Increasing medical aid scheme costs: What are the alternatives?

Each year, medical aid scheme memberships become more expensive, moving further out of the reach of South Africans with annual premium increases far outpacing inflation.

Staying covered is an uphill battle as many consumers find themselves questioning whether their medical aid is worth the cost, while others are forced to downgrade or abandon it entirely.

“Medical aid scheme premiums are increasing exponentially, leaving many members struggling to keep up. With some opting to drop medical aid altogether, it is essential to understand what is driving these costs and explore possible alternatives,” Dr Jessica Hamuy Blanco, head of product and clinical risk at Dis-Chem, says.

ALSO READ: Why are medical scheme increases for 2025 so high?

Biggest factors driving medical aid scheme costs

Understanding why medical aid membership is becoming so expensive is the first step in making informed choices about your healthcare, she says. Hamuy Blanco says these are some of the key factors affecting the increase:

• Prescribed minimum benefits (PMBs): These mandatory benefits ensure access to essential healthcare but drive up costs as they are built into all plans.
• Community rating: Medical aids must charge everyone the same premium, regardless of their health status, which leads to higher costs for healthier individuals.
• Open enrolment: Many medical schemes cannot deny membership based on health status, resulting in higher costs due to increased risk exposure.
• A large number of small to medium schemes: A smaller risk pool results in higher risk exposure. Pooling risk by amalgamating smaller schemes would likely be beneficial.
• Mandatory solvency ratio: All schemes are mandated to retain 25% of all contributions irrespective of the size of the scheme. Some schemes may have sufficient protection at a lower ratio but must still account for this minimum threshold.

ALSO READ: Watch out: medical aid scheme surprises that can cost you money

Fraud, waste and inefficiencies further increase costs

Beyond regulations, Hamuy Blanco says inefficiencies and fraud contribute to escalating medical aid costs:

• Fraudulent claims: Some people submit false claims or claim benefits for non-covered dependents.
• Over-servicing by providers: Unnecessary procedures and expensive treatments inflate costs.
• Administrative waste: Inefficient processes and unnecessary hospital admissions increase expenses.
• Misuse of benefits: Overuse of certain medical services adds to overall expenditure.

She points out that, unlike in some countries where government-funded health insurance is mandatory, South Africans can opt out of medical aid. However, she says this leads to anti-selection, where people join medical schemes only when they need care, creating a risk-heavy pool and pushing premiums higher.

ALSO READ: How to make the most of your medical aid scheme

Alternatives to traditional medical aid

As medical aid costs increase, more South Africans are turning to alternative healthcare solutions, such as:

• Medical insurance: Unlike traditional medical aid, medical insurance offers more flexible and affordable coverage options. It typically covers day-to-day medical expenses like GP visits, medication, dentistry and eye exams.
• Employer-sponsored health benefits: Some employers offer corporate medical insurance, bridging the gap for employees who cannot afford full medical aid.

Hamuy Blanco says to address the affordability crisis South Africa needs a combination of solutions. “One of the most urgent priorities is to combat fraud, waste and inefficiencies that continue to drain the system.

“Eliminating unnecessary procedures, tightening administrative processes and cracking down on fraudulent claims could significantly lower costs for both medical schemes and consumers.”

ALSO READ: Gap cover analysis shows massive erosion of medical scheme benefits

Other alternatives to medical aid schemes

In addition, she says embracing alternative healthcare funding models could provide much-needed relief. Options such as medical insurance, gap cover, hybrid plans and employer-sponsored health benefits are already proving to be viable alternatives for many South Africans.

Encouraging innovation in the healthcare sector, while allowing for more regulatory flexibility, could create a more competitive market where consumers have access to affordable and sustainable healthcare solutions. Hamuy Blanco says developing approaches where funding is correlated to health outcomes, rather than a simple fee-for-service model, is becoming ever more important.

“With medical aid becoming unaffordable for many people, exploring alternatives and pushing for regulatory changes could help ensure that more South Africans have access to the healthcare they need.”