Editor’s note: This analysis draws on a detailed review of Medihelp’s annual reports from 2021 to 2025 and its 2025 audited financial statements. Artificial intelligence was used as an analytical research tool to compare financial and operational data across multiple reporting periods and identify long-term trends. Every calculation, interpretation, and conclusion was independently reviewed against the original reports before publication.
By the time Medihelp restored its statutory solvency ratio to 27.01% at the end of 2025, the explanation for what happened had become familiar.
The scheme has consistently argued that its financial challenges began with a deliberate decision taken during the Covid-19 pandemic. Rather than passing higher healthcare costs on to members at a time of widespread economic uncertainty, it froze contribution increases and even reduced average contributions for 2022.
The explanation is plausible and well documented. But does it fully explain what happened over the next four years?
To answer that question, Moonstone analysed five years of Medihelp’s annual reports and its 2025 audited financial statements. Together, they tell a more nuanced story.
Covid was the starting point. It was not the whole story.
The decision
The decision itself was unusual.
By the end of 2021, medical schemes were generally in a stronger financial position than many had expected. Lockdowns, postponed elective procedures, and lower healthcare utilisation had strengthened reserves across much of the industry. Medihelp’s solvency ratio stood at 39.85%, comfortably above the statutory minimum of 25%.
Rather than preserve those unusually strong reserves, the board chose to use part of them to support members still facing financial hardship.
Contribution increases were frozen, and, on average, contributions were reduced by 0.45% for 2022. Four benefit options recorded average contribution reductions of 5.57%, while the remaining options increased by an average of only 2.74% – well below the industry’s average increase at the time.
Board chairperson Chris Klopper later described the decision as a calculated intervention designed to ease pressure on households emerging from the pandemic. Medihelp has consistently maintained that the strategy effectively returned about R800 million to members.
The strategy initially appeared to work. During the 2022 financial year, net organic growth exceeded 8%, almost 19 000 principal members joined the scheme, and beneficiary numbers increased from 191 558 to 205 771. The solvency ratio declined from 39.85% at the end of 2021 to 33.93% at the end of 2022, but it remained comfortably above the statutory minimum.
Importantly, the board did not present the weaker financial result as an unexpected consequence of its strategy. In the 2022 annual report, it stated that “as expected, and as part of the scheme’s 2022 competitive pricing strategy, a net deficit was reported”.
Healthcare utilisation was beginning to normalise, yet the relevant healthcare expenditure ratio remained below 100%.
Taken together, the figures suggested a scheme deliberately using part of its reserves to protect members while continuing to grow.
If events had stopped there, the decision would probably have been remembered simply as an expensive – but successful – response to an extraordinary period.
They did not.
The first cracks
The first signs that the strategy might prove more costly than expected are scattered throughout the 2022 annual report.
None stands out on its own. Together, they tell a different story.
Healthcare utilisation was returning faster than contribution income was growing. Elective procedures postponed during the pandemic returned to hospital schedules, utilisation trends moved back towards pre-Covid levels, and medical inflation pushed up the cost of care. At the same time, contribution income remained constrained by the board’s decision to moderate contribution increases for 2022.
For the first time, the scheme was under pressure from both sides: claims costs were rising while contribution income had been deliberately restrained.
Another challenge was emerging.
Much of Medihelp’s strongest membership growth occurred on its lower-contribution benefit options.
Initially, that looked like good news. More members generally mean more contribution income. But medical schemes need more than growth. They need sufficient contribution income to fund rising claims while continuing to build reserves.
The board itself hinted at that emerging tension. Reflecting on the scheme’s membership growth in its 2023 annual report, it observed: “The contributions of these options do, however, make it challenging to increase reserves.”
At the time, it read as little more than an observation. Today, it reads more like an early warning.
None of these developments suggested the strategy had failed. Together, however, they showed the margin for error was shrinking.
Claims were recovering. Healthcare costs were rising. Reserve growth was slowing.
The conditions that had made the 2021 decision possible were beginning to disappear.
The turning point
The real turning point arrived in 2023.
It is tempting to see the decline in solvency as the point at which Medihelp’s fortunes began to change.
The annual reports suggest otherwise.
By the time the scheme’s solvency ratio had fallen from 33.93% at the end of 2022 to 23.84% at the end of 2023 – below the statutory minimum of 25% – several pressures had already been building for more than a year.
Healthcare utilisation had largely returned to pre-pandemic levels. Hospital admissions increased, members visited specialists more often, and the cost of medical services continued to rise. Medihelp also highlighted significant growth in HIV- and oncology-related claims.
The relevant healthcare expenditure ratio climbed to 100.8%.
In simple terms, the scheme was spending slightly more on members’ healthcare than it was collecting in contribution income.
That matters because contribution income is what builds reserves. When claims consume all – or more than all – of that income, reserves inevitably come under pressure.
The effect was visible across the 2023 financial statements.
Medihelp reported a deficit before other comprehensive income of R286.6m.
The 2023 annual report points not to a single cause, but to several developments that converged at roughly the same time. Contribution income had been deliberately restrained through the 2022 pricing strategy, while healthcare utilisation and medical inflation returned to pre-pandemic levels.
