In recent announcements about medical scheme contribution increases for 2025, questions have begun to emerge around the level of the increases and sustainability of the industry. Among the top five open medical schemes, Bestmed and Medihelp have reported the highest average increase of 12.75% and 10.8%, respectively. Following closely are Bonitas with 10.2%, Momentum with 9.4%, and Discovery with 9.3%.
The contribution increases need to allow for inflation, plus an additional margin to account ageing and utilisation (on average usually 2% to 4%), benefit changes, as well as an allowance to maintain reserves, because these are needed to protect a scheme during unexpected events.
According to the August 2024 Consumer Price Index (CPI) from Statistics South Africa, the component relating to healthcare cost inflation is 5.1%, outpacing the overall CPI of 4.4%. A combination of inflation and utilisation rates over recent periods, along with the need for enhanced margins to provide a cushion against adverse experience, has necessitated a contribution increase that exceeds the rate of CPI.
Each medical scheme possesses its unique risk pool, resulting in variations in claims experience, ageing, utilisation, and benefit changes and enhancements. This means that both the schemes themselves and their individual options will experience different contribution increases.
Additionally, on a scheme level, negotiated rates with providers such as hospitals can vary, impacting the overall cost of providing benefits and, consequently, the contributions required. This complexity leads to a diverse landscape of contribution adjustments across the market.
According to law, medical schemes are community-rated, and contributions can be differentiated based only on option, family size, and income. As a result, no differential rates may be charged for the elderly or for individuals with higher medical needs.
Medical schemes are seen as a grudge purchase for several younger individuals, who do not deem medical cover an immediate need. An increasing number of younger and healthier people elect against medical scheme membership, unless the cover is a mandatory condition of employment. Consequently, medical schemes tend to age, with the cross-subsidy required by younger, healthier members to fund those with higher medical needs gradually reducing.
Why are average contribution increases high in 2025?
During the Covid-19 years, a few schemes introduced lower contribution increases or created mechanisms that leveraged excess reserves to enhance affordability. However, this has led to a necessary adjustment, because some of these schemes need to realign contributions to sustainable levels. This adjustment aims to mitigate losses associated with certain options and reduce reliance on reserves to subsidise benefits. Additionally, it is essential to maintain reserves at an appropriate level to provide a buffer against potential adverse experiences in the future.
Furthermore, as demonstrated by the recent scheme launches, contribution increases have been driven by deteriorating claims experience because of the delayed diagnosis of serious and costly illnesses, compounded by an ageing membership and the emergence of new technology that contributes to increased costs of providing healthcare.
In response, medical schemes are adapting by introducing additional benefits beyond current packages and forming innovative partnerships that specialise in benefits such as virtual care and wellness programmes. The latter has been a key focus, grounded in the principle that “prevention is better than cure”. These initiatives aim to manage costs effectively while enhancing overall member savings. Without these additional benefits implemented in recent years, the 2025 contribution increases could have been potentially higher.
In setting contribution increases, it is important for members to understand that the scheme must prioritise sustainability by preserving its reserves. This approach enhances the security of benefit provision, ensuring that the needs of members and their beneficiaries are met as and when required. A key focus for the scheme is to instil confidence in its members, reinforcing their trust in its commitment to their well-being.
Are these increases sustainable?
Alexforbes believes that significant increases in healthcare costs are neither affordable nor sustainable in the long run, and the need for equitable access to affordable healthcare is becoming more apparent – in other words, low-cost benefit options (LCBOs) and insurance options.
Medical schemes have implemented substantial short-term increases to rebuild reserves and enhance the sustainability of loss-making options. However, we do not anticipate that these high increases will persist in the future. Instead, we expect to see more moderate increases as reserves strengthen and the sustainability of previously loss-making options improves.
How will NHI affect medical scheme contributions?
Under the current National Health Insurance (NHI) framework, medical schemes will be permitted to offer only complementary coverage for services outside the scope of NHI. The range of complementary services permitted will influence the contributions charged by medical schemes and the tax rates for the NHI (which is a potential source of funding), ultimately affecting affordability for members. To ensure that healthcare remains affordable, collaboration between the private and public sectors will be essential in promoting equitable access for all.
Given the uncertainty surrounding NHI timelines, it is expected that medical schemes will continue to operate in their current form until further clarity on NHI emerges.
Conclusion
Currently, the industry is on a stable footing, supported by significant reserve levels. Additionally, there are regulatory measures that can enhance the affordability of schemes, including the introduction of LCBOs, mandatory membership, and price regulation, which have not been considered to date. These interventions have the potential to strengthen the financial sustainability of medical schemes while ensuring that quality healthcare remains accessible to all.
For NHI to be implemented efficiently, collaboration between the private and public sector is required to ensure equitable access for all.
Paresh Prema is branch head: Health Actuarial Services at Alexforbes
Disclaimer: The views expressed in this article are those of the writer and are not necessarily shared by Moonstone Information Refinery or its sister companies.
