Most schemes likely to wait till next year to up premiums for VAT

Specialists are also set to be more expensive following the increase in VAT from 14% to 15%. /Tshepo Kekana
Specialists are also set to be more expensive following the increase in VAT from 14% to 15%. /Tshepo Kekana

You don't pay VAT on your medical scheme contributions, so you may be expecting that this is one thing in your budget that won't go up on April 1.

But, members of some schemes may face an increase in contributions during the year because schemes' claims will all increase as a result of the one percentage point increase in VAT that takes effect on April 1.

The increase in VAT from 14% to 15% was announced in the budget speech last month and will affect medical schemes' claims and costs because doctors, specialists, hospitals, medicines and consumables billed to medical schemes will increase by one percentage point.

Paresh Prema, head of benefits management at the Council for Medical Schemes, said schemes are likely to see a hike of between 0.6% and 0.9% in their claims and costs for the nine months from April 1.

He said schemes have
reserves and are likely to use these reserves to cover the
increase in costs for the rest of the year. Contributions for next year can then be adjusted accordingly to take account of the increase in costs and any reserves that have been depleted.

Some schemes that have reserves below the limit  required by law - below 25% of contributions - may apply to the Registrar of Medical Schemes to implement an
interim increase in contributions that will apply before next year, but Prema expects most schemes will see the year out on the existing contribution rates.

Bestmed was quick to announce this week that it has taken the decision not to increase its contributions

Jessogan Chetty, the executive manager of finance at Bestmed, said the scheme has decided that it may incur a financial shortfall for the 2018 financial year but will manage its operations without a disadvantage to members.

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