Employee benefit

Failure to properly manage HIV/AIDS strategies for employees has led to some workplace programmes being closed down because audits have revealed unacceptable costs.

Although the operating performance of medical schemes took a knock last year, a survey by Global Credit Ratings has found that schemes are financially robust.

The advisory team set up by the health department to look at reforming tax breaks on medical scheme contributions has recommended not scrapping these subsidies as was widely expected and instead wants employees to pay an income-based levy as part of their medical scheme contributions. The team chairman, former Medscheme CEO Anton Roux, said the team was concerned that changes to the tax breaks enjoyed by employers who paid medical scheme contributions might discourage them from providing medical cover for their workers. The proposed levy would be used to fund the difference in cost between providing a basic basket of healthcare (called the prescribed minimum benefits) in the public and private sector. It was expected that the reforms would help lower the price of medical scheme contributions and enable low-income workers who use state hospitals and clinics to buy their own health insurance. The present system was inherently unfair, said Roux, as only high-income earners enjoyed much larger tax breaks on their medical scheme contributions. The effect was that the rich got a much larger health subsidy from government than the poor. The team's recommendations were the culmination of six months of industry-wide consultation with employers and medical schemes. The work was conducted in tandem with a team looking into setting up a Risk Equalisation Fund to share risk between medical schemes. The two teams had published their reports, which were to be scrutinised by an international team of experts at the end of this month, before being finalised by the department. Government hoped the reforms would not only make medical aid more affordable and attract new members, but would also stabilise the industry and make the overall the healthcare system more equitable. The fund's team recommended that government start a new risk-sharing system next year, which would do away with some of the advantages enjoyed by medical schemes with a high proportion of young members, who were generally healthy and therefore low risk and cheap to service. At the moment, people who belonged to schemes with an older age profile frequently paid higher monthly contributions for the same cover as people who belonged to a scheme with a younger profile, said the fund team chairwoman Heather McLeod, director of the Centre for Actuarial Research at the University of Cape Town. It's grossly unfair that if your employer puts you into a scheme with an older profile you pay so much more for the same benefit, she said. Under the proposed fund, schemes would be subsidised for their risk profile, based on a calculation involving the age of its members, and the number of members with chronic diseases, HIV/AIDS, and pregnancy. Schemes with many young and healthy members would pay into the fund, and those with older, sicker members would be paid out from the fund, helping drive down monthly contributions. McLeod said the fund would only cover HIV/AIDS, the prescribed minimum benefits, and deliveries. (Source : Business Day, 14 January 2004).

A study commissioned by the Council for Medical Schemes to determine the affordability of prescribed minimum benefits for members of medical schemes, has quashed industry speculation that this state-determined minimum basket of healthcare is driving up the cost of monthly contributions. The study, led by Prof Heather McLeod from the Centre for Actuarial Research at the University of Cape Town, used the database of SA's largest medical scheme administrator Medscheme to put a price tag on the cost of delivering the benefits package in both a public and private sector setting. The package covers 270 medical conditions and must be provided by all schemes without financial limits, or co-payments, (schemes cannot ask patients to pay for part of the costs themselves, for instance). They can be provided in private hospitals, or in private wards within public hospitals, such as those in Tygerberg, Groote Schuur and the Johannesburg General Hospital. From next year, the benefits will be expanded to include more comprehensive HIV/AIDS cover and medication for 25 conditions such as diabetes, asthma and hypertension, detailed in the chronic disease list. Using 2001 prices, the researchers found the annual cost per beneficiary of the complete package would be R1551 for the low cluster, R3798 for the high cluster, and R2157 for the industry in the private sector. In a public sector setting, those costs fell to R1016, R2425, and R1400 respectively. For a family of four, the monthly cost of the complete package would be R321 for the low cluster, R638 for the high cluster, and R417 for the weighted industry if delivered in a public sector environment. McLeod said there was considerable scope for the medical schemes industry to design cheaper benefit packages that would be affordable to low-income families, thus drawing in the employed but currently uninsured market.(Source: Tamar Kahn: Business Day, 6 February 2003)

A Sake-Rapport survey of five of South Africa's largest medical schemes indicates membership levies will increase by between 13% and 40% next year. The increases are more than double the rise in members' salaries. Thus, households are spending a greater portion of their income on medical expenses. If this trend continues, medical scheme levies will be affordable only by the richest households The medical schemes say it is unfair to blame them for the higher levies. They point out some of the increases are due to external factors over which they have little control. More expensive medication and the poor rand/dollar exchange rate (for imported medicines) are named as important contributory factors to higher levies.