Medical aid sector in good shape despite Covid-19 pandemic – Alexforbes


The latest Alexforbes Sustainability Index indicates a resilience of medical aid scheme membership during the Covid-19 pandemic, with membership falling by only 1% in 2020.

The financial services provider says schemes experienced lower claims resulting in higher reserves despite a general slowdown in economic growth and rising unemployment.

Health branch head of technical and actuarial consulting solutions at Alexforbes, Paresh Prema, says since the inception of the index in 2006, the company noted that medical scheme uptake increased gradually over the years until 2019, when it remained unchanged before experiencing the 1% drop in 2020.

“What we found is that the experience has not been as harsh as we expected against the backdrop of a rising unemployment rate, retrenchment and halted business operations due to the lockdown levels,” he adds.

Losses and gains

The index confirmed that the industry’s net decline of 18 375 members over the 2020 financial year was driven by the decrease in Discovery Health Medical Scheme membership, which shrank by 18 483 principal members.

The Government Employees Medical Scheme (Gems) however counteracted the decrease with its growth of 11 175 principal members in this period.

According to the overview, there were 76 registered medical schemes in South Africa at the end of 2020.

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Alexforbes Health reports that 63 of the 76 schemes (82.9%) achieved an operating surplus in 2020 compared to 35.1% in 2019.

Moreover, the index indicated that the industry has grown by 1.5 million principal members and 2.3 million beneficiaries since 2000.

“South Africa, at the end of 2020, served a total of 4 million principal members and 8.9 million beneficiaries,” adds the report.

Prema says the 40% solvency rate found in 2020 is of significance given the 25% standard rate. The sustainability index recorded a 40.7% average solvency rate across all schemes at the end of December 2020, compared to 31.6% in the prior year.

Facts and figures

The index, which assesses the performance of several medical schemes against metrics including size and average age, found that individual schemes increased in 2020 and that the average age of all beneficiaries was 33.6 years, almost 1% higher than in 2019 when the average was 33.3 years.

The average age for open schemes increased from 34.9 years in 2019 to 35.3 years in 2020, while it also marginally rose for restricted schemes to 31.5 years from 31.3 years in 2019.

The company observed that the increase in the average beneficiary age should encourage schemes to attract young members.

“This is because young members claim less than older members, owing largely to the fact that acute medical conditions that require extensive, and often expensive, long-term treatment are more prevalent in the older population,” it adds.

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The bigger, the better

Alexforbes notes that the size of a medical scheme matters due to the stability and predictability offered to members.

This, coupled with lower volatility in claims, and greater negotiating powers in procuring cheaper medical services, contributes towards a higher sustainability index score.

However, the financial services provider reported that small schemes can be a sustainable source of affordable and comprehensive benefits to members.

Prema says Alexforbes Health anticipates a growth in membership.

“We would like to see the opportunity for affordability and low-cost options. These medical aid schemes are for the benefit of members.

“The idea is not to ignore the public sector but for the private sector to acknowledge its role in providing a service to those who can afford it, without placing any additional strain on the public sector.”

Listen to this interview on SAfm Market Update with Moneyweb:

Nondumiso Lehutso is a Moneyweb intern.



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