The Council for Medical Schemes (CMS) has released its 2024 Industry Report, with Registrar and chief executive Dr Musa Gumede (pictured) highlighting the growing pressures facing the sector despite a strong solvency position and stable membership base.
In his foreword to the report, Gumede said the financial sustainability of medical schemes is increasingly shaped by rising healthcare utilisation, demographic shifts, and the lingering effects of years of contribution restraint after the pandemic.
The report offers what the Registrar described as “a truly integrated review” designed to guide policy directions and ensure that the regulatory framework continues to safeguard members and support industry resilience.
According to Gumede, the medical schemes environment in 2024 remained stable but continued to operate amid “complex conditions” characterised by slow membership growth and a steadily ageing beneficiary population.
Industry membership grew by 0.45% from 2023, increasing the number of lives covered to 9.17 million. Although restricted schemes saw growth of 2.41%, open schemes again recorded a decline, falling by 1.31%.
The data points to a gradual shift in demographic risk: the average beneficiary age increased from 32 years in 2023 to 34.2 years, with older members typically requiring more frequent and intensive healthcare services. This trend, Gumede noted, “continues to influence utilisation patterns across key benefit categories”, and contributes to higher claims costs across the industry.
Healthcare utilisation rises as costs accelerate
Healthcare utilisation continued its upward trajectory in 2024 as schemes recorded higher demand for in-hospital and out-of-hospital care. Total healthcare expenditure increased by 8.52% to R259.3 billion, while benefits paid per beneficiary rose by 7.8%.
Out-of-pocket payments climbed to R46.3bn, underscoring persistent affordability pressures for members.
Hospital services remained the single largest component of benefit expenditure, accounting for 35.95% of total benefits.
Although private hospital admissions per 1 000 beneficiaries declined slightly, the cost per admission increased sharply – rising 9.88% year-on-year. The Registrar attributed part of this trend to supplier-induced demand, observing that many scheme rules allow fully funded baskets of care for pre-authorised admissions, which may be contributing to the utilisation of services unrelated to the primary reason for admission.
Specialist services and medicines also remained key cost drivers. Restricted schemes showed systematically higher utilisation of medicines, GPs, and allied health services, reflecting demographic and structural differences compared with open schemes.
Expenditure on specialists accounted for 28.02% of benefit expenditure, followed by medicine dispensed at 14.05%, and supplementary and allied health professionals at 8.47%.
Despite these pressures, Gumede noted encouraging progress in preventive and primary care investment, including improvements in chronic disease management – interventions he described as “critical to ensure long-term sustainability and better health outcomes”.
Claims outpace contribution growth
Although insurance revenue per average beneficiary per month increased by 8.65% – significantly above CPI – relevant healthcare expenditure rose even faster, increasing by 9.03%. This widening gap between benefit costs and pricing resulted in a relevant healthcare expenditure ratio of 96.18%, a level well above pre-pandemic norms.
Gumede said the industry continues to face the consequences of prolonged contribution restraint during the post-Covid period. “The under-pricing of insurance services has resulted in an insurance service deficit that now requires careful correction,” he said.
In 2024, for every R100 collected in insurance revenue, schemes paid R96.18 in claims and R6.89 in directly attributable insurance service expenditure, leaving a shortfall of R3.07, which had to be covered from investment income and other non-insurance revenue.
“Current product pricing does not support reserve building or maintenance,” the Registrar said, signalling that higher contribution increases are likely to persist “as an incremental process” over the foreseeable future.
Solvency remains strong but masks underlying pressure
Despite the financial strain from rising claims, the industry retained a strong solvency position. Net assets increased to R109.24bn, supported by favourable investment markets. The sector ended 2024 with a solvency ratio of 40.87%, substantially above the statutory minimum of 25%.
However, Gumede cautioned that this solvency strength should not obscure underlying sustainability challenges. Market-driven investment gains are excluded from statutory reserve calculations, and the persistent mismatch between claims and contributions limits schemes’ ability to bolster reserves during periods of high utilisation.
Tariff reform and PMB review
Gumede highlighted tariff regulation as a key area requiring structural reform.
The CMS supports efforts to establish a multilateral negotiating environment that enables funders and providers to agree on reference tariffs. Such a system, he argued, would help to address the problem of unregulated and divergent provider pricing, which contributes to rapidly escalating costs due to information asymmetry.
The report noted the February 2025 draft interim block exemption published by the Department of Trade, Industry and Competition, which seeks public comment on tariff determination in the healthcare sector.
The Registrar also emphasised ongoing reforms to Prescribed Minimum Benefits (PMBs) and the development of a standardised Primary Healthcare (PHC) package. Jointly undertaken by the CMS and the National Department of Health, the review aims to align the PHC package with the draft National Health Insurance PHC framework.
PMB conditions accounted for 57.43% of risk benefits paid in 2024, underscoring their centrality to scheme benefit design and long-term cost dynamics.
Managed care and risk transfer arrangements expand
Managed healthcare arrangements continued to play a major role in controlling cost and promoting evidence-based care.
Managed care fees increased by 7.67% to R6.18bn, with nearly all beneficiaries (99.11%) covered by such arrangements.
The Registrar noted that options with older or higher-risk beneficiaries typically incur higher managed care expenditure per member, and that disease-specific contracts tend to be more costly than scheme-wide agreements because of the loss of volume-based discounts.
Risk transfer arrangements, including capitation agreements, also increased. Schemes incurred R5bn in capitation fees but realised R5.65bn in value from these arrangements in 2024. Pharmacy benefit management remains the largest component of risk transfer expenditure.
A sector at an inflection point
Gumede said the 2024 findings “reinforce the need for strategic interventions, proactive regulation, and strong stakeholder collaboration”.
He said although schemes have provided temporary financial relief after the pandemic, the cost pressures now confronting the industry require more sustainable pricing, stronger cost management, and enhanced regulatory oversight.
The combined utilisation and financial data presented in the Industry Report, he said, should support “policy directions that safeguard beneficiaries and ensure the long-term financial sustainability” of medical schemes – an imperative that will shape regulatory priorities in the years ahead.
Click here to download the 2024 Industry Report and the annexures.
