South African medical schemes are battling the country’s economic challenges. The Health Funders Association’s (HFA) first-ever State of Medical Schemes (SOMS) report found that 12 of the 28 respondents reported declining membership, while around four in 10 reported increases in membership terminations, dependants being removed from cover and contribution payment difficulties.
Despite sustained affordability, demographic, cost and regulatory pressures, their responses describe a sector that remains resilient and socially important.
“There is a difficult tension at the heart of the sector,” said HFA CEO Thoneshan Naidoo while launching the report at the HFA’s 2026 Scenario Planning Symposium at The Venue, Melrose Arch.
“People value the protection that medical schemes provide, but that protection has to remain affordable.
“If affordability deteriorates, members leave or reduce their cover. That weakens the risk pool and ultimately places even more pressure on those who remain.”
Thoneshan Naidoo 28 Aug 2026 Calls for coherent reform
At the same time, principal officers pointed to prudent financial governance, benefit management, risk management and managed care as important factors supporting sustainability.
Because preserving and extending this value requires reform, principal officers also made it clear that their priorities include modernising the prescribed minimum benefit framework, enabling affordable low-cost benefit options, strengthening risk pooling, improving the regulation of provider costs and establishing a more coherent and predictable regulatory framework.
“Principal officers are not calling for the status quo to be preserved. They are calling for coherent reform that protects the value medical schemes provide while making cover more affordable, sustainable and accessible,” continued Naidoo.
Hoani Smith, Dion Enari, and Phil Borell 14 Aug 2026 Reform implementation
The report then asks what could happen if South Africa implemented two reforms that have long formed part of the intended medical scheme regulatory architecture: risk equalisation and mandatory membership.
Co-authored with Insight Actuaries, the report found that medical scheme membership has remained broadly stagnant over the past decade while the covered population has aged.
The average beneficiary age increased from 31.7 years in 2005 to 34.5 years in 2024, while the pensioner ratio increased from 6.4% to 10%.
In a community-rated system, members cannot be charged more because they are older or less healthy. However, without risk equalisation, schemes with older, higher-risk populations face higher predictable costs.
This can create incentives to compete for lower-risk members rather than competing primarily on efficiency, quality, care management and value.
The SOMS modelling estimates that a risk equalisation framework (REF) could redistribute approximately R5.9bn annually between schemes to compensate for predictable demographic risk.
This would “level the playing field” by redistributing existing funding between schemes, and it follows the broader argument for fairer competition.
“The objective should be a medical scheme environment in which schemes compete on the factors they can control, namely service, efficiency, purchasing, quality, care management and value, rather than on their ability to attract favourable risks.”
Michael-John Damant 27 Jul 2026 Mandatory membership
Mandatory membership addresses a different problem: younger and healthier people who can afford cover may remain outside the system until they anticipate needing healthcare.
Broadening participation could therefore strengthen the overall risk pool and reduce adverse selection, building on the case for risk equalisation.
The analysis suggests that extending mandatory membership to employed people earning above the income tax threshold could potentially add 8.79 million people to the modelled risk pool and reduce average expected PMB risk cost by approximately 13%.
Extending participation to all employed people produces a modelled reduction of approximately 18%.
A separate restricted-scheme proxy indicates that the effect of broader and more stable participation could potentially be as high as 30%. However, this should be treated as an indicative upper estimate.
The report stresses, however, that mandatory participation would need to be accompanied by affordability measures and affordable benefit options.
“Risk equalisation and mandatory cover solve different parts of the same problem,” Naidoo said.
“Risk equalisation compensates schemes for predictable differences in risk and allows them to compete more fairly, but it does not reduce the average expected PMB cost across the system.
“Wider participation can improve the overall risk profile by bringing more people, including younger and lower-risk people, into the pool. But this cannot be considered without first addressing affordability.”
Making medical schemes accesible
The SOMS analysis concludes that mandatory participation, risk equalisation and affordability measures would work best as a carefully sequenced, integrated package, helping to create a broader and more stable risk pool while supporting fairer competition between schemes.
Naidoo said the report is intended not simply to identify the problems confronting the sector, but to encourage a more constructive discussion about its future.
“South Africa needs to expand access to quality healthcare, not allow existing access to erode. Medical schemes provide timely access to care, protect households against financial shocks, relieve pressure on the public health system and contribute to a healthier, more productive society.
“The challenge before us is to preserve that value while making medical scheme protection more affordable, sustainable and accessible to more South Africans.”
