The government’s proposed Risk Equalisation Fund (REF) for medical schemes can only work if it is introduced with a mandatory medical scheme membership, a senior medical scheme official believes.
The idea of the REF is to spread the medical schemes’ risk factors across all schemes, with low-risk schemes in effect subsidising high-risk ones. The fund will compensate those schemes whose members are older or have a relatively poor health profile. Schemes have little control over risk costs because legislation prohibits them from barring older or sicker people from becoming members.
“Introduction of the REF on its own could simply accelerate the exit of better risks from the system, leaving some schemes financially worse off and at a competitive disadvantage due to their poor risk profile,” Adrian Baskir, executive at Old Mutual Health Care, said in a statement from the company.
Baskir argues that mandatory medical scheme membership will ensure that everyone keeps contributing, even after scheme fees go up. With the new system, each scheme will pay a uniform contribution to the risk-equalisation pot. The REF will then redistribute the pot according to the risk profile of each scheme.
Schemes with low-risk clients will receive less from the pot even though they make equal contributions. They will most likely recover these fees from their members, who in turn might be frightened into abandoning their scheme due to the rise in price.
A health department task team, tasked with reviewing the national health care system, also urged the government to make membership of medical schemes mandatory as soon as possible, because the current voluntary system is not adequate to support health care in South Africa.
Another task team investigating how REF could be best implemented recommended that the REF mechanism be applied only to the package of prescribed minimum benefits that schemes are obliged to make available to their members.