As South Africans brace for substantial medical aid contributions in 2025, it is important to know the factors that are pushing the increase. Picture: Rawpixel.com/Freepik
Five major medical aid schemes have already announced increases in contributions for 2025, but what is pushing the hike in costs?
The five medical aids that have revealed their increases for 2025 include:
– Discovery: 9.3%
– Bestmed: 12.75%
– Momentum: 9.4%
– Bonitas: 10.2%
– Medihelp: 10.8%
Paresh Prema, Branch Head: Health Actuarial Services, Alexforbes said that the contribution increases need to allow for
– CPI, plus an additional margin to account ageing and utilisation (on average usually 2.0%-4.0%)
– benefit changes
– allowance to maintain reserves, as these are needed protect a scheme during unexpected events.
According to the August 2024 Consumer Price Index from Stats SA, the component relating to healthcare cost inflation stands at 5.1%, which is higher than the overall CPI of 4.4%.
Prema said that combination of inflation and utilisation rates over recent times, along with the need for enhanced margins to cushion against adverse experience, has made it necessary for a contribution increase that exceeds the rate of CPI.
“Each medical scheme possesses its own unique risk pool, resulting in variations in claims experience, ageing, utilisation, and benefit changes and enhancements,” Prema said.
“This means that both the schemes themselves and their individual options will experience different contribution increases.”
Plus, on a scheme level, negotiated rates with providers like hospitals can vary, having an impact on the overall cost of providing benefits and, therefore 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 only be differentiated based on option, family size and income. This means that no differential rates may be charged for the elderly or those with higher medical needs.
For some young people, medical aid is seen as a grudge purchase who do not deem medical cover an immediate need and are therefore 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,” Prema said.
Prema said that during the time of the Covid-19 years, a few medical aid schemes introduced lower contribution hikes or created tools that leveraged excess reserves to enhance affordability.
“However, this has led to a necessary adjustment, as some of these schemes need to realign contributions to sustainable levels,” Prema said.
“This adjustment aims to mitigate losses associated with certain options and reduce reliance on reserves to subsidise benefits.”
It is also important to maintain reserves at an appropriate level to act as a buffer against potential adverse experiences in the future.
According to Prema, contribution increases have been driven by deteriorating claims experience, due to delays in the diagnosis of serious and costly illnesses, complicated by ageing membership and new technology that contributes to rising 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,” Prema said.
These initiatives aim to properly manage costs while enhancing overall member savings. Without these extra benefits that were implemented in recent years, the 2025 contribution increases could have been higher.
In setting the rise in contributions, it is vital that members to understand that the scheme must prioritise sustainability by preserving its reserves.
This approach improves the security of benefit provision, making sure that the needs of members and their beneficiaries are met as and when required.
Prema said: “Alexforbes believes that significant increases in healthcare costs are neither affordable nor sustainable in the long run, and that the need for equitable access to affordable healthcare is becoming more apparent i.e. the need for Low-Cost Benefit Options (LCBOs) and insurance options.”
Medical schemes have implemented significant 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,” Prema said.
According to Prema, under the current NHI framework, medical schemes can only offer complementary coverage for services that are 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,” Prema said.
“To ensure that healthcare remains affordable, collaboration between the private and public sectors will be essential in promoting equitable access for all.”
Considering the uncertainty of NHI timelines, it is expected that medical schemes will continue to operate in their current form until there is further clarity on NHI.
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