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Transfer of Risk




We are nearing the end of the year and most brokers involved in the healthcare funding arena should be finalising their client renewals.  The past year has once again been an interesting one with certain Medical Aid Schemes merging,others making changes from one administration house to another, and various changes being made in some of the major healthcare brokerages.  All these occurrences produce opportunities - depending on whether you are a client or a broker.


Emerging Trend

One specific issue seems to be emerging in the healthcare funding arena - more and more clients are insuring against hospital costs only.  This trend has been growing during the past 18 months and looks set to continue gaining momentum.  The trend is primarily driven by cost, as more employers to remunerate employees on a “cost to company” basis. This affects many healthcare funders in our industry, who are seeing more and more members purchasing products that offer primarily hospital cover.

This trend of only insuring against hospital costs is not new and realistically healthcare funders who have been offering cover for day to day costs via savings mechanisms,have been on a “money swapping” exercise.


Implications

However, what the industry now has to deal with is the following scenario: An insured member is only covered via a hospital only plan/option.  The said member develops a medical condition and subsequently visits theirlocal medical practitioner. This particular medical condition is initially treated conservatively i.e. via medication, however, the condition either persists or re-occurs. The insured member has, up to this point, been funding this conservative treatment from their own after tax income.  It is at this stage that the member possibly stops treatment due to costs, and the possibility exists that the condition deteriorates to the extent that hospitalisation is required or, alternatively, the member is hospitalised to heal the condition.  The “voluntary” option of being hospitalised is seen as a sound decision as all in-hospital costs are covered via an insured healthcare plan/option.


Hospital frequency increasing

This trend, for the member to either neglect treatment by the medical practitioner (due to costs), or rather undergo the treatment in hospital (due to costs) has resulted in the industry frequency for hospital visits to climb during the past 18 months. This rise in hospital frequency is difficult to curb by simply employing the use of a managed care program, as many of the higher frequency hospital procedures only require 5 or 6 hours of hospitalisation – but cost R5 000 to R8 000!


Excesses

The market appears to be working towards combating this trend by implementing an excess per hospital stay on many of the healthcare funding schemes.  The excess levels announced range from R500 up to R5 000 per hospital visit - and these steps have been implemented by some of the larger Medical Aid Schemes.

The public will have to become accustomed to these excess levels and I believe they are here to stay.They are prevalent worldwide and obviously assist in making members think twice before being hospitalised for a minor procedure.


Members are going to need to become more and more involved in the cost management of their own healthcare funding if they wish to enjoy sustainable affordable healthcare funding products.


Adrian Hofman

Health and Accident