The report stresses that mandatory participation would need to be accompanied by affordability measures and accessible benefit options.
Mandatory medical aid membership for South Africans earning above the income tax threshold was presented as one of the medical scheme reforms in research commissioned by the Health Funders Association (HFA). For the 2027 tax year (1 March 2026 to 28 February 2027), the South African tax-free income threshold is R99 000 for people under 65.
HFA released its inaugural State of Medical Schemes report (SOMS) on Wednesday, providing an evidence-based view of both the contribution medical schemes make to South African healthcare and the pressures that could undermine their sustainability, according to the association’s CEO, Thoneshan Naidoo.
“The debate around medical schemes is understandably dominated by affordability and rising healthcare costs. These are serious challenges, and we cannot shy away from them,” he said. “But we also need to understand what medical scheme protection means in practice, what is putting that protection under pressure, and what reforms are needed to preserve and extend it.”
HFA is a non-profit organisation representing key private healthcare funding stakeholders. Medical schemes and healthcare funding organisations listed as HFA members include Discovery Health Medical Scheme, Momentum Medical Scheme, Fedhealth, Medscheme and others.
SOMS assessed the impact of introducing mandatory membership and a risk-equalisation mechanism on medical schemes and their members. According to Naidoo, these measures could help stabilise the industry and ensure its long-term stability.
He said mandatory membership would create a larger and more balanced group of members, reducing the risk that mostly sick or older people are left in the pool.
“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.”
Naidoo highlighted that the SOMS analysis suggests that mandatory membership for employed people could add approximately 8.79 million people to the modelled risk pool and reduce the average expected Prescribed Minimum Benefits (PMB) risk cost by approximately 13%.
PMBs are a set of healthcare services that all South African medical schemes must cover by law, regardless of the specific plan or option you choose. “Extending participation to all employed people produces a modelled reduction of approximately 18%,” he added.
A separate analysis suggests that if more people participated in the scheme, and their participation was more consistent, the impact could potentially be as large as 30%. However, 30% is a best-case estimate, not a guaranteed outcome.
“A separate restricted-scheme proxy indicates that the effect of broader and more stable participation could potentially be as high as 30%, although this should be treated as an indicative upper estimate,” said Naidoo.
In theory, mandatory membership could create room for lower premiums because schemes would have a broader and potentially healthier risk pool.
SOMS highlighted that mandatory participation would need to be accompanied by affordability measures and affordable benefit options.
The report also 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%.
Naidoo said that 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 R5.9 billion annually between schemes to compensate for predictable demographic risk,” he said. “This would ‘level the playing field’ by redistributing existing funding between schemes.
“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.”
“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.”
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.
