Broker advice rise up as existential threat looms
The slow and winding road to South Africa’s National Health Insurance (NHI) Act implementation, and the constitutional challenges against the legislation, has dominated headlines of late, leaving the country’s medical schemes sector somewhat under reported. In case you missed the story, medical schemes face an existential threat because of how the NHI Act determines the health benefits they may offer.
Medical schemes in the spotlight
FAnews turned to the 2024-2025 Medical Aid Insights, the Insights Report, published by Alexforbes, to bring medical schemes back into the spotlight. The report promised to give readers “a comprehensive view of the performance of the medical schemes industry, as well as some of the changes and challenges the industry faces.” Your writer immediately turned to the ‘big picture’ stats page, which is based on financial results for all registered medical schemes as disclosed by the Council for Medical Schemes (CMS).
Unfortunately, up to date in the CMS world means to 31 March 2025; results for 2026 will only land in October or so. The stats do, however, confirm the long-term decline in registered medical scheme numbers, from 131 in 2005 to just 71 at the end of March 2025. There were 16 open schemes and 55 restricted schemes, representing a 68% and 32% decline respectively over the past 20 years. In addition to these schemes, the CMS also oversees 33 administrators, 43 managed care organisations, 7 773 accredited brokers and 2 223 brokerages.
“Despite reductions in the number of medical schemes, the industry has grown by 1.3 million principal members (46%) and 2.2 million beneficiaries (32%) since 2005,” writes Paresh Prema, Branch Head: Technical and Actuarial Consulting Solutions at Alexforbes Health, in a note accompanying the Insights Report. By 31 December 2024, 70 medical schemes boasted a combined 4.11 million principal members and just over 9 million beneficiaries. These totals exclude Sizwe Hosmed due to the late submission of its audited financial statements.
The LCBO and NHI dilemma
These nine million members, and the thousands of accredited brokers supporting them, are in for a rough few years. According to Prema, the Insights Report findings “point to a sector that remains stable in overall size, but is under mounting pressure from higher healthcare utilisation, rising provider costs and an ageing beneficiary base.” Agreed; but the impact of the NHI Act and the long-standing failure to integrate a sensible low-cost benefit option (LCBO) alongside medical schemes should also carry some of the blame.
The NHI Act was signed into law on 15 May 2024, outlining the establishment of an NHI Fund as the financing mechanism for the purchasing of healthcare services from accredited providers on behalf of users. In your writer’s opinion, the Act creates a real existential threat to healthcare brokers, medical schemes and scheme members in that it restricts the benefits that medical schemes may cover, as contemplated in section 33. Another concern is that funding mechanisms for the centralised healthcare behemoth remain unclear.
Case in point: the ongoing threat to tax credits. “The National Department of Health (NDoH) proposed the elimination of tax credits for individuals with medical aid, with the intention of allocating the corresponding funds to the NHI Fund,” noted the Insights Report. This envisioned transition will impact members’ disposable income. Tax credits remained in place when National Budget 2026 was tabled on 25 February 2026. Remember, however, that this tax credit is a drop in the ocean of the total tax revenue required for a functioning NHI Fund.
Challenges aplenty as NHI loads
The Insights Report reflects on a 2023 submission on the then NHI Bill, made by Discovery Health, the administrator of the country’s largest open medical scheme, Discovery Health Medical Scheme. They warned that “limiting the role of medical schemes may increase the burden to the state, leading to increasing catastrophic out-of-pocket healthcare expenditure across the system; a loss of healthcare professionals from the country; and damage to the private healthcare sector as well as tarnished investor confidence.”
Undeterred, the Minister of Health published draft regulations in preparation for the promulgation of the NHI Act around March 2025. “Medical schemes in their current form will remain until such time as the NHI Act has been clearly defined and set into practice, with no detail of such date currently communicated,” notes the Insights Report. The status quo looks locked in for now, as various legal challenges proceed. You can read more in ‘National health policy faces constitutional roadblock’.
Your writer has always been intrigued by how slowly the CMS and NDoH have moved on LCBOs. Had the LCBO process been finalised years ago, the private sector might have played a far bigger role in funding access to basic healthcare for lower-income households. Instead, the market has been left in a holding pattern, with advisers, insurers and consumers forced to navigate a temporary (sic) framework. The current issue dates back to the 2016 Demarcation Regulations, which drew a line between insurance products and the business of a medical scheme.
The boundless demarcation framework
The CMS felt that certain health insurance products, especially primary healthcare and hospital indemnity-type products, fell on the wrong side of that line. Rather than shut these products down immediately, the CMS administered a demarcation exemption framework that allowed affected insurers to continue offering cover, subject to exemption conditions, while policymakers worked out what should replace them. That replacement was supposed to be the LCBO framework; but years of consultation have produced zip.
The demarcation exemption framework has been extended and extended again, first to March 2024, then to March 2025 and now to 31 March 2027. At the same time progress on LCBOs has been mired in ineffectual policy-making and talk shops since the concept first surfaced around 2015. Glossing over that decade-long history, the latest update in the Insights Report mentions CMS Circular 53 of 2022, which invited public comment on the draft LCBO framework.
Per the report, the CMS was finalising guidelines for submission to the Minister of Health in March 2023. By February 2025, the NDoH had re-published the LCBO recommendations and guidelines report for public comment, with the Minister raising concerns about how the proposals aligned with the NHI. In plain English, despite being on the cards since the early 2000s, when low-income medical schemes (LIMS) were the flavour of the day, the regulators have done little to facilitate private sector participation in affordable healthcare cover.
Small mercies for some broker cheer
There was better news for healthcare brokers, who, thanks to consistent reminders sent by the Financial Intermediaries Association of Southern Africa (FIA) to the Minister of Health, have benefited from annual reviews of the fee they earn for advising clients on medical schemes. Like clockwork, the CMS issued Circular 2 of 2024, Circular 2 of 2025 and Circular 2 of 2026, adjusting the maximum amount payable to brokers.
With effect from 1 January 2026, the maximum broker fee payable for medical scheme advice is capped at R125.86 plus VAT per member per month, or 3% of the contribution plus VAT, whichever is the lesser. And that, dear reader, should get you two-and-a-half pints in your favourite drinking house. On a more serious note, Prema says the long-term trend analysis points to a medical schemes industry “entering a more complex period in which affordability, membership composition and regulatory uncertainty will shape future sustainability.”
An exceptionally uncertain future
Healthcare brokers, medical schemes and scheme beneficiaries can expect business-as-usual for years to come, because a fully functioning NHI seems a long way off. The current constitutional challenges, if successful, could force government into a serious step back and review of the legislation. And if these fail, further challenges to the NHI Act and its implementation are waiting in the wings. Either way, industry should brace for the double-whammy of policy and implementation uncertainty, likely spanning another decade or longer.
Writer’s thoughts:
In the usual ‘turkeys voting for Thanksgiving scenario’ many healthcare professionals are celebrating the NHI as a victory for all. Do you agree with this view, even if it means abandoning your medical scheme cover due to future affordability challenges? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
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