Affordability concerns are preventing nearly 9 million South Africans from joining medical schemes, despite earning above the tax threshold.
The Health Funders Association’s (HFA) inaugural State of Medical Schemes Report (SOMS), released this week, estimates that 8.79 million South Africans earn enough to join a medical scheme but remain outside the system, opting instead to pay out of pocket for medical expenses.
According to the HFA, the average medical scheme contribution is approximately R2 400 a month, which one analyst described as significant.
Luyanda Njilo, senior research analyst at Nedbank Corporate and Investment Banking, said income distribution helps explain the pressure.
He said South African Revenue Service (SARS) data showed that approximately 3.25 million assessed taxpayers claimed medical tax credits in the 2024 tax year.
Of these, approximately 1.69 million, or 52%, earned between R200 000 and R500 000 a year. This translates to a gross monthly income of roughly R16 700 to R41 700.
“For a person earning R200 000 annually, that (R2 400 medical scheme contribution a month) represents approximately 14.4% of gross income; at R350 000, around 8.2%; and even at R500 000, approximately 5.8%, before considering additional dependants or out-of-pocket healthcare expenditure,” Njilo said.
He added that the pressure increased when contributions consistently rose faster than household incomes.
The Council for Medical Schemes (CMS) reported an average industry contribution increase of approximately 10.1% in 2025, above prevailing inflation.
“If healthcare contributions compound at 8% to 10% while household incomes grow closer to general inflation, healthcare inevitably consumes a progressively larger share of disposable income,” Njilo said.
“For a young, healthy consumer who may visit a GP only a few times a year, the rationalisation becomes understandable: Why commit R25 000 to R30 000 or more annually when my expected routine healthcare expenditure is substantially lower?”
Njilo highlighted that the insurance system needed low-claim individuals in the pool to cross-subsidise members experiencing significantly higher healthcare costs.
Opting out, he said, could be economically rational for an individual while simultaneously weakening the sustainability of the collective insurance pool.
“Behaviourally, consumers assess value according to what they experience. The industry’s challenge is therefore not simply to demonstrate that schemes pay substantial claims; it is to ensure that consumers can clearly understand and experience the value they are purchasing relative to an increasingly significant monthly contribution,” Njilo said.
The HFA has suggested that mandatory membership for employed people earning above the income-tax threshold could bring approximately 8.79 million additional people into the risk pool and reduce expected average Prescribed Minimum Benefits (PMBs) risk costs.
PMBs are defined healthcare benefits that all South African medical schemes must cover by law under the Medical Schemes Act.
Njilo said the underlying economics of the HFA’s suggestion made sense: broaden the denominator and average risk falls.
“However, compulsion cannot be separated from affordability. Requiring someone immediately above the income-tax threshold to purchase a conventional medical scheme product costing several thousand rand a month would simply convert a healthcare affordability problem into a household affordability problem,” he said.
Njilo said the most interesting conclusion from the HFA report was that the private healthcare funding debate and the National Health Insurance (NHI) debate, despite starting from very different institutional positions, increasingly recognised the same fundamental economic principle: healthcare systems depend on broad risk pooling and cross-subsidisation.
“The real debate is increasingly about who participates in the pool, who administers it, what benefits are guaranteed, who provides the care, and how efficiently available resources are deployed,” he said.
Thoneshan Naidoo, CEO of the HFA, also cited affordability as one of the biggest barriers preventing many working South Africans from acquiring medical scheme cover.
He said the affordability equation was influenced by the size and composition of the risk pool.
“Medical schemes depend on cross-subsidisation, with younger and healthier members helping to subsidise those who are older or need more healthcare. Bringing more of the estimated 9 million working but currently uncovered South Africans into the medical scheme environment would significantly broaden and improve that risk pool,” he said.
Naidoo added that HFA modelling suggested that, based on age alone, bringing this group into the medical scheme system could reduce contributions by as much as 30%.
“So there is potentially a virtuous circle here: if we can make cover more affordable and bring more people into the system, a larger and more balanced risk pool can, in turn, help make cover more affordable for everyone,” Naidoo said.
Medical schemes are also losing members.
Naidoo conceded that medical scheme contributions tended to increase at a rate above general inflation. He said one of the biggest reasons was that the medical scheme population was ageing, and older people generally needed more healthcare.
Naidoo said HFA analysis indicated that around 10.2 million people earning between R7 726 and R30 000 a month could potentially benefit from more affordable, pre-funded primary healthcare options. Importantly, more than 95% of this group came from previously disadvantaged communities.
“From HFA’s perspective, we need to move forward on both fronts: create an appropriate regulatory framework for more affordable primary healthcare options, while also reviewing the PMBs to bring down the minimum cost of comprehensive medical scheme cover. That would give more South Africans a realistic pathway into pre-funded private healthcare rather than requiring them to continue paying out of pocket,” Naidoo said.
gcwalisile.khanyile@nationalmg.co.za