Significant rise in medical scheme claims as Covid-19-related pent-up demand is released

Medical scheme expenditure on claims increased significantly in the 2021/2022 financial year compared to the previous year when many members postponed treatment due to the Covid-19 pandemic and hard lockdowns. According to the Council for Medical Schemes 2021/2022 annual report, claims expenditure increased to R186.15 billion up from R162 billion in the previous year.

This includes claims related to COVID-19 that amounted to R10.10 billion. During this time contributions collected from members increased to almost R205 billion up from R199 billion in the previous reporting period.

The CMS says a release of pent-up demand in service utilisation was noted with the claims’ ratio increasing from 81.38% in 2020 to 90.94% last year.

Surplus down but solvency rate up?

The industry’s total surplus was significantly lower at R820.52 million in 2021 compared to the almost R20 billion in the previous year due to rising demand after lockdowns were eased and the pandemic started to wane. The average solvency rate of both open and closed schemes now stands at almost 47%, significantly higher than the required solvency rate of 25%.

The open scheme industry’s solvency level has been stable over the past decade, reaching a solvency level of 39.61% at the end of 2021. The restricted scheme solvency level is mainly affected by the performance of the Government Employee Medical Scheme (GEMS). As such, the overall restricted scheme market reported improved solvency of 52.48% in 2020 increasing to 56% at the end of last year.

Health Squared Medical Scheme that has since been placed under provisional curatorship after its management applied for liquidation of the scheme, is flagged as one of two schemes with a solvency level of below 25%. The other is the closed scheme, Transmed Medical Fund (Transmed) which reported a solvency ratio of almost 20%, down from 22.37% in the previous year. A business plan was submitted by the scheme and has been approved by the CMS.

Despite the country’s unemployment crisis, there was a slight increase in medical scheme membership (48 887 new beneficiaries) to end the year with 8.95 million beneficiaries.

?However, the CMS anticipates that high inflation will affect membership in the long-term.

In the report, the Council emphasises that its goals for 2025 are two-pronged: improving its regulatory effectiveness and efficiency and to position the CMS as a key player in the implementation of the NHI. In executing this, the CMS says it is working on implementing the Health Market Inquiry (HMI) recommendations and providing support to the National Department of Health, consistent with its mandate.

The 2021/2022 CMS Annual Report is available on; https://www.medicalschemes.co.za/cms-annual-report-2021-22/.