New medical aid trend takes hold in South Africa – a blow to members

Hospital and medical group Netcare has flagged a new trend where existing scheme members are downgrading due to cost pressures in South Africa.

This is an exacerbation of a different trend that started in 2023, where new medical scheme entrants were being priced out of more inclusive plans and were looking for cheaper, restricted plans.

At the time, Netcare noted that current medical scheme members were retaining their plans and only new entrants were being impacted by the cost pressures – but this is has now changed and existing members are downgrading.

As part of its interim results for the 2024 financial year, the group noted that the macroenvironment in South Africa remains “challenging”.

In particular, this has hit the medical schemes industry quite significantly, with the prevailing elevated unemployment rates and a financially constrained consumer base forcing households to make changes.

The persistent downturn in formal sector employment has led to sluggish growth in medical aid membership in the country, where approximately 9.1 million South Africans now have coverage.

This is only slightly higher than the 9 million figure in the year before.

“The ‘buy-down’ trends continue, with falls in membership of comprehensive plans versus growth in low cost networks or partial cover plans, which attract lower contributions but have similar healthcare expenditure,” the group noted.

This is adding pressure to medical schemes as a whole as healthcare demand is increasing due to a growing disease burden and aging patient population, but the pool of comprehensive members (who pay the highest premiums) is sinking.

Making matters worse, Netcare flagged disposable income pressures impacting self-pay activity, while high scheme contribution increases in 2024 likely to have a continued adverse impact on pool of funds.

“The outlook for GDP growth and formal employment remains muted,” it said.

Uncertain future

The high cost of medical aids in South Africa is one of the key criticisms levelled against the industry by the government, and often cited as a big reason the country needs to reform healthcare.

This culminated in President Cyril Ramaphosa signing the National Health Insurance bill into law on 15 May, which the president claims will remove the imbalances in healthcare – specifically where the private sector only caters to a tiny percentage of the population while the public sector remains overburdened and underfunded.

However, the bill has faced significant backlash from businesses and healthcare groups and professionals – particularly the medical aid industry, which the government hopes to make obsolete with universal healthcare coverage.

Under the NHI, medical aids will not be able to provide coverage for anything the NHI covers, with the state being the single purchaser of services in the country.

While the government has argued that medical aids will be able to continue to exist, critics have noted that this will likely only be allowed for a small (as yet to be determined) selection of services, and will result in members having to pay even higher fees.

Given the uncertainty and vagueness around the bill, it is also highly likely that medical aid users will be triple-taxed to maintain a decent level of healthcare – having to pay normal taxes, the NHI surcharges, and keeping their medical aids while the government meanders to implement the system.

Despite the NHI’s lofty objectives – which many critics support in principle – groups like Nedcare have pointed to many fundamental areas of weakness in the new laws, including the manner in which it was rubber-stamped through parliament, the lack of funding for its goals, and the inability of the state to implement it.

Read: NHI ‘triple tax’ and the end of medical aids – what you need to know