Turn on the radio, read a magazine or drive past a big intersection and you're likely to hear or see an advertisement for a medical scheme. The increasing amounts that scheme administrators are spending on marketing to attract new members shows the industry is having to find new ways to compete for members.
The rise of consumerism in the industry has revolutionised the way companies sell medical cover, but it's had little impact on bringing new members into the medical aid net. Total membership has stagnated at about 7m for the past few years - many members are "buying down" their cover to cheaper options; new members are often simply the result of churn between schemes; and about 37% of members that have left schemes are exiting health-care cover completely, say scheme administrators.
Government is now trying to bring more people into the private medical aid industry. It is introducing a range of regulations to try to do this. But with increased regulatory pressure, schemes are battling to come up with ways to make private medical cover affordable.
This year, a task team set up by the Council for Medical Schemes and headed by Discovery Health's Jonathan Broomberg will investigate options for the low-income market.
It will also liaise with providers in the industry, such as hospitals and pharmaceutical companies, to try to get players to come up with cheaper products.
The barrage of new regulations implemented over the past year, coupled with consistently high medical inflation, has changed the way companies think about health cover for their workers.
As government prepares to implement a social health insurance system over the next five years, overhaul the tax subsidy system and bring more members into the private medical aid system, companies are looking for better ways to manage risk and control costs.
"Companies are looking to replace their present medical aid liabilities with lower-risk alternatives," says Lekana specialised consulting head Colin Bullen. "That means employees will shoulder most of their medical costs and risks."
Added to this, the health department proposes dismantling the two-thirds medical aid subsidy for employers because that favours higher-income employees. Instead, it proposes a 5% tax on all employees to ensure that lower-income workers enter the private medical aid system.
"The council will have to determine what poorer people are willing to pay for medical cover and how much wealthier people are willing to subsidise them," says Bullen.
Treasury seems set against the idea of introducing another payroll tax and favours capping the amount allowable for medical scheme membership.
The macro changes in the industry will influence how members choose their medical aid plans. Liberty Life divisional director of health care Stephen Maasch says employees are increasingly wanting to choose their own medical cover, without being dictated to by their employer. "Often they're paying for it either in part or in full and therefore want the right to decide," he says.
But consumers now demand more than medical cover. They even want more than access to loyalty programmes that offer discounts at stores and cheap air flights. "Bells and whistles are no longer a differentiator," says Medscheme CEO André Meyer. "The way schemes manage their risk will be the real difference in the next few years."
That's because government is implementing a Risk Equalisation Fund (REF) from next year to level the playing field between schemes. Those schemes with younger, healthier members will have to pay into the fund, while those with an older and sicker membership profile will receive "compensation" from the fund.
"With the move towards standardised benefits across the industry, the only difference will be in the service provided by the administrators and the price members pay for the package," says Maasch.
Meyer says that is the reason managed care will become increasingly important as schemes compete on how well they can manage their costs.
Though the impact of the REF is likely to be small in most open schemes, some closed schemes, with high pensioner ratios, will benefit greatly.
Old Mutual health-care executive Paul la Cock says the net payment from the fund in some cases will be as much as R200/beneficiary/month, which will allow some schemes to reduce their premiums dramatically. The Council for Medical Schemes' research, however, shows the impact on most schemes' contribution rates will be less than 10%.
Despite the positive impact of the REF on some schemes, there is likely to be continued consolidation at both scheme and administration level. The REF will put increasing pressure on schemes to become more efficient, and to do that they need economies of scale.
In addition, a health-care charter due out this year will force administrators to sell equity to black partners. Enticed by the chance of winning the tender to administer a huge proposed state-employee scheme, some administrators have already done this. While large players such as Discovery, Medscheme, Metropolitan and Old Mutual battle it out for the tender, a rash of empowerment deals are likely to be concluded in the next few months.
This year's list of Top Companies shows that the administration of SA Giants' medical aid schemes has remained fairly stable. In the open-schemes market, Discovery still dominates - counting 95 SA Giants among its members.
Metropolitan enjoyed enormous growth, with six new SA Giants, including Implats, Ahealth, Foschini and Sekunjalo. National Medical Plan lost some important members such as Illovo, Tongaat and Mr Price, and Sizwe Medical Fund scooped some important new black empowerment companies such as Johncom and Sekunjalo.
After years of companies shifting to open-plan schemes, many companies are sticking to closed-scheme arrangements.
Many employers are also choosing to manage the total health benefit of their employees.
With reserves at a record high, scheme administrators are managing risks better, especially HIV/Aids. Most have been able to reduce their premium increases to single-digit figures. But the biggest risk remains ill-considered regulatory interference from government.
