Employers are increasingly allowing their employees to choose whether or not to participate in medical plans. However, this trend is concerning for the South African healthcare industry, especially given the decade-long stagnation in the number of people enrolled in medical schemes. There are concerns that the voluntary nature of medical scheme membership will deteriorate under the National Health Insurance (NHI) system.
According to healthcare consulting and advisory firm Simeka Health, an increasing number of employers are abandoning mandatory medical scheme membership for their employees. Simeka highlighted during the presentation of Sanlam Corporate’s annual retirement benchmark survey report that even younger people are delaying the purchase of medical aid until later in their careers, despite working full-time. “We are seeing a significant decrease in compulsory participation,” said Simeka Health’s managing director, Mbali Khumalo. She went on to say that if it hadn’t been for the COVID-19 pandemic, the impact of the shrinkage would have been even more pronounced.
This shift in employer policies comes at a time when the medical plan market is already struggling with slow growth. According to the Council for Medical Schemes, only 8.9 million South Africans have medical aid, a figure that has remained stable over the last decade despite population growth. As a result, only 25% of employed South Africans are members of medical schemes. The situation is especially bad for those under the age of 35. Khumalo mentioned that AfroCentric, the owner of Medscheme, revealed that only 15% of their 3.8 million members joined voluntarily, with less than a fifth of them being under the age of 35. This group accounts for only 2.8% of AfroCentric’s total membership.
Medical plans, on the other hand, see an increase in female membership when women anticipate the need for hospitalization, such as during pregnancy.
When these figures are extrapolated to the 8.9 million medical scheme members in South Africa, it is clear that voluntary membership accounts for only 250,000 people. Interestingly, as employers relax their mandatory medical scheme membership requirements, Khumalo observes that they are not implementing alternative corporate wellness solutions such as on-site clinics, primary health insurance, or employee assistance programs.
Meanwhile, Simeka Health’s analysis of various medical scheme data has revealed concerning trends in mental health diagnoses, behavioural risks, and life-threatening conditions. According to the data, in-hospital mental health authorizations have increased from around 10 per 1,000 lives in the comparable period of 2021 to 15 per 1,000 lives so far in 2023. Insurers have also noticed an increase in late-stage diagnoses of critical illnesses, such as cancer, resulting in higher hospitalization and insurance claims costs.
With fewer young and healthy people joining medical schemes, the practice of cross-subsidization, in which the healthy help the sick and elderly, is dwindling. Within the industry, there is growing concern that the National Health Insurance (NHI) system will exacerbate this shrinking pool of potential medical scheme members. Despite the fact that the NHI has been in development for over a decade, experts believe it will take another 10 to 15 years to fully implement. When it is finally established, medical schemes will likely play a smaller role, primarily providing supplemental coverage.
Mbali Khumalo warns against the notion that the NHI will reduce disparities in access to quality healthcare, claiming that the new system will likely worsen the low voluntary percentage of medical scheme membership. Dr Katlego Mothudi, Managing Director of the Board of Health Funders of Southern Africa, agrees, stating that while the NHI will bring universal healthcare financing to South Africa, providing quality healthcare services will be a separate challenge. Furthermore, some industry participants have expressed reservations about the NHI’s funding model, claiming that it is unclear and may result in underfunding.
In conclusion, the industry is concerned about the shift toward voluntary medical scheme membership by employers and the reluctance of young people to join medical schemes. The stagnant growth of the medical scheme market, combined with the potential consequences of the NHI system, has raised concerns about the long-term sustainability of healthcare coverage in South Africa.
