South Africa’s private healthcare sector is facing a severe sustainability crisis. According to a new report by Alexander Forbes Health, the medical scheme industry is trapped in a tightening financial vice. Rising provider fees, escalating utilisation, and rapid technological advances are driving up the cost of care across the board.
Paresh Prema, the head of technical and actuarial consulting at Alexander Forbes Health, warned that affordability has become the definitive hurdle for the sector. Contribution increases continuously outpace general inflation. This leaves corporate clients and household consumers struggling to keep up.
The Root Causes Of Medical Scheme Financial Pressure
The current squeeze is not just a temporary spike. It represents a structural shift. Schemes face higher provider fees alongside a sharp increase in healthcare service utilisation. Furthermore, the relentless march of medical technology means diagnostic and treatment options become pricier every year. Compounding this is a growing national burden of chronic disease.
Open Versus Restricted Schemes: A Tale Of Two Ratios
The Alexander Forbes Health analysis evaluated data from the Council for Medical Schemes. The report specifically tracked the 10 largest open and restricted schemes. The findings paint a grim picture.
The industry’s overall risk claims ratio ticked up from 95.8% in 2023 to 96.2% in 2024. This metric indicates the exact percentage of contribution income paid out to cover claims.
| Scheme Type | Risk Claims Ratio (2024) | Financial Impact |
|---|---|---|
| Open Schemes | 91.9% | Managed to maintain a slight surplus margin. |
| Restricted Schemes | 101.3% | Paid out more in claims than received in contributions. |
Consequently, the total medical scheme industry suffered a massive operating deficit of R11.64 billion in 2024. This is a significant widening from the R10.2 billion deficit recorded in 2023. To survive, many schemes had to rely heavily on investment income to buffer their mounting operational losses.
How An Ageing Population Drives Medical Scheme Financial Pressure
Demographics are also working against the sector. While total beneficiary numbers grew slightly, by 0.6%, to 9.04 million at the end of 2024, the growth was uneven. Open schemes actually saw a 1.2% year-on-year drop in membership. This suggests that individuals are opting out of private cover unless they have employer-subsidised options.
Crucially, younger, healthier individuals are opting out or delaying joining. This leaves a higher concentration of older members and pensioners within the system. Older beneficiaries naturally require more frequent medical services and claim at much higher rates. This demographic shift intensifies the medical scheme financial pressure, locking providers into a dangerous cycle of escalating claims and above-inflation premium hikes.
Striking a balance between member affordability and statutory solvency requirements will dominate the healthcare strategy agenda. If healthcare inflation continues on its current trajectory, schemes will face unprecedented pressure to survive.
Read the Original Article (May require a subscription)