Although membership continued to grow, much of that growth came from lower-contribution benefit options. The board acknowledged that this made rebuilding reserves more difficult. In other words, the scheme was adding members, but many were joining plans that generated less contribution income to absorb rising claims and strengthen reserves.
None of these factors alone threatened the scheme’s financial position.
Together, they did.
The board responded by submitting a three-year financial recovery plan to the Council for Medical Schemes (CMS), which approved the proposal before Medihelp launched its 2024 products. The plan set out phased contribution increases over three years, with the explicit objective of restoring reserves to the statutory 25% solvency requirement.
The strategy marked a noticeable shift.
The emphasis was no longer on protecting members from contribution increases. It was on rebuilding the balance sheet.
Contribution increases accelerated. After implementing a weighted average increase of 15.97% for the 2024 benefit year, Medihelp followed this with a further weighted average increase of 10.8% for 2025 as the recovery plan entered its second year.
At the same time, the scheme tightened underwriting, expanded hospital audits, and strengthened case management as part of a broader effort to improve claims performance. It also intensified its focus on managed care, disease management, digital services, and healthcare risk management.
Reading the 2023, 2024, and 2025 annual reports in sequence, it is possible to watch that strategy evolve almost in real time.
What actually changed?
The 2024 and 2025 annual reports make it possible to measure the recovery.
By 2024, the turnaround strategy was beginning to produce measurable results. The relevant healthcare expenditure ratio fell from 100.8% in 2023 to 94% in 2024, easing pressure on reserves for the first time since the recovery plan was introduced. By the end of 2025, it had fallen further to 91.2%.
The improvement was steady rather than dramatic.
For two consecutive financial years, Medihelp reduced the proportion of contribution income spent on healthcare benefits. In 2024, healthcare expenditure per beneficiary increased by only 6%, despite continued medical inflation. That helped to contain claims growth and contributed to the sharp improvement in the relevant healthcare expenditure ratio.
The 2024 and 2025 annual reports attribute the improvement to tighter claims management, managed-care interventions, disease management, healthcare risk management, and fewer preventable hospital re-admissions.
The operational improvement is equally visible in profitability.
After recording a deficit before other comprehensive income of R286.6m in 2023, the scheme returned to a surplus of R30.7m in 2024. By the end of 2025, that surplus had increased almost nine-fold to R282.3m.
Principal officer Varsha Vala attributed the improvement to two related developments: a lower-than-anticipated increase in relevant healthcare expenditure and the above-inflation contribution increases implemented under the three-year recovery plan, beginning with the weighted average increase of 15.97% for the 2024 benefit year. Together, they strengthened the insurance service result and provided the first clear financial evidence that the recovery strategy was working.
Membership tells a slightly more complicated story.
The sharp contribution increases introduced under the recovery plan coincided with lower membership numbers in 2024.
According to Klopper, the board had anticipated a slight decline in enrolments after implementing the weighted average contribution increase of 15.97% across all plans.
Even so, the average age of principal members declined from 41 years in 2023 to 39 years in 2024, supporting Medihelp’s longer-term strategy of attracting younger members to strengthen the risk pool.
Perhaps the biggest surprise is what did not happen.
Administrative costs did not spiral. Claims did not collapse overnight.
The recovery was gradual rather than dramatic. Operational performance simply improved, year after year.
The verdict
Was it really just Covid?
The answer appears to be both yes and no.
Covid clearly set the process in motion.
The decision to reduce contributions for 2022 deliberately used reserves to support members during a period of exceptional economic hardship. Without that decision, Medihelp estimates its solvency ratio could have reached about 35% by the end of 2025.
The annual reports support the view that the strategy materially affected reserve growth. They also show that the subsequent deterioration reflected more than that single decision.
- Healthcare utilisation returned to pre-pandemic levels.
- Medical inflation resumed.
- Claims increased sharply.
- Membership growth became concentrated on lower-contribution benefit options, making reserves more difficult to rebuild.
Taken together, these developments appear to explain the decline in solvency between 2022 and 2024 more convincingly than any single event.
The recovery followed a similarly measured path.
- Claims were brought back under control.
- The relevant healthcare expenditure ratio improved from 100.8% in 2023 to 94% in 2024 and 91.2% in 2025.
- Operational performance returned to surplus before the balance sheet recovered.
- Above-inflation contribution increases implemented under the three-year recovery plan in 2024 and 2025, together with improved claims experience and disciplined cost management, helped rebuild reserves.
The final step came in 2025, when Medihelp disposed of a long-held Allan Gray-linked investment. The transaction contributed R79.5m to the year’s reported surplus and converted about R201.2m in previously unrealised investment gains into realised gains. Because realised gains count towards accumulated funds for statutory solvency purposes while unrealised gains do not, the disposal strengthened the reserves used to calculate the scheme’s solvency ratio and accelerated its return above the 25% regulatory threshold.
Viewed across five years of annual reports, the turnaround looks less like a dramatic recovery than a carefully sequenced rebuilding process.
Claims were brought under control. Operational performance recovered. Contribution income strengthened.
Only then did reserves rebuild.
The Allan Gray transaction accelerated the final step.
Covid explains where the story began. The annual reports show the rest of the story was written over the four financial years that followed.
