Two medical schemes fail to maintain prescribed solvency ratio

Two medical aid schemes – Medihelp and Compcare – failed to maintain their solvency ratios at or above 25% in 2024, the minimum statutory level prescribed in the Medical Schemes Act.

This is revealed in the Council for Medical Schemes (CMS) Industry Report 2024, released last week.

Read: Trio of medical aids fail to maintain required liquidity [May 2025]

The report shows that Medihelp’s solvency ratio was 33.93% in 2022, deteriorated to 23.84% in 2023, and fell further to 20.99% in 2024.

Compcare Medical Scheme’s solvency ratio deteriorated from 25.14% in 2023 to 21.83% in 2024.

The report states that 4.93% of beneficiaries in open schemes were covered by Medihelp and Compcare Medical Scheme in 2024, and that no restricted medical schemes failed to meet the minimum required solvency level at the end of 2024.

In 2023, Medihelp, Sizwe Hosmed Medical Scheme and Transmed Medical Fund failed to maintain their solvency ratios at the required minimum level.

Transmed inches up

Transmed Medical Fund attained a 25% solvency ratio during 2024, according to the 2024 CMS Industry Report.

It improved its ratio from 17.7% in 2022 to 23.79% in 2023.

However, the latter was at least the fourth consecutive year it failed to comply with the prescribed minimum after achieving a  ratio of 19.72% in 2021 and 22.37% in 2020.

Provisional curatorship for Sizwe Hosmed

The CMS said in September it had obtained a Gauteng High Court order to place Sizwe Hosmed Medical Scheme under provisional curatorship and had appointed Lebogang Mpakati as the provisional curator.

It said it was common cause that Sizwe Hosmed had been experiencing financial difficulties and its solvency level had declined to a level far below the statutory requirement of 25%.

It said the scheme was recently informed by the South African Local Government Bargaining Council that it had not been granted accreditation to market the scheme and benefit options to local government employees for the 2026 year.

The CMS said Mpakati was expected to investigate Sizwe Hosmed’s financial position and advise on viable solutions and the future of the scheme, including a merger, liquidation, or continued existence.

Last week Mpakati indicated that the scheme had restored provider access and improved its claims processes – but despite the scheme having made “substantial progress” in stabilising its operations, its challenges remain.

Overall industry solvency ratio down

The CMS Industry Report said the overall industry solvency ratio of 40.87% in 2024 exceededed the minimum required, but showed a decline from 43.94% in 2023.

The solvency ratio of open schemes decreased by 2.68% to 33.36% in 2024 from 34.28% in 2023.

Restricted schemes experienced a decrease of 10.87% in their solvency ratio to 50.52% in 2024 from 56.68% in 2023.

The average industry solvency ratio has deteriorated over the past three years from 59.48% in 2022 to 56.68% in 2023 and 50.52% in 2024.

The CMS report attributes the industry-wide decrease in solvency levels to the growth in reserves not keeping up with the growth in contributions.

The report said Medihelp deliberately underpriced its benefits during the Covid-19 pandemic in an attempt to provide relief to its members.

It said the scheme experienced a 3.89% decrease in its insurance revenue per average beneficiary per month (pabpm) from 2021 to 2022 compared to an average Consumer Price Index (CPI) of 6.9% during the same period.

The report said Medihelp corrected its pricing for the 2024 financial year and experienced an increase of 13.79% in its insurance revenue pabpm, compared to the average CPI of 4.4%.

It said the scheme submitted the required business plan in terms of Regulation 29, which was subsequently approved by the registrar of medical aid schemes.

The dreaded ‘death spiral’

The report noted that: “Schemes with higher demographic profiles are at particular risk of the so-called ‘death spiral’, where adjustments to price appropriate for the profile of its members might result in the unaffordability of contributions and the subsequent loss of its younger members, thereby exacerbating the effect.”

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The report said Compcare is a smaller medical scheme with a very poor demographic profile, and is therefore exposed to significant claims volatility risk.

It said the scheme restructured its benefits for the 2025 financial year in an attempt to address its underlying membership risks, and the registrar approved its Regulation 29 business plan.

Medihelp

Approached for comment by Moneyweb, Medihelp said the scheme is financially fit, stable and (sufficiently) well-positioned for the future to give its members and advisors reassurance that it remains reliable, resilient, and responsibly run.

Read: Medihelp finds itself below solvency level

“Independent rating agency Global Credit Rating (GCR) has once again affirmed Medihelp’s financial strength rating of A+ with a stable outlook, confirming our ability to meet our obligations and pay claims now and in the future,” it said.

Medihelp said its solvency ratio is expected to reach the legally required 25% by the end of 2025.

“Through solid investment returns and effective managed care strategies that ensure access to quality care while avoiding unnecessary costs, we remain on track to meet this target.”

Compcare has not yet responded to a Moneyweb request for comment.

Industry outlook and actions

The report concluded that the medical schemes industry remained underpriced in the 2024 year, and it is anticipated that this will be incrementally addressed through pricing adjustments over time.

It stressed that there are currently no interventions addressing the demand side escalations as it pertains to the demographic profile deterioration of the medical scheme population.

“During 2024 supply side driven utilisation increases were noted, specifically as it relates to non-related services to inhospital basket of care admissions.

“Medical schemes will be addressing this pervasive behaviour through benefit changes.”

The report added that the CMS and the Department of Health are currently working on the introduction of a standardised benefit package and the review of prescribed minimum benefits.

It said alignment between the two entities’ primary healthcare packages is also taking place.

“The CMS is excited to participate in the engagement on creating a multilateral negotiating environment for funders and practitioners to determine reference tariffs,” it added.

“This would relieve medical schemes from rapidly escalating costs, as tariffs are currently not determined through a competitive process.”

Read: The best medical aid in South Africa [Feb 2025]

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