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Medical schemes’ increases for 2025 will hit consumers hard while they already suffer with mountains of debt and the ever-increasing cost of living, making them wonder why the increases are so high and if they are sustainable.
The increases for the top five medical schemes are:
Why are these increases so high? Paresh Prema, branch head for health actuarial services at Alexforbes, explains that the contribution increases must allow for inflation, plus an additional margin to account for ageing and utilisation, which is on average usually between 2% and 4%, as well as benefit changes and an allowance to maintain reserves.
Reserves are needed to protect a scheme during unexpected events, such as a pandemic.
“A combination of inflation and utilisation rates in recent times, along with the need for enhanced margins to provide a cushion against adverse experience necessitated a contribution increase that exceeds the inflation rate,” Prema says.
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“Each medical scheme has its own unique risk pool, resulting in variations in claims experience, ageing, utilisation and benefit changes and enhancements. This means that the schemes themselves as well as their individual options will experience different contribution increases.
“In addition, on a scheme level, negotiated rates with providers such as hospitals can vary, affecting the overall cost of providing benefits and consequently the contributions required. This complexity leads to a diverse landscape of contribution adjustments across the market.”
Prema says according to law, medical schemes are community-rated and contributions can only be differentiated based on option, family size and income. As a result, no differential or higher rates may be charged for the elderly or individuals with higher medical needs.
Medical schemes are seen as a grudge purchase for several younger individuals, who do not regard medical cover as an immediate need, he says. “An increasing number of younger and healthier people choose not to join a medical scheme unless the cover is a mandatory condition of employment.
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“Consequently, medical schemes tend to age, with the cross-subsidy required by younger, healthier members to fund those with higher medical needs gradually reducing.”
Why are average contribution increases so high in 2025? Prema says during the Covid-19 years a few schemes opted for lower contribution increases or created mechanisms that leveraged excess reserves to enhance affordability.
However, he points out, this has led to a necessary adjustment, as some of these schemes must realign contributions to sustainable levels. This adjustment aims to mitigate losses associated with certain options and reduce reliance on reserves to subsidise benefits.
In addition, he says, it is essential to maintain reserves at an appropriate level to provide a buffer against potential adverse experiences in the future.
As demonstrated by the recent scheme announcements, contribution increases have also been driven by deteriorating claims experience, due to the delayed diagnosis of serious and costly illnesses, compounded by an ageing membership and the emergence of new technology that contributes to increased costs of providing healthcare, Prema says.
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“In response, medical schemes adapt by introducing additional benefits beyond current packages and forming innovative partnerships that specialise in benefits such as virtual care and wellness programmes.
“Wellness programmes have been a key focus, grounded in the principle that ‘prevention is better than cure’. These initiatives aim to manage costs effectively while enhancing overall member savings. Without these additional benefits implemented in recent years, the 2025 contribution increases could have been potentially higher.”
Prema says it is important for members to understand that, in setting contribution increases, schemes must prioritise sustainability by preserving its reserves. “This approach enhances the security of benefit provision, ensuring that the needs of members and their beneficiaries are met as and when required. A key focus for the scheme is to instil confidence in its members, reinforcing their trust in its commitment to their well-being.”
Can these increases be sustained in the future? Prema says 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, such as the need for Low-Cost Benefit Options (LCBOs) and insurance options.
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“Medical schemes have implemented substantial 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.”
How will National Health Insurance (NHI) affect contributions to medical schemes in the future? Prema says under the current NHI framework, medical schemes will only be permitted to offer complementary coverage for services outside the scope of NHI.
“The range of complementary services permitted will influence the contributions medical schemes charge and the tax rates for the NHI (which is a potential source of funding), ultimately affecting affordability for members. To ensure that healthcare remains affordable, collaboration between the private and public sectors will be essential in promoting equitable access for all.”
He says given the uncertainty surrounding NHI timelines, it is expected that medical schemes will continue to operate in their current form until further clarity on NHI emerges.
Perma emphasises that the industry is on a stable footing currently, supported by significant reserve levels. There are also regulatory measures that can enhance the affordability of schemes, including the introduction of low-cost benefit options, mandatory membership and price regulation, which have not been considered to date.
“These interventions have the potential to further strengthen the financial sustainability of medical schemes while ensuring that quality healthcare remains accessible to all.”
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