Constantly rising and increasingly unaffordable medical aid hikes are pushing consumers to the limit, and the Board of Healthcare Funders (BHF) has said households cannot indefinitely keep absorbing the escalations or dropping to lower benefit options that cost less, reports Moneyweb.
BHF managing director Katlego Mothudi said the organisation has recently written to the Council for Medical Schemes (CMS) pleading for long-term structural reforms allowing medical aids to spend less and therefore charge less.
Mothudi said it has received a response and is still awaiting a meeting.
In its recent annual report for 2025/26, the CMS anticipated that “higher contribution increases will continue in the foreseeable future to address the misalignment between the benefits provided and their pricing”.
Momentum Health chief marketing officer Damian McHugh said the cost of healthcare is driven by both annual inflation-linked cost increases and utilisation – with the latter including the growing use of hospitals and doctors by scheme members as they age and their healthcare needs become more complex.
To address structural issues, the BHF wants the long-running review of prescribed minimum benefits (PMBs), which began in 2017, to be concluded.
PMBs require that medical aids cover the full cost of treatment for 271 specified conditions, emergencies, and 26 chronic conditions (although medical schemes can insist on certain generic drugs and certain procedures).
PMBs are intended to shield members from catastrophic health expenditure and prevent them from stopping treatment for chronic conditions.
PMB regulations should, by law, be reviewed every two years but the rules have remained the same since 2003.
In 2023, the CMS said the Health Minister did not accept its review as it had not devised a primary healthcare element, which would look at providing cover for GPs and basic healthcare.
The latest CMS report says the costs of PMBs were around R1 242 per beneficiary in 2024, up 9% from the prior year – with the highest expenditure observed among those over 85.
The BHF wants PMBs to focus more on “primary healthcare, prevention, essential medicines and diagnostics”, to create a medical aid package that would be more affordable and allow for earlier intervention, so people are treated before they end up needing hospital care.
The CMS’ new report says it is reviewing PMBs and has developed a proposed primary health package that would focus on preventive healthcare services, including screening and vaccination programmes, mental healthcare, basic dental services, and rehabilitative services.
McHugh said “there is a strong case for continued reform of the PMB framework” and that “any reform needs to balance the principle of protecting members against catastrophic health events with the financial sustainability of medical schemes”.
“Reform should also … encourage prevention and early intervention, rather than focusing only on treatment once someone is seriously ill.”
Collective bargaining
The BHF is also calling for collective bargaining among medical schemes, hospitals, and specialists to reduce costs.
Until 2003, the South African Medical Association and the BHF negotiated tariffs centrally. Under the Competition Act, the Competition Commission then prohibited this collective bargaining, so tariffs are now set between hospitals, doctors and individual medical aids.
“One priority is allowing medical schemes to negotiate tariffs collectively with willing providers, under clear regulatory oversight and with transparent pricing,” said Mothudi.
“Currently, providers, particularly large hospital groups, have considerable influence over prices, leaving schemes and their members with limited bargaining power.”
South Africa’s competition regulator is now considering allowing healthcare funders and providers to negotiate tariffs collectively again.
In February 2025, the Minister of Trade, Industry & Competition published draft rules in the Government Gazette that would exempt medical schemes from the law preventing collective bargaining for three years.
The CMS says in its report that it backs the plan, and that it could improve transparency and protect scheme sustainability.
However, neither the PMB review, which started a decade ago, nor the collective bargaining exemption proposed last year, has been finalised.
“The Competition Commission’s 2019 Health Market Inquiry recognised the need for a more transparent approach to tariff determination,” says Mothudi.
“Seven years on, the reform needed to put this into practice remains outstanding.”
Schemes slapped with extra R1bn bill
Meanwhile the announcement by the Health Department last month (30 September) that pharmaceutical companies would be granted a second increase in the single exit price has caught the medical scheme sector unawares, which now has to find an extra R1bn in medicine expenditure next year, reports Business Day.
It will also ultimately have an additional impact on already struggling consumers, whether they are medical scheme members or not.
After months of lobbying from the pharmaceutical industry, the department announced that the SEP for medicines sold in the private sector would be increased by 2.88% from 1 October, the decision aimed at offering some temporary relief to the sector, which it said faced numerous cost pressures, including “the effect of geopolitical tensions”.
Although welcomed by pharmaceutical manufacturers, it poses a headache for schemes, which had to submit their 2027 budgets, benefit designs and contribution increases to the CMS by 30 September. Most have already begun marketing their 2027 plans to brokers, employers and the public, subject to CMS approval.
There had been no discussions on the planned increase, they said, expressing concern about the impact on members.
Health Funders Association (HFA) CEO Thoneshan Naidoo said it would lead to an extra R1bn unbudgeted expenditure on medicines in 2027. Consumers who did not belong to medical schemes would face an extra R400m in medicine costs, he added.
Medical schemes spent R36.43bn on medicines in 2024, according to the most recent publicly available analysis from the CMS.
It was too late for schemes to revise their budgets, benefit designs and contribution rates for 2027, Naidoo added.
The HFA had written to the Health Minister asking for clarity on how the adjustment was determined and why schemes had not been consulted.
The BHF said schemes had varying capacity to absorb the increase, which could put some of them at increased risk of reporting an operating deficit for the year. Schemes would also be affected by the next medicine price increase, which could be as early as January, said BHF head of research Charlton Murove.
Discovery Health Medical Scheme estimated the price adjustment would result in additional expenditure from the risk pool of about R90m in the last quarter of 2026 and by more than R300m in 2027.
“Ultimately these adjustments are funded by members through contributions,” said DHMS principal officer Charlotte Mbewu. The scheme was in a strong financial position and would absorb the unforeseen increase in medicine expenditure without increasing the contribution rates already announced for 2027. But it would have a knock-on effect on contribution increases in subsequent years.
Medicine expenditure was already increasing before the extraordinary adjustment, she noted.
Discovery Health head of policy and research Roseanne Harris said the announcement was surprising, as members and uninsured householders were under immense financial pressure. The SEP adjustment sets a ceiling for price increases, which means pharmaceutical companies are not obliged to take it and can hold prices down. However, it appeared all drug makers had increased their prices, she said.
The Government Employees Medical Scheme (GEMS) said the SEP increase would introduce additional and unanticipated cost pressures but it had yet to finalise its analysis of the projected financial impact.
Moneyweb article – Households cannot keep absorbing medical aid hikes, funders warn (Open access)
Business Day article – Medicine price hike hits medical schemes with R1bn bill (Restricted access)
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