Thoneshan Naidoo | CEO | Health Funders Association (HFA) | mail me |
We have launched our inaugural State of Medical Schemes Report (SOMS). The report brings together the views of medical scheme leaders, new data illustrating the scale of protection provided by medical schemes, and modelling of reforms that could strengthen the sector’s long-term sustainability.
We aim to provide an evidence-based view of medical schemes. As such, the report examines our contribution to South African healthcare and the pressures that could undermine their sustainability.
The debate around medical schemes is understandably dominated by affordability and rising healthcare costs. These are serious challenges and we cannot shy away from them. But we also need to understand what medical scheme protection means in practice, what is putting that protection under pressure, and what reforms are needed to preserve and extend it.
Beyond the numbers – what medical scheme protection means
One of the strongest messages emerging from SOMS is the scale of financial protection provided through risk pooling.
The Beyond the Numbers chapter draws on anonymised data supplied by four medical scheme administrators. These administrators cover approximately 5.74 million beneficiaries, equivalent to 62% of all medical scheme beneficiaries for the year ended 31 December 2025. The data shows protection extending from newborn babies to people over the age of 100. It also covers oncology, rare diseases, complex hospital admissions and other high-cost healthcare needs.
Among the findings, the highest annual claims for a single beneficiary reached R20.7 million. At an assumed average contribution of R2,400 per month, one member would need 717 years to contribute R20.7 million. Put differently, funding R20.7 million would require the combined monthly contributions of 8,607 members for one month. This assumes that none of those members incurred claims of their own.
Administrators also reported 34,888 beneficiaries with claims exceeding R500,000. Meanwhile, almost one million beneficiaries, or 17% of surveyed beneficiaries, incurred healthcare costs that exceeded their annual contributions.
High-cost care across every generation
The analysis also identified 321 beneficiaries over the age of 100. Of these, 270, or 84%, were women. The oldest beneficiary is a woman aged 114, while the oldest male beneficiary is 106.
The data also shows that catastrophic healthcare costs were not confined to older people. High-cost claims occurred across every age group. One neonatal beneficiary incurred claims of R9.8 million and spent 309 days in hospital. From the responses, we noted that 132,800 beneficiaries were receiving oncology treatment. The claims of 265 beneficiaries exceeded R1 million.
The 10 longest continuous hospital admissions reported ranged from 158 days to 381 days. The longest lasted 381 days. It involved a 41-year-old beneficiary who had a parasitic brain infection called toxoplasma meningoencephalitis.
The highest medicine claims reported ranged from R4.5 million to R7.2 million. They included treatments for rare conditions such as Hunter syndrome and Pompe disease.
These figures help explain the value of medical scheme cover beyond the benefits an individual member may claim in a particular year. They also illustrate the careful balance schemes must maintain when managing a finite pool of member contributions. Schemes must fund interventions that can improve health outcomes across a broader population. At the same time, they must ensure that resources remain available for members who may unexpectedly require extremely costly or prolonged care.
Medical scheme sustainability faces growing pressure
At the heart of a medical scheme is a finite pool of funds that must meet very different healthcare needs.
Schemes have to consider where those funds can deliver the greatest benefit across their membership, while ensuring that resources are there for the individual member who may suddenly need extremely costly or prolonged care. 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.
SOMS also captures the perspectives of 28 medical scheme principal officers. Their responses provide insight into the pressures they see affecting membership, affordability, sustainability, regulation and innovation. Their responses describe a sector that remains resilient and socially important. However, it continues to face sustained affordability, demographic, cost and regulatory pressures.
Twelve of the 28 respondents reported declining membership. Around four in ten also reported increases in membership terminations, dependants being removed from cover and contribution payment difficulties.
At the same time, principal officers identified prudent financial governance, effective benefit management, effective risk management and managed care as important factors supporting sustainability.
Their responses highlighted four dimensions of value provided by medical schemes. Medical schemes:
- enable timely access to quality healthcare;
- protect households against unpredictable and potentially catastrophic healthcare costs;
- relieve pressure on the constrained public health system; and
- contribute to a healthier, more productive society by supporting healthcare professionals and infrastructure, sustaining employment and helping people remain economically active.
