Unlocking value and security: advantages of industry medical schemes

Johannesburg - Choosing a medical scheme that prioritises value and security is crucial for both individuals and employers. Ian Isdale, Member-Elected Trustee of the Consumer Goods Medical Scheme (CGMS), highlights the advantages of industry medical schemes, which are restricted to specific sectors and generally offer superior value compared to open schemes that are open to anyone.

Combatting anti-selection and costly administration

Isdale points out that open schemes often could victim to anti-selection, where individuals often join only when they require expensive care, leading to inflated healthcare costs and administrative burdens.

“Private members of open schemes claim, on average, up to 30% more than their counterparts in industry medical schemes, showcasing the high degree of anti-selection faced by many open medical schemes. CGMS, with its focus on employer groups in the consumer goods industry, is largely insulated from this risk,” he notes.

The unseen value of preparedness

In the medical scheme environment, members make monthly contributions generally without seeing the immediate benefits, leading to questions about the value of these payments. However, when members experience unexpected events firsthand, the significance of their contributions becomes clear. “It is precisely during these unforeseen crises that the importance of these preparations truly resonates with members,” says Isdale.

“Foresight in healthcare planning is not just a precaution – it’s a lifeline. Month after month, countless medical scheme members dutifully pay their contributions, often without filing a single claim, viewing their ongoing membership as a safeguard for the future. But there comes a day when this foresight proves invaluable—a sudden illness, an unexpected accident, or a critical diagnosis flips their world upside down. In that pivotal moment, the true worth of their commitment becomes clear.

“In times of unexpected crises, medical schemes must step up to turn potential financial ruin and distress into relief by ensuring access to essential care. It's vital for schemes to be prepared and ready to act when their support is needed most. This is where industry and closed schemes excel, prioritising the individual and demonstrating their commitment by going above and beyond for members and employers," he adds.

Financial security and resilience

In an environment where many schemes struggle to meet the Council for Medical Schemes' 25% reserve requirement, industry medical schemes demonstrate notable financial stability. They generate higher surpluses and maintain superior reserve levels, ensuring greater financial security. For example, the Consumer Goods Medical Scheme (CGMS) maintains a solvency ratio of 43%, providing strong protection against financial shocks like those encountered during the COVID-19 pandemic.

"An industry medical scheme can provide more personalised, member-focused solutions that open schemes may not provide. We are not starting from scratch; we're building on decades of experience and understanding what our members want and need,” notes Isdale.

“With its existing employer base in the industry, the recent decision to make the CGMS available to all employers and employees in the consumer goods industry made sense. While it is still in the early days, the board has been encouraged by the level of interest shown by employers in the consumer goods industry,” he adds.

Governance and influence

While the makeup of the Board of Trustees in industry-specific schemes tends to be more concentrated, the open schemes environment typically features representation spread across various employers and members. Isdale notes that CGMS's governance structure is a key differentiator, with a Board of Trustees consisting of 50% employer group-nominated representatives and 50% member-elected representatives. "This empowers employers to influence critical decisions, such as contribution increases and benefit adjustments, to support their employees. In contrast, open schemes often provide limited representation, reducing employers' ability to advocate effectively for their employees. The member representation on the board ensures that members have a voice in discussions that directly affect them."

“There are many advantages of an industry medical scheme like CGMS, which offers significant savings, reduced costs, enhanced financial security, and a say in decision-making, all of which provide added l value to employers and their employees,” concludes Isdale.