Discovery Health Medical Scheme (DHMS) has announced a weighted average contribution increase across all benefit plans of 7.5% for 2024. This takes effect 01 January 2024, and comes on the back of very strong performance.
In 2023, DHMS contributions are, on average, 12.3% more affordable than those of comparable medical schemes.
DHMS’ in-hospital cover ratio remains the highest in the industry at 96% cover of all in-hospital claims on average, across all plans, and at 6 percentage points higher than other comparable medical schemes.
DHMS forecasts ending 2023 in a strong financial position with projected solvency of 29.4%.
Across the world and here in South Africa, medical inflation always exceeds consumer price inflation (CPI) due to annual increments in healthcare consumption, i.e., consumption of healthcare increases every year by defined populations. Going into 2024, medical inflation is further affected by specific period-related factors -namely the difficult economic climate and consumer squeeze, as well as the impact of ongoing COVID-19 diagnosis and treatment.
The DHMS contribution increases for 2024 vary by plan, to allow for plan-specific changes in healthcare consumption, while balancing affordability with long-term sustainability.
39% of DHMS members will experience an increase of less than 4% in their gross contributions for 2024.
A further 34% of DHMS members will experience an increase in their gross contributions for 2024 of between 5% and 10%, implying that 73% of members experience an increase of less than 10%. This remains within the band of guidance for medical inflation which traditionally exceeds CPI by 3% to 4%.
Johannesburg, Tuesday 26 September 2023: Today, Discovery Health Medical Scheme (DHMS) announced the annual increases in member contributions for 2024, across all benefit plans. The weighted average increase in gross contributions of 7.5% will be effective from 1 January 2024.
Maintaining sustainability and value for members
DHMS continues to maintain a strong financial position with healthy solvency levels heading into 2024. During 2023, the Scheme has offered exceptional value to its members through higher levels of cover at more affordable price points than comparable medical schemes.
“While the long-term sustainability of DHMS is paramount, we remain extremely sensitive to the economic environment and affordability pressures that Scheme members are currently facing. We are keenly aware of the far-reaching impacts of increasing inflation, high interest rates and low GDP growth on households and businesses in our country. With this in mind, we strive to maximise value for members of the Scheme whilst maintaining the long-term sustainability of the medical scheme,” explains Dr Ryan Noach, CEO of Discovery Health.
Drivers of medical inflation for 2024
Each year, healthcare claims increase by medical inflation, which remains a function of increases in healthcare tariffs and changes in healthcare consumption. In almost all countries across the globe, medical inflation runs at a premium to consumer price inflation, typically 3 to 4% higher.
For 2024, there are two period-specific factors that contribute to the changes in healthcare utilisation:
1. additional adverse selection risk because of rising interest rates, and
2. the cost of diagnosis and treatment of COVID-19, now in a “steady state” since the end of the pandemic emergency phase.
In respect of interest rates, the repo rate has increased to a 14-year high of 8.25% in May this year (the tenth consecutive hike by the SARB), intensifying the financial pressure facing consumers and businesses.
“Challenging economic climates are typically represented by higher interest rates and lower disposable income for households. Our longitudinal data show a strong correlation between interest rates and adverse selection in medical insurance, typified by young healthy members on the margin of affordability prioritising other living expenses over the medical insurance contributions,” explains Noach.
“To further clarify, during times of financial strain, members who have an immediate need for healthcare prioritise their medical scheme membership. Healthier members facing the same financial strain choose to prioritise other necessities, while those outside medical schemes typically remain uncovered and do not buy cover,” explains Noach.
“Then, COVID-19 is effectively a new disease, in a steady-state since the end of the pandemic emergency phase, and so adding to the global disease burden. The projected costs of COVID-19 to the Scheme are estimated at R700 million for 2023, to fund COVID-related diagnostic testing and treatment, including in-hospital care. This year, the Scheme has so far funded 3,500 hospital admissions for members.”
Ongoing risk management initiatives, the impact of shared value through Vitality (an entirely separate program to DHMS), and the continued deflationary effect of non-healthcare expenses are favourable and help to reduce medical inflation in the period.
Weighted average increase of 7.5% in gross contributions for 2024
“The contribution increases for 2024 are based on medical inflation and vary by plan to allow for the unique changes in healthcare utilisation on the different plan options,” adds Noach. “The increases in gross contributions also allow for optimisation of Medical Savings Accounts (MSAs) on the Saver Series plans, considering the affordability challenges and the introduction of new benefits for DHMS members, previously funded from MSA. These include virtual urgent healthcare and cognitive behavioural therapy (CBT) online for depression and anxiety.
While DHMS members will experience a weighted average increase of 7.5% in gross contributions from 1 January 2024, contribution increases range between 3% and 12.9% depending on plan choice (as explained above, this is based on the utilisation differentials across plans).
Also, 39% of members will experience an increase of less than 4% in their gross contributions, and a further 34% of members will experience an increase between 5% and 10%. Effectively, 73% of members experience an increase of less than 10%.
These 2024 increases for DHMS members, off a very strong current performance and market position, will ensure that contributions keep pace with medical inflation, while maintaining value and affordability for members of the Scheme.