Reform priorities for medical scheme sustainability
Principal officers were also clear that preserving and extending this value requires reform. Their priorities include modernising the Prescribed Minimum Benefit (PMB) framework. They also support enabling affordable low-cost benefit options, strengthening risk pooling, improving the regulation of provider costs and establishing a more coherent and predictable regulatory framework.
There is a difficult tension at the heart of the sector. People value the protection that medical schemes provide, but that protection has to remain affordable. If affordability deteriorates, members leave or reduce their cover. That weakens the risk pool and ultimately places even more pressure on those who remain.
Principal officers are not calling for the status quo to be preserved. They are calling for coherent reform that protects the value medical schemes provide while making cover more affordable, sustainable and accessible.
What if? Completing the reform architecture
The third major component of SOMS asks what could happen if South Africa implemented two reforms. These reforms have long formed part of the intended medical scheme regulatory architecture: risk equalisation and mandatory membership.
The report, co-authored with Insight Actuaries, finds that medical scheme membership has remained broadly stagnant over the past decade. Meanwhile, the covered population has aged. The average beneficiary age increased from 31.7 years in 2005 to 34.5 years in 2024. During the same period, the pensioner ratio increased from 6.4% to 10%.
In a community-rated system, members cannot be charged more because they are older or less healthy. However, without risk equalisation, schemes with older and higher-risk populations carry higher predictable costs. This can create incentives to compete for lower-risk members. Instead, schemes should compete primarily on efficiency, quality, care management and value.
The SOMS modelling estimates that a Risk Equalisation Framework (REF) could redistribute approximately R5.9 billion annually between schemes. This would compensate schemes for predictable demographic risk. It would also ‘level the playing field’ by redistributing existing funding between schemes.
The objective should be a medical scheme environment in which schemes compete on the factors they can control, namely service, efficiency, purchasing, quality, care management and value, rather than on their ability to attract favourable risks.
Mandatory membership and a broader risk pool
Mandatory membership addresses a different problem. Younger and healthier people who can afford cover may remain outside the system until they anticipate needing healthcare. Broadening participation could therefore strengthen the overall risk pool and reduce adverse selection.
The analysis suggests that extending mandatory membership to employed people earning above the income tax threshold could potentially add 8.79 million people to the modelled risk pool. It could also reduce average expected PMB risk cost by approximately 13%.
Extending participation to all employed people produces a modelled reduction of approximately 18%. A separate restricted-scheme proxy indicates that broader and more stable participation could potentially produce an effect as high as 30%. However, the report stresses that this should be treated as an indicative upper estimate.
The report also stresses that mandatory participation would need to accompany affordability measures and affordable benefit options. Risk equalisation and mandatory cover solve different parts of the same problem.
Risk equalisation compensates schemes for predictable differences in risk and allows them to compete more fairly, but it does not reduce the average expected PMB cost across the system. Wider participation can improve the overall risk profile by bringing more people, including younger and lower-risk people, into the pool. But this cannot be considered without first addressing affordability.
The SOMS analysis concludes that mandatory participation, risk equalisation and affordability measures would work best as a carefully sequenced, integrated package. Together, these measures could create a broader and more stable risk pool. They could also support fairer competition between schemes and strengthen medical scheme sustainability.
Looking beyond the immediate challenges
These themes form part of the wider conversation at our Scenario Planning Symposium. The sessions examine the factors undermining medical scheme sustainability, critical interventions required for health reform, the implications of Artificial Intelligence (AI) and emerging technologies, and new approaches to healthcare delivery.
The intention is not simply to identify the problems confronting the sector. Instead, we want to encourage a more constructive discussion about its future.
South Africa needs to expand access to quality healthcare, not allow existing access to erode. Medical schemes provide timely access to care, protect households against financial shocks, relieve pressure on the public health system and contribute to a healthier, more productive society. The challenge before us is to preserve that value while making medical scheme protection more affordable, more sustainable and more accessible to more South Africans.