Financial Performance Industry Report 2023

The Council for Medical Schemes (CMS) is pleased to announce the release of the 2023 Financial Performance Industry Report and Annexures. This comprehensive report offers a detailed and data-driven view of the financial health of South Africa’s medical schemes and provides critical insights to inform ongoing regulatory developments.

Financial overview of the industry

The report shows a financially sound medical schemes industry. At the end of 2023, the industry recorded a solvency level of 43.45%, well above the minimum required level of 25% as set out in Regulation 29 of the Medical Schemes Act.

Solvency is a key indicator of a scheme’s financial health, it reflects the strength of a scheme’s reserves and its ability to pay future claims. Higher solvency means greater stability and readiness to manage unexpected events, such as pandemics or increases in claims.

Open schemes reported solvency of 33.75%, while restricted schemes ended the year at 56.64%.

Insurance revenue vs. Healthcare expenditure

In the context of medical schemes, insurance revenue refers to the monthly risk contributions incurred by members, while relevant healthcare expenditure represents the net claims incurred, accredited managed healthcare services and reinsurance results (previously known as claims).

• Insurance revenue per average beneficiary per month (pabpm) increased by 6.40% from R1 961.06 in 2022 to R2 086.50 in 2023, which was only slightly higher than the average CPI of 6.00%.
• This increase was not sufficient to address the 2021 and 2022 financial year’s under-pricing, during which schemes implemented contribution increases below consumer inflation to provide temporary financial relief to members during the economic downturn. Schemes were able to implement these interventions due to reserves built-up during the COVID-19 pandemic.
• Relevant healthcare expenditure increased by 8.70%, from R1,840.48 pabpm to R2,000.57 pabpm. This resulted in an increased relevant healthcare expenditure ratio of 95.88%, compared to 93.85% in 2022, and significantly above pre-COVID levels (which were below 91%).

The rise in claims is largely attributed to:

• Tariffs, which are currently not regulated.
• Increased utilisation, which is closely linked to the worsening demographic profile of medical schemes – 2023 saw an increase of only 1.04% in medical scheme membership, whilst the average age increased by 0.27 years.
• Utilisation levels also increased post-COVID, as beneficiaries resumed delayed treatments and elective procedures. Based on monthly indicator information submitted during 2024, the increased levels of utilisation continued in 2024 and had to be factored into the 2025 year’s contribution increases

With claims rising faster than contributions, CMS notes that significant repricing and benefit adjustments will be necessary for long-term sustainability.

Insurance service result and net results

The insurance service result (previously known as the net healthcare result) of a medical scheme indicates its position after relevant healthcare expenditure and directly attributable insurance service expenditure are deducted from insurance revenue.

Due to the combination of lower-than-CPI contribution increases and increased relevant healthcare expenditure during 2023, the insurance service result for all medical schemes combined reflected a deficit of R6.73 billion in 2023 (2022: R2.01 billion deficit).

A total of 81.25% (13 of 16) of open schemes and 61.82% (34 of 55) of restricted schemes incurred insurance service deficits during the year.

Investment income and built-up reserves were critical in covering shortfalls, contributing to a net surplus of R1.35 billion.

 

For every R100 received in insurance revenue, an additional R2.96 from reserves or investment income was used to fund:

• R95.88 in relevant healthcare expenditure.
• R7.08 in directly attributable insurance service expenditure (DAE).

Strategic interventions and regulatory focus

To address growing cost pressures and continue to protect medical scheme members, the CMS is pursuing the following priorities:

• Monitoring and guiding the industry’s adoption of IFRS17 accounting standards, which improve financial reporting consistency and allow members to better understand the financial health of their schemes.
• Promoting sustainable pricing and benefit adjustments to ensure schemes remain solvent and continue to deliver value to beneficiaries in the face of rising healthcare utilisation and ageing membership profiles.
• Approving slightly higher than the average CPI contribution increases over a multi-year period to gradually address under-pricing and avoid sudden, unaffordable premium hikes for members.
• Supporting the development of a standardised benefit package and reviewing Prescribed Minimum Benefits (PMBs) to ensure equitable access to essential healthcare services.
• Participating in the creation of a multilateral negotiating environment that enables funders and healthcare providers to agree on reference tariffs, which would improve pricing transparency and alleviate cost pressures on medical schemes.

The CMS remains steadfast in its commitment to protecting the interests of medical scheme members. As the healthcare landscape continues to evolve, this dedication ensures that medical schemes remain sustainable, transparent, and capable of delivering meaningful health coverage to millions of South Africans.

Annual Return Dashboard

 

Download the Industry Report here and the Annexures here.