Membership of open medical schemes has not recovered from the impact of the financial hardships on members induced by the Covid-19 pandemic, the 2021/22 annual report from the Council for Medical Schemes (CMS) shows.
Lives covered by open and restricted medical schemes increased by 0.49% last year, from 8.895 million in 2020 to 8.938 million. However, this is still below the industry’s peak membership of 8.99 million achieved in 2019.
Restricted schemes continued their growth trajectory last year, to cover 4.1 million lives, an increase of 1.09% from 4.06 million in 2020, and 4.01 million in 2019. In other words, the pandemic did not put a break on these schemes’ membership growth.
But membership of open schemes, which account for 54% of the industry’s beneficiaries, declined slightly last year, by 0.01%, from 4.83 million in 2020 to 4.829 million. Open schemes covered 4.98 million lives in 2019.
The sharp decline in 2020 plus the further decline last year mean open scheme membership is almost at the level last seen in 2013, when these schemes covered 4.85 million lives.
A closer look at the statistics shows that open medical schemes experienced a slight increase in the number of main members last year, rising from 2 328 963 to 2 348 765. The reason for the decline in beneficiaries is that the number of dependants fell from 2 501 199 to 2 480 673.
Michael Willie, the executive for policy, research and monitoring, said this could be attributed to main members who were under financial pressure removing some of their dependants from their medical scheme cover.
Investment income generates a healthy surplus
South Africa’s medical schemes reported a net surplus of R12.18 billion last year, down from the record R24.84bn in 2020, when members postponed elective treatments during the pandemic and lockdowns.
The net surplus is the net healthcare result – essentially, operating income – plus investment income. The net healthcare result is what is left after expenditure on healthcare benefits and non-healthcare items are deducted from income received from members’ contributions.
Over the past five years, medical schemes have not had to rely on their investment income to turn a net deficit into a surplus.
Schemes produced a net healthcare result of R820.52m last year, down from R19.93bn in 2020. However, financial markets rebounded strongly in 2021, and income from investments took schemes’ net surplus to more than R12bn.
The higher investment yields had a positive impact on schemes’ statutory reserves, which increased by 7.91% to R105.66bn last year. The solvency ratio for the industry continues to be well above the prescribed minimum of 25%, rising to 46.73% last year from 44.55% in 2020 and 35.61% in 2019.
The overall solvency ratio obscures the difference between the solvency ratios of the open and restricted sectors.
The average solvency ratio of open schemes reached 39.61% at the end of 2021, from 38.72% in 2020 and 29.35% in 2019. For restricted schemes, the solvency ratio was 56.15% at the end of 2021, up from 52.48% in 2020 and 44.31% in 2019.
Claims ratio back to normal
Schemes received gross contribution income of R225.65bn and paid gross claims of R205.8bn last year.
A total of R204.69bn was collected in risk contributions (2020: R199.08bn), and expenditure on risk benefits was R186.15bn (2020: R162bn).
On average, medical schemes incurred an increased claims experience compared to 2020. A release of pent-up demand in the utilisation of healthcare services saw the claims ratio increase from 81.38% in 2020 to 90.94% in 2021, which was in line with 90.58% in 2019.
