SA sees sharp decline in medical aid coverage

But information on the financial health of SA’s medical aid schemes is missing from the 2023 CMS Industry Report.

Only 14.7% of South Africa’s total population was covered by medical aid schemes in 2023, according to the latest Council for Medical Schemes (CMS) Industry Report.

It said the proportion of beneficiaries covered by medical schemes, relative to the national population, decreased to this level from 16% in 2000.

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Read: The growing burden of medical aid on South Africans

The report said this decrease occurred despite growth in medical aid beneficiaries from 9 039 259 in 2022 to 9 127 453 in 2023.

However, the 2023 version of the CMS Industry Report is noteworthy more for what it excludes than what it includes.

Information on the financial health of South Africa’s medical aid schemes is missing from the 2023 report, including the solvency ratio of schemes.

Read: Report on racial profiling and discrimination by medical schemes delayed again

This ratio refers to the accumulated funds of a scheme as a percentage of its gross annual contributions and indicates which schemes appear to be in financial trouble or heading in that direction.

South African medical aid schemes are required in terms of the Medical Schemes Act to maintain their solvency ratio at or above 25%, the minimum statutory prescribed solvency level.

Delays

CMS spokesperson Stephen Monamodi told Moneyweb significant changes had to be made to the CMS statutory returns because of the implementation of the new accounting standard.

Monamodi said the development and testing of the data collection tool was significantly delayed, which resulted in the CMS only receiving the 2023 financial statements submissions at the beginning of November 2024, compared to the normal end-of-April submission date.

“CMS is therefore currently occupied with analysing the audited annual financial statements, and it is anticipated that the financial section of the industry report will only be published during March 2025,” he said.

Solvency ratio stats expected later

The CMS failed to respond to a number of questions posed by Moneyweb about the solvency ratio of medical schemes, including how many medical aid schemes failed to maintain their solvency ratio at or above 25% in 2023 and the names of these medical schemes.

Monamodi said the CMS is engaged in analysing submissions by schemes, and once this analysis has been completed, it will be able to provide a detailed response to these questions.

The 2022 CMS Industry Report highlighted that Transmed Medical Fund had once again failed to maintain its solvency ratio at or above 25%, with its solvency ratio deteriorating further to 17.96% in 2022 from 19.72% in 2021 and 22.37% in 2020.

Read:
Another SA medical scheme is facing solvency issues [Oct 2022]
Transmed Medical Scheme’s solvency issues continue [Dec 2023]

Transmed was the only restricted medical scheme that failed to comply with the statutorily prescribed solvency ratio in 2022.

Monamodi said Transmed has an employer grant guaranteed by Transnet. As such, even though its solvency is below the minimum required level, the employer subsidy and cover can ameliorate the risks of further decline.

“The scheme’s business plan for the 2024 year had been approved, and we met with the trustees on a quarterly basis to monitor the scheme’s progress against the business plan,” he said.

Membership declines

The 2023 Industry Report said several medical schemes experienced membership declines, with MediPos Medical Scheme (-17%) and Pick’ n Pay Medical Scheme (-13%) experiencing the most significant decreases.

It said other schemes, including the MBMED Medical Aid Fund and the Transmed Medical Fund, also showed notable declines, which may impact their long-term viability if trends continue.

“The membership decline in these schemes may point to challenges such as increased member costs, competitive pressures or service limitations that deter member retention,” it said.

These shifts in membership numbers also reflect the dynamic environment of medical schemes, where factors like competitive positioning, service offerings, and pricing can impact member acquisition and retention, it said.

Sizwe Hosmed

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The 2022 CMS Industry Report also expressed concern about the significant deterioration in the solvency of Sizwe Hosmed Medical Fund because, given its low solvency level, it had incurred the fourth highest operating deficit.

Monamodi said the statutory manager of Sizwe Hosmed Medical Fund is working closely with the board of trustees to improve the scheme’s solvency.

Sapo and MediPos

Responses to parliamentary questions submitted by the then minister of Communications and Digital Technologies, Mondli Gungubele, in May 2023 revealed that the South African Post Office (Sapo) owed MediPos R561.7 million in outstanding medical aid contributions despite deductions having been made from employees’ monthly salaries.

Sapo has been in business rescue since July 2023, and National Treasury excluded a proposed R3.8 billion bailout for the postal parastatal in its Medium-Term Budget Policy Statement (MTBPS) last month.

Read:
Government ‘forces’ Post Office into business rescue [Jul 2023]
R12.5bn debt headache for SA Post Office business rescue practitioners [Sept 2023]
Post Office rescue plan gets the green light [Dec 2023]
Union to fight ‘slaughter’ of Post Office jobs [Jan 2024]

Monamodi did not disclose MediPos’s solvency ratio in 2022 and 2023 but stressed the scheme’s solvency has always been above the minimum requirement.

He said the basis for the application for MediPos’s curatorship was that its solvency was declining sharply because Sapo was not paying its contributions, and the trustee did not seem to have any plan to protect the interests of members.

“The business rescue practitioners started paying monthly contributions when the scheme was placed under curatorship, which resulted in a stable solvency ratio well above the minimum requirement,” he said.

The provisional curator of MediPos was instructed to investigate its financial position and advise on viable solutions, including the scheme’s future, such as a merger, liquidation, or continued existence.

However, Monamodi said the provisional curator could not complete this process because the court discharged the curatorship before the provisional curator could formally table this recommendation to the members.

Monamodi said the CMS is not aware of any current challenges being experienced by MediPos.

Read: Regulator to probe ‘extravagant costs’ of medical scheme AGMs [Jan 2024]

“Sapo has been paying contributions since the time a curator was appointed and it continues to do so.

“There is however, no guarantee that Sapo will be able to maintain the payments forever and it is for this reason that the board of trustees are also exploring the same options which the curator was exploring to safeguard the interest of members,” he said.

Challenging year for MediPos

Monamodi added that it has been a challenging year for MediPos with many fast-moving changes that required agility and focus, but the scheme has worked hard to ensure that:

• Members are not turned away by health service providers;
• Contributions are paid as they become due and will continue to be paid to safeguard members’ interests; and
• The distribution due to the scheme by Sapo in terms of the business rescue plan is collected.

He said all these efforts aimed to provide value-for-money benefits and a sustainable scheme for the future.

Expenditure and claims

The 2023 CMS Industry Report said total healthcare expenditure on benefits paid in 2023 increased by 9.44% to R239 billion from the R218.4 billion reported amount in 2022.

It said the claims paid per average beneficiary per annum increased 8.2% to R26 404.79 in 2023 from R24 394.75 in 2022.

The proportion of healthcare expenditure paid towards hospital services was 35.56%, with expenditure on all specialists accounting for 27.67%, followed by medicine dispensed at 14.49%, and then supplementary and allied health professionals at 8.4%.

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