Some companies are also decreasing their medical scheme contributions for employees, thus forcing many members to leave medical schemes or deregister dependents. This means more people have to become reliant on the public health sector.
Currently only seven million South Africans (out of 47-million) have access to private health insurance, but 60% of the R100-billion spent on healthcare in 2005 was on private healthcare.
The SAHR chapter on medical schemes confirms that these health insurance plans are only within reach of those who are employed or financially reliant on an employed person.
Authors Heather McLeod and Shivani Ramjee warned that the issue of pensioners not being covered would impact the industry when those who joined from 2000 onwards reach retirement age.
They said there was a significant move towards excluding pensioners from company funding for health care. In 1995, 89 percent of companies surveyed were providing funding of health benefits for pensioners. But this plummeted to 43 percent in 2003 and slipped to only 29 percent offering some form of post-retirement subsidy in 2005.
McLeod and Ramjee said employers had been remarkably successful at reducing the risk of health care inflation to themselves and ensuring that workers and pensioners carry that risk.
‘This was accomplished with almost no response from unions,’ they observed, adding that the impact would become apparent some 10 to 30 years into the future.
‘If this practice does not receive serious policy attention then the impact on affordability of medical schemes for those future pensioners is devastating,’ the authors said.
A Old Mutual annual survey for 2005 found that employers had employed the following strategies to deal with the additional liability imposed by the accounting standards:
· excluding health care benefits in retirement from the employment contracts of all new employees. The percentage of companies not offering health care subsidies in retirement was estimated to be between 85 and 95 percent in 2005;
· capping employer contributions for all future as well as existing pensioners;
· offering cash or other benefits in lieu of continuing to cover the liability of post-retirement medical scheme contributions;
· re-designing the medical scheme benefit structure or imposing limitations on benefits.
There was further evidence that when faced with affordability problems, children were those most likely to be left off the medical scheme.
There has also been a significant decline in the employer contributions to medical scheme membership.
The Old Mutual 2003 survey revealed how employers had increasingly passed the risk of escalation in health care costs to employees. While 75 percent of employers in 1999 paid a fixed percentage of medical scheme contributions, only 41 percent of employees did so with no limit and a further 18 percent did so with a limit in 2003.
‘Employees thus bear the brunt of the increase in the cost of health care,’ said authors Heather McLeod and Shivani Ramjee.
They warned that although companies may nationally make subsidies available to all workers, the 2005 Old Mutual Survey found many individuals cannot make use of the subsidy because it is too small in relation to the total contribution.
This results in a significant portion of the workforce buying down to cheaper options, deregistering some of their dependents or being unable to continue to afford medical schemes cover. ‘ Health-e News Service.