Health insurance outpaces traditional medical aid as consumers seek cheaper options

Health insurance products have emerged as the fastest-growing segment of South Africa’s private health care market as consumers seek cheaper alternatives to traditional medical aid amid mounting financial pressure.

The shift is forcing medical schemes to rethink their offerings as consumers downgrade from comprehensive plans, delay joining medical aid or leave the sector altogether in search of more affordable cover.

Momentum Health says open medical scheme membership declined about 3% between 2019 and 2024, reflecting pressure on household finances and the challenge of attracting younger consumers into private health care. But the pressure is not simply resulting in consumers abandoning private health care altogether. Instead, many are downgrading to affordable options, while others are turning to health insurance products that provide limited benefits at significantly lower premiums.

Health insurance, provided by medical schemes and companies like Dis-Chem and Tyme Bank, has enabled people who would otherwise be unable to afford private health care to gain access to cover, particularly through employer-sponsored plans. Woolworths is one of the companies providing health insurance to its employees through Momentum Health4Me.

Unlike medical schemes, which offer comprehensive benefits such as chronic cover and prescribed minimum benefits, health insurance products typically cover services such as GP consultations, medication, blood tests and limited emergency or hospital-related benefits.

Momentum estimates the health insurance market is growing by between 14% and 16% a year, far outpacing the largely stagnant medical scheme industry. It estimates that more than 1.2-million principal members now hold health insurance policies, translating to close to 2-million beneficiaries when dependants are included.

The health insurance is actually helping us cover more South Africans, and that’s a good thing.—  Damian McHugh, Momentum Health chief marketing officer

By comparison, South Africa’s medical scheme industry covers about 8-million beneficiaries.

Damian McHugh, chief marketing officer at Momentum Health, said health insurance should not necessarily be viewed as a threat to traditional medical schemes but as a complementary part of the private health care market.

“The health insurance is actually helping us cover more South Africans, and that’s a good thing,” he said.

Momentum’s Health4Me product, which the company says is South Africa’s largest open-market health insurance product, is predominantly distributed through employers. About 95% of its members are company employees, with many employers paying premiums on behalf of their workers.

Momentum Health is also one of the country’s largest health care administrators. Besides administering the Momentum Medical Scheme, which has about 156,000 principal members, the group also administers a number of other medical schemes, including the Government Employee Medical Scheme (Gems) and Bonitas.

As part of making private health care accessible, the medical schemes industry is calling for the introduction of low-cost medical scheme options.

Momentum believes there is room for low-cost medical scheme products that would allow medical schemes and health insurers to compete on a more equal footing while extending access to private health care.

“I do think you could have low-cost medical scheme options, and we can see the need for them by the power that health insurance has in attracting new lives,” McHugh said.

The pressure is also expected to accelerate consolidation. The number of medical schemes has already fallen from about 96 in the early 1990s to 46 today as smaller schemes struggle to compete with larger players that benefit from greater scale and negotiating power.

We really have tried to build innovative solutions into both our medical scheme and health insurance products to help people think about their health more, not just that they’ve got health care cover—  Damian McHugh

“I do think acquisitions or mergers will continue to happen. It becomes harder and harder to compete if you’re a small scheme without scale,” McHugh said.

At the same time, medical schemes are increasingly relying on innovation rather than price alone to attract and retain members. Medical schemes and health insurers are increasingly using wellness incentives, cash rewards and digital health care services to make cover more attractive.

Momentum, for example, has shifted from a traditional loyalty model towards a system that rewards members financially for healthier behaviour, with health returns of up to R1,000 per adult a month.

Momentum has adopted a similar approach in its health insurance products, where lower-income members can earn rewards such as airtime and grocery vouchers. “If I can be healthier, I can actually take some of my normal expenditure and get it almost for free … Your health actually becomes your wealth,” McHugh said.

“We really have tried to build innovative solutions into both our medical scheme and health insurance products to help people think about their health more, not just that they’ve got health care cover.”

Technology is also playing a growing role in health care delivery. Momentum says consultations through its Hello Doctor telehealth platform have increased by about 600%, reflecting consumers’ growing appetite for convenient and potentially cheaper access to primary health care. “It’s by now the largest telehealth capability in South Africa,” McHugh said.

The service allows members to consult doctors telephonically or by video, obtain certain prescriptions and receive health care advice remotely. “It really does put a doctor in your pocket,” he said.