One of the benefits of being in the financial services industry for 43 years is that I can look back, as a participant, to the impact that legislation has had on our industry. Nowhere is that impact more visible — or more personal for so many South Africans — than in medical aid.
I read in a recent article that, according to StatsSA, medical aid membership fell from 18.1% of the population in 2014 to 15.5% in 2024.
In my opinion regulation carries most of the blame.
Successive governments, handling of SA's healthcare funding history has gone full circle. Deregulation in 1989 and the early 1990s allowed schemes to charge fees based on health and exclude the sick —So cheap cover for the healthy, none for those who needed it. The result was a huge increase in membership as attractive schemes for younger members began emerging. In 1998, driven by ideology, Medical Schemes Act 131, abolished different fees for age and state of health and everyone could join. Slightly later Prescribed Minimum Benefits had to be offered, policed by the government. This was social solidarity: the young and healthy paying for the old and ill.
But reforms left one thing out. Community rating without mandatory membership gave low-risk and younger members every reason to stay out or leave their medical aid. So the result was as economics would predict, fees climbed as the membership got older, and — as the numbers now show — membership stagnated.
Community rating asks the young to overpay today so the old pay less tomorrow but gives them nothing to show for it — so they leave. A model that allows the young to build up a reserve fund and fund a insured medical calamity benefit within the scheme, so their own escalating premiums into old age are partly pre-paid rather than dumped on the next generation. Contributions become savings, not a sunk cost.
Singapore proves it works. Its Medisave system channels part of every worker's income into an individually-owned medical savings account used across a lifetime, backed by MediShield Life for catastrophic costs and MediFund as a safety net for those who cannot pay — prefunded reserve, catastrophe cover and solidarity, combined rather than opposed.
South Africa has never allowed this. Medical savings accounts do exist locally, but the 1998 regime deliberately kept them minor: allocations were capped at 25% of contributions, and in 2006 the regulator banned flexible savings ratios as backdoor risk-rating. Savings were permitted only as a small, standardised day-to-day buffer — never a lifetime reserve. Prefunding was subordinated to solidarity by design.
Prefunding does not solve all the problems. It does little for those who arrive old, poor or already sick — which is why a publicly funded safety net, as in Singapore, remains essential. The point is not to abandon solidarity but to fund it properly: reserves and catastrophe cover for those who can build them, targeted public support for those who cannot.
South Africa need not accept a slowly shrinking, ever-pricier private system as inevitable. The 1998 reforms were right to insist on fairness; they were wrong to ignore the clock. A prefunded, competitive model answers both.