to delaying the increase, Momentum Medical Scheme also decided to increase members’ contributions by only 6%, effectively only passing on a 2% increase over the full year. A critical element of the deferment strategy was to ensure that members did not end up having to make up for the increase deferment in the form of exorbitant contribution hikes later, which would have defeated the Scheme’s purpose of providing quality healthcare at affordable prices.
When reviewing the proposed increases, Momentum Medical Scheme factored in the likelihood that healthcare utilisation will, in due course, revert to pre-pandemic levels, while at the same time allowing for medical inflation, which is typically two to three percent higher than CPI. However, the Scheme was of the view that to be truly socially relevant, the effective increase should not be higher than 3-4%, as salary inflation had not tracked higher than that over the COVID-19 period.
Momentum Medical Scheme is also in the position to delay the increases further to 2023, employing a similar deferment strategy if there is a need to do so, without devaluing the quality of benefits offered to members, while also ensuring the sustainability of the Scheme in the long term.
So, as tempting as cancelling or deferring one’s medical scheme contributions can be to a beleaguered consumer, we advise people to consider choosing an option that is more aligned to their affordability rather than foregoing their cover all together.
About the author
Damian McHugh is an Executive at Momentum Health Solutions.
Published: 20 June 2022