Johannesburg – 30 September 2020
Discovery Health Medical Scheme (DHMS) annual contribution increases are calculated based on medical inflation (the year-on-year increase in healthcare costs).
“In 2020 we have experienced a discontinuity in the usual healthcare utilisation patterns, with a consequent 0% medical inflation impact expected for the first half of 2021,” explains CEO of Discovery Health, Dr Ryan Noach.
“Each year we strive for the lowest possible contribution increase. For the first six months of 2021, DHMS will deliver a contribution freeze for all scheme members across all plans, mindful of and sensitive to the financial pressures facing individuals at this time within the country’s stressed economic climate. This freeze matches contribution increases to the expected medical inflation during the January - June 2021 period.”
Reduction in total claims results in strengthening of scheme reserves
“While we have seen increased demand for healthcare services related to COVID-19, there has been a concomitant marked reduction in health-seeking behaviour for non-COVID related healthcare needs. This is reflected in 20 - 40% reductions in usual healthcare utilisation patterns, driven predominantly by cancellations of elective surgeries, marked reductions in discretionary medical admissions, cancellations of preventative healthcare and wellness checks and reductions in infectious diseases typical of the winter months. The net effect of this utilisation discontinuity has been to reduce the total claims received by DHMS during the period, resulting in a marked increase in scheme reserves.”
Medical schemes are required by law to maintain 25% of annual gross premium income in capital reserves, to ensure that future healthcare claims obligations will be met. DHMS is in a strong position to meet the future healthcare funding needs of its members following COVID-19, with the highest investment rating possible for a medical scheme in SA. The Scheme’s reserves are 20% higher than the combined reserves of all other open medical schemes in the industry, allowing for the necessary provisions to cater for expected future healthcare utilisation changes.
Heightened demand for healthcare funding forecast for the second half of 2021
The discontinuity we are seeing is temporary as it is related directly to the COVID-19 epidemic. We anticipate a return of non-COVID healthcare demand to pre-COVID levels by the middle of 2021 and we also expect the demand for healthcare funding to be higher in the second half of next year. This is linked to the return of non-urgent, elective care that has been deferred during the pandemic, the effects of reduced health-seeking behaviour during the pandemic which often leads to long-term health complications, the availability of a COVID-19 vaccine and taking any potential resurgence of COVID-19 infections into account.”
Consequently, Noach explains, it is necessary to match the DHMS contributions for the second half of 2021 to this higher medical inflation expectation. The DHMS mid-year contribution increase for 2021 will be announced during the second quarter of the year.
“We currently project an increase reflective of medical inflation at no more than 5.9% (i.e. CPI + 2%), across all plans for the second half of 2021,” adds Dr Noach. “This translates to a weighted annual increase of less than 3% for all DHMS members on all plan options in 2021 and balances the need for affordability and scheme sustainability.”
- Read the full detail around the contribution freeze announced by Discovery Health today - September 2020 Health Discoverer (pages 41 to 45).
For more information, contact
Nthabiseng Chapeshamano (084 037 1951)
Senior Reputation Manager
Discovery Limited is a South African-founded financial services organisation that operates in the healthcare, life assurance, short-term insurance, banking, savings and investment and wellness markets. Since inception in 1992, Discovery has been guided by a clear core purpose – to make people healthier and to enhance and protect their lives. This has manifested in its globally recognised Vitality Shared-Value insurance model, active in 24 markets with over 20 million members. The model is exported and scaled through the Global Vitality Network, an alliance of some of the largest insurers across key markets including AIA (Asia), Ping An (China), Generali (Europe), Sumitomo (Japan), John Hancock (US), Manulife (Canada) and Vitality Life & Health (UK, wholly owned). Discovery trades on the Johannesburg Securities Exchange as DSY.
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