South African medical schemes increased their beneficiaries from 8.9 million in 2021 to 9 million in 2022 (about 1.1%). Picture: Simphiwe Mbokazi.
South African medical schemes increased their beneficiaries from 8.9 million in 2021 to 9 million in 2022 (about 1.1%). This is in line with South Africa’s annual population growth rate of roughly 1%, meaning that the proportion of the country’s population covered by medical schemes (15%) remains relatively static.
In December 2023, the Council for Medical Schemes released its industry report for the year ending December 2022. It showed that the industry has maintained a relatively stable overall membership over the past decade, but the number of schemes continues to decline, mainly through mergers and acquisitions. In 2000 there were 144 medical schemes in South Africa; in 2022 this had halved to 72.
Membership
The two biggest schemes continue to be Discovery Health Medical Scheme (2.81 million members in December 2022), an open scheme, and the Government Employees Medical Scheme (2.14 million members in December 2022), a closed, or restricted, scheme. Together these two schemes account for 55% of all medical aid beneficiaries in South Africa. (Note: “beneficiaries” refers to members and their covered dependants.)
The schemes showing the biggest changes in membership in 2022 were:
* Increases: Bestmed (10%), Thebemed (8%), Medihelp (7%), Umvuzo Health (7%), and Platinum Health (7%).
* Decreases: Sisonke Health (-12%), Transmed (-12%), Lonmin Medical Scheme (-9%), BP Medical Aid (-8%) and Fedhealth (-8%).
The average age of beneficiaries across all schemes was 34.0 years, up from 32.6 years in 2017. Schemes’ pensioner ratios have also increased – from 8.4% in 2017 to 9.3% in 2022. This is bad news for schemes, which rely on younger, healthier members to subsidise older, sicker members.
Claims and contributions
While schemes pay for various medical treatments and medicines from your medical savings account, depending on your plan or option, the more significant figure is what they cover in terms of risk benefits – after all, it is the insurance aspect of medical aid that makes membership worthwhile.
In 2022, schemes paid R22 696 in risk benefits on average per beneficiary, amounting to a total outlay of about R203 billion.
Income from risk contributions (gross contributions minus medical savings account contributions) was almost R211 billion.
The average claims ratio across schemes – the proportion of contribution income used to pay risk benefit claims – was 93.96%, up substantially from 2020 (81.38%) and 2021 (90.94%).
The report says various factors impacted the claims experience of medical schemes over the past few years: “These include changing benefit design, demographic profiles, increased utilisation of benefits and a higher number of high-cost cases. Some schemes were also affected by the widespread fraud and abuse of benefits, as well as wastage of resources.
“The utilisation of services was substantially reduced with the postponement of elective procedures in response to the Covid-19 pandemic and resulted in a decreased claims ratio in 2020. On average, medical schemes incurred much higher claims experience in both 2021 and 2022 compared to 2020. This was mainly due to the release of pent-up demand.”
What schemes charged for administration
So what portion of your contributions went towards administration and internal expenses, or non-healthcare expenditure, incurred by your scheme? An above-average figure may mean that the administrator’s profit margins are unreasonably high or the scheme may be operating inefficiently. (Remember, medical schemes themselves are not run for profit, but the administrators they outsource to are profit-driven businesses.)
According to the report, the non-healthcare expenditure ratio (as a percentage of contributions) increased from 8.66% in 2021 to 8.96% in 2022. The bulk of this expenditure (84.18%) was for administration, while distribution costs and broker fees accounted for 14.54%.
Among open schemes, the average non-healthcare expenditure ratio was 11.49%. The three open schemes with the highest ratios were: Momentum Medical Scheme (15.40%), Fedhealth (12.97%) and Suremed Health (12.83%).
Restricted schemes reported a substantially lower average non-healthcare expenditure ratio of 5.85%. The three restricted schemes with the highest ratios were: Horizon Medical Scheme (21.95%), LA-Health (11.98%), and Profmed (10.51%).
Put another way, the average open scheme spent R229.60 per beneficiary per month (pbpm) on non-healthcare expenditure, while the average restricted scheme paid R112.20 a month. But some schemes spent considerably more – up to R295 pbpm.
PERSONAL FINANCE