Battling industry headwinds, Bestmed – South Africa’s fourth-largest open and biggest self-administered medical scheme – has notched its sixth consecutive year of member growth, steadily increasing its market share.
At last week’s annual general meeting, chief executive and principal officer Leo Dlamini reported a net membership rise of 4.4% (2023: 4.8%), underpinned by strong solvency and a healthy balance sheet.
“Economic uncertainties, ongoing regulatory changes, and real pressure on household budgets created a tough operating environment,” Dlamini admitted, yet the scheme celebrated its 60th anniversary with solid financial results. Despite persistently high claims ratios, disciplined management of healthcare and non-healthcare costs saw Bestmed outperform its budgeted net healthcare result – and it forecasts a positive outcome for 2025.
Investment income (net of expenses) climbed to R345.3 million (2023: R286.9m), lifting total assets from R4.9 billion to R5.4bn and maintaining a solvency ratio of 33.23% (2023: 36.89%). Under the Medical Schemes Act, schemes must hold at least 25% of annual contributions in reserves.
Key metrics at year-end 2024 included:
- Insurance revenue per beneficiary per month: R2 412.
- Healthcare spend per beneficiary per month: R2 280 (94% of revenue).
- Net surplus: R164.4m (2023: R38.7m).
The average claims ratio eased slightly to 94% (2023: 96%), with total healthcare costs of R6.8bn (2023: R6.2bn) delivering a positive insurance service result of R57m (2023: –R41.9m). In-network spending rose to 82.6% (2023: 81.7%), while investment returns improved to 8.6% (2023: 7.9%).
Dlamini highlighted post-Covid trends, noting fully resumed elective surgeries, routine check-ups and specialist care, alongside a rise in complex cases and cancer treatment.
“The 9.6% weighted average contribution increase for 2024 was driven by higher claims and the need to maintain adequate solvency. In 2021 and 2022, we deliberately kept our contribution increases low – at 4% and 3.9%, respectively – well below medical inflation at the time, but as claims normalised and healthcare costs increased, we needed to adjust to ensure we can pay claims and remain financially sustainable in the long-term. In 2024, we paid out R6.5bn in healthcare claims.”
Hospitalisation claims remained the largest share at 47%, specialists at 19%, medicines dipped to 9% (from 10%), and general practitioners, pathology, and other services held steady at 2%, 7%, and 16%, respectively.
“What’s encouraging is that these trends are relatively stable,” Dlamini said.
Outgrowing the industry
Dlamini attributed Bestmed’s principal-member growth to rising new registrations and strong retention.
“It is also important to note that positive relationships with the scheme’s healthcare adviser community, which is effectively an extension of the sales division, is an important contributor to its growth since most sales are generated via this channel.”
Over the past year, more advisers signed contracts with the scheme, and the number completing their product specific training assessments increased.
In the direct sales environment, enhancements to processes and a focused lead‑generation drive by the marketing and communication department delivered further gains.
“Compliance with the Financial Advisory and Intermediary Services Act is very crucial in this environment. Compliance audits are completed quarterly, and the scheme achieved 99.9% on the audits conducted by the external compliance organisation for the year under review.”
On the corporate front, Dlamini noted that a growing number of organisations have added Bestmed to their list of preferred medical schemes.
Over the year under review, membership among the scheme’s material groups has either remained stable or increased.
Economic outlook
Dlamini noted that South Africa’s medical scheme industry and healthcare sector are shaped by economic forces that influence consumer choices, operational expenses, and access to care.
“This was evident in Bestmed during 2024, as members continued to buy down to lower options as a result of economic pressure, while claims ratios remained high. Rising inflation and interest rates strain household budgets, leading consumers to reassess discretionary expenditures, including their medical aid membership.”
He warned that such financial pressure could drive members towards cheaper healthcare alternatives or even prompt them to drop coverage, weakening schemes’ risk pools and financial stability.
He also pointed to demographic trends: the average age of beneficiaries in open schemes has risen from 33.5 years in 2013 to 36.1 years in 2023, “lead[ing] to higher claims ratios, challenging the financial sustainability of schemes.”
He added that South Africa’s high youth unemployment compounds the problem by limiting the influx of younger, healthier members needed to cross-subsidise older beneficiaries.
Global factors add further uncertainty. Dlamini said trade tensions and economic policies abroad can tighten financing conditions and dampen exports, slowing growth and affecting domestic prices.
“These factors can tighten global financing conditions and affect South Africa’s exports, potentially slowing economic growth and influencing domestic price formations. Such external pressures may challenge the SARB’s efforts to maintain a stable inflation profile while supporting economic activity.”
Domestically, low growth expectations remain a concern for Bestmed’s expansion and for encouraging members to select benefit options that suit their needs. Meanwhile, the industry continues to battle fraud, waste and abuse – ranging from false claims to code farming.
Bestmed is investigating suspicious cases and exploring AI tools to flag irregularities swiftly.
Looking ahead, he outlined the scheme’s priorities: “For the year ahead, we have a number of key focuses, including prioritising competitive benefit options, ensuring contributions remain market aligned, as well as strengthening our service excellence, human resources and IT infrastructure. In addition, we remain committed to navigating the uncertainty surrounding the implementation of National Health Insurance.”
