Acute decrease of young professionals seeking medical cover is alarming

The latest analysis is based on the 2022/23 CMS Annual Report. File photo.

The latest analysis is based on the 2022/23 CMS Annual Report. File photo.

Published May 4, 2024


The average family size from a medical coverage perspective has declined since 2000.

But there was an exception in 2020, according to Alexforbes Healthcare’s Medical Aid Insights publication, which provided a comprehensive view of the performance of the local medical scheme industry.

The report said fewer dependants per principal member were being registered on medical schemes, over time.

"This may be due to affordability constraints of members who can no longer provide cover for the entire family.“

The report showcased the changes and challenges in the industry and analysed the top 10 largest open and restricted schemes by principal membership over the period 2000 to 2022.

As dependants become self-supporting adults, they ended up becoming principal members themselves. The average family size remained the same from 2021 to 2022 at 2.2. There was a change in the distribution of members by age over the past 16 years.

"It is concerning that there has been a decrease in the proportion of young working members seeking medical scheme coverage. This is with an exception in growth in the age group 35-39 years, which may be attributed to females seeking medical protection during childbearing age," the survey showed.

The analysis revealed that the number of open medical schemes has decreased by 31 (66%) compared to a decrease of 42 (43%) for restricted medical schemes over the past 23 years.

"The large decrease can be explained by the difficulties in maintaining the sustainability of small schemes in the current environment, as well as the significant amount of time required to manage an employer-based restricted scheme," it said.

Principal membership of open schemes grew by 1.2%, while the principal membership of restricted schemes grew by 1.1% from 2021 to 2022.

"The 71 medical schemes operating in South Africa at the end of 2022 had a total of 4.11 million principal members and 9.04 million beneficiaries," the report noted.

At the end of 2022, there were three open medical schemes and 26 restricted schemes with fewer than 6 000 principal members.

"A small membership base generally results in a more variable claims experience, which increases the risk of contributions not being set at an appropriate level to cover all claims and expenses," it said.

Out of the top 10 largest open and top 10 largest restricted medical schemes, 16 did not have sufficient contribution income to cover claims and expenses in full.

"Consequently, they made use of investment income, and reserves in some cases, to subsidise the costs incurred. Of these 16 schemes, 12 schemes did not have sufficient investment income, resulting in a negative net result for the year," it said.

It said the average age of beneficiaries has been consistently increasing from 2012 to 2022.

"This average age is indicative of the likely claims profile, which needs to be considered when pricing its benefits. As a scheme gets older, we expect the average claims per member to increase by 2%," Alexforbes said.

Meanwhile, the Sustainability Index, an Alexforbes Healthcare measurement tool, assesses the combined impact of key performance statistics on the sustainability of a medical scheme.

The medical schemes are ranked from highest to lowest to indicate their relative sustainability.

"The index aims to provide a comparative assessment between schemes. It has been re-based to 2012 so that the index reflects more relevant and updated information from the last ten years. This is in contrast to the previous Medical Aid Insights report where the base year of 2006 was used," it said.

The index shows that the largest increase in 2022 was for Polmed, which improved their score in 2022 by 30.3%, while Umvuzo increased by 18.6%. The open schemes trailed by a small margin, with Bonitas improving their score by 18.2%, followed by Medshield with a 14.1% increase. LA Health is the highest ranked out of the restricted schemes, followed closely by GEMS and Umvuzo. Discovery is the highest ranked out of the open schemes, followed closely by Bestmed and Bonitas.

The profile of the industry remained stable, while most schemes incurred operating losses, primarily due to increases in claims ratios.

"The results for 2022 indicate a return to pre-Covid-19 levels of claims, and this trend is expected to continue into the medium term. In line with this trend, we have observed that contribution increases for schemes in 2023 and 2024 have exceeded the increase in CPI.

"With industry reserve levels at record highs, schemes must maintain the level of contributions in line with the increase in claims should this trend continue indefinitely," Alexforbes said.