The coronavirus pandemic and the impact it has on claims is going to make it very difficult for medical schemes to decide on premium increases for 2021.
It’s almost that time of year again that medical schemes have to start announcing their premium increases for next year. Damian McHugh, CEO of sales and marketing at Momentum Health Solutions, said in a presentation to insurance brokers that it is currently very difficult to determine what will happen to claims next year.
He says medical schemes have many seasonal claims and are relatively predictable, such as in winter when there are more claims, and in holidays with fewer claims.
However, the coronavirus pandemic completely overturned this seasonality.
According to him, the pattern of claims was changed by, among other things, panic purchases of medicines, as well as visits to doctors and operations that were postponed.
McHugh says over-the-counter medicine sales, like toilet paper, skyrocketed after the announcement of a state of restraint.
A traditional medical scheme offering such benefits would have had a sharp rise in claims and people with savings accounts would have used up their savings faster than under normal circumstances.
At the same time, doctor visits fell sharply in April with the level 5 restriction.
He says the difference between this year and last year’s claims amounted to a saving for more traditional medical funds. This would have resulted in savings for members with savings accounts over the period.
What also happened during the curfew, as already reported, is that hospital admissions dropped because people postponed their planned surgeries, and because there were fewer emergencies.
McHugh believes the operations have just been postponed and an accumulated demand may later lead to a sharp rise in claims.
The fewer emergencies did result in savings.
At the same time, the full impact on medical funds with claims regarding Covid-19 has not yet been fully determined.
More serious, critical and fatal cases are more expensive because the people are hospitalized.
Here the average age profile of a scheme also plays a role. A scheme that has younger members has fewer cases that require expensive treatment.
Members with less chronic and underlying illnesses will also cost schemes less.
McHugh says actuaries must now determine what next year’s claims will look like after a year never experienced before.
“It will be difficult. How does one predict what will happen in 2021? Will there be a new normal with fewer doctor visits? Will there still be fewer surgeries, but will it bring other demands because people did not get the treatment they needed in time?
“The new normal is very difficult to predict.”
He says schemes do not have the information to determine what will happen to claims next year.
“We are on the lookout for early signs that could help us predict this.”
He believes that some medical schemes will proceed conservatively and only return the savings they now enjoy to their members, while others will return the savings in the form of smaller premium increases as early as next year.
He believes it is dangerous to give members a smaller premium increase now.
“The impact of the pandemic in the future could wreak havoc in our marketplace if we make a mistake.”
The effect that the economy will have on membership because many redundancies are taking place will also have an impact.
According to him, the growth in membership is expected to decline in 2021.
“You may have saved now because fewer surgeries have been done, but now the impact of smaller membership growth on the average age of the scheme must also be taken into account,” says McHugh.
Most people who leave medical schemes are people who are younger or working while the pensioners remain.
“We are going to see a shift in the average age that is possibly the most drastic that has been seen so far.”
He says at the same time there is now a feeling among trustees that they want to help members, but how much help is given will have to be determined carefully.
