News

SCHEME RESERVES AS IMPORTANT AS AFFORDABILITY

The average family of four makes a monthly medical scheme contribution almost equaling the monthly repayment amount on a small car or home valued at R200 000. Affordability may, therefore, be an issue for the average working person who does not have the benefit of an employer assisting with his or her monthly medical scheme installment.

The major causes of rising contribution rates include an increase in hospital-related claims, over-utilisation, abuse and fraud, with 2006 proving to be a rather expensive year for South Africa's medical scheme industry in general.

It stands to reason that the main focus nowadays seems to be the affordability of medical schemes. The end of each year brings with it much hype in terms of different medical schemes, their options and how much these will cost when the time comes for individuals and families to renew annual memberships.

Marthie Bester, Marketing Director of Selfmed Medical Schemes, says, "Very little thought is given to scheme reserves which, as each year progresses, play an important role in extending the availability of scheme monies. This may possible be due to the fact that little is known by the general public about the role these reserves play."

The scheme focuses on individuals and their families as well as the small- and medium-sized business owners. "This focus combined with exceptional service levels makes ours a scheme of choice for the self-employed."

In terms of the Medical Schemes Act, schemes need to maintain accumulated funds, termed a solvency ratio or reserve, of 25 percent of annual member contributions. It is this 25 percent reserve that assists with a scheme's ability to deal with the medical industry's financial volatility, absorb associated knocks and protect member benefits.

When contributions rates levied by members during the course of the financial year do not cover member expenditure, scheme trustees have recourse in terms of three options. They can impose interim contribution rate increases during the year or cover the deficit from reserves or reduce benefits. They could also resort to all three.

Schemes with high reserve levels are often able to assist members by bridging scheme money shortfalls from their reserve accounts and, where possible, delaying, or not implementing, contribution rate increases or benefit reductions.

It is therefore a good idea, when considering medical scheme options, to ask about reserve levels.

"Selfmed's reserve level has already exceeded 50 percent, far surpassing the legislated level of 25 percent. It is therefore ideally positioned in terms of competitiveness and, importantly, its ability to offer its members value for money on a sustainable basis," Bester concludes.