How the cost of medical aid could be cut by up to 30%

Story audio is generated using AI

The cost of medical scheme membership could be reduced up to 30% if everyone earning above the tax threshold were required to sign up, concludes research commissioned by the Health Funders Association (HFA). The HFA is an industry association for medical schemes and administrators covering about half the market. Its analysis, set out in a report released on Wednesday, considered the impact of introducing mandatory membership and a risk equalisation mechanism between schemes. These measures would help stabilise the industry and ensure its long-term sustainability, said HFA CEO Thoneshan Naidoo. These reforms were previously planned by the health department under its social health insurance policy, but abandoned when the ANC resolved to pursue National Health Insurance instead. These interventions were intended to balance the Medical Schemes Act’s requirements that schemes accept anyone who can afford their monthly premiums and that they charge everyone the same rate, regardless of their risk profile.Over the past decade, annual medical scheme contribution increases have risen much faster than consumer price inflation, driving a decline in the share of the population that can afford membership. Medical scheme membership fell from 16% in 2014 to 14.5% in 2024, according to the HFA. Younger and healthier members have increasingly opted out, leading to an ageing risk pool with greater ― and therefore more costly ― healthcare needs. About 9.9-million people belong to medical schemes, but another 8.7-million taxpayers do not, said the HFA. These people already make extensive use of private healthcare services but pay out of pocket, said the HFA.Since this uninsured group is younger and healthier than the medical scheme population, bringing them into the net could reduce the cost of cover by 10%-30%, according to its analysis, commissioned from actuarial consultancy Insight. The lower figure uses only age to adjust for risk, while the upper figure considers other factors such as antiselection and the higher burden of disease in the present medical scheme population. Antiselection refers to the phenomenon in which people sign up in anticipation of planned health events, such as pregnancy and childbirth, and resign when their needs have been met. Medical scheme members who have a maternity event are five times more likely to resign within the next three months than other members, according to Insight CEO Christoff Raath. “That’s perfectly rational behaviour in the current environment,” he said.A risk equalisation framework could redistribute about R5.9bn a year between schemes to compensate those that had older, sicker members, shows Insight’s modelling.A small number of medical schemes are on the brink of collapse due to their poor risk profile and could be saved if mandatory enrolment and risk equalisation were introduced, said Raath. The HFA’s “State of Medical Schemes” report analysed anonymised data provided by South Africa’s biggest medical scheme administrators, covering about 5.74-million beneficiaries, or 62% of the market for the year to December 31 2025. Emphasising the role medical schemes play in protecting members from catastrophic financial expenses by pooling funds, Naidoo said the highest annual claim in the data provided by administrators was R20.7m. Assuming an average contribution of R2,400 a month, it would take one member 717 years to pay that sum, but just one month for 8,607 members to do so, he said.“None of us knows when we may face cancer, a premature birth, a serious accident or a rare disease. That uncertainty is precisely why risk pooling matters. A member’s contribution does not simply fund the healthcare they use that month or year; it contributes to a shared pool that protects members when they face healthcare costs that very few households could afford on their own,” he said.Business Day