Residents of South Africa may face an increase in medical insurance costs by hundreds of rand per month next year. This will add an extra burden to family budgets, which are already under pressure due to rising food prices, debt burdens, and declining purchasing power.
Most major open medical schemes have announced premium increases for the 2027 period ranging from 7% to 9%. This percentage significantly exceeds the estimated accessibility benchmark of 3.8% recommended by the Council for Medical Schemes.
Discovery Health Medical Scheme, the country's largest open medical scheme, has announced premium increases of 7.4%–8.9% depending on the chosen plan, with a weighted average increase of 8.2%, which they state corresponds to the level of medical inflation. Bestmed reported a weighted average increase of 7.35%, while Medihelp premiums are set to rise by an average of 7.5%. Momentum Medical Scheme and Medshield have also announced an average increase of 7.9%.
Pressure on wages
These increases come as South Africans are already receiving less money in real terms. According to the PayInc Net Salary Index, which tracks about 2.1 million people earning between 5,000 and 100,000 rand per month, the average net salary dropped to 21,622 rand in August. Adjusted for inflation, the real value of the average salary was only 20,164 rand, which is 2.6% less than the previous year.
For a person earning the average net salary of 21,622 rand, a medical contribution of 5,000 rand is already nearly a quarter of their income. After an 8% increase, the 5,400 rand contribution will account for approximately 25% of the income.
Over 103 billion spent
The scale of these expenditures is evident according to the latest household expenditure statistics from Statistics South Africa. In 2022/23, only 14.1% of South Africans had medical insurance. Households headed by men spend 71.8 billion rand on medical insurance contributions, while households headed by women spend 31.7 billion rand, totaling 103.5 billion rand.
Average annual contributions were 27,662 rand for male-headed households and 20,875 rand for female-headed households. If these averages increased by 8%, the annual cost would rise by approximately 2,213 rand and 1,670 rand respectively, equivalent to an additional 184 and 139 rand per month. Furthermore, Statistics South Africa found that households spent an additional 31.5 billion rand out-of-pocket on healthcare in 2022/23.
Food takes another bite
Healthcare is just one of the bills competing for household income. The Pietermaritzburg Economic Justice & Dignity Group Household Affordability Index showed that the average household food basket cost 5,488.06 rand in September, and 5,679.01 rand in Johannesburg. Although the average basket was only 2% more expensive than last year, some individual items saw significant price hikes: onions became 66% more expensive, potatoes 34% more, bananas 23% more, carrots 19% more, and tomatoes 18% more.
When comparing the 5,000 rand medical contribution and the average food basket of 5,488 rand against the average net salary of 21,622 rand, there remains about 11,134 rand before paying for housing, transport, electricity, insurance, and other expenses. After an 8% increase in the contribution, this amount drops to approximately 10,734 rand.
Debt also costs more
Borrowers are also facing higher interest rates. Following a recent 25 basis point hike in interest rates, a 1.5 million rand mortgage over 20 years at the base rate now costs approximately 15,228 rand per month, compared to the previous 14,976 rand, increasing the monthly payment by about 253 rand. A car worth 500,000 rand financed over six years at the base rate now costs around 9,453 rand per month, an increase of 64 rand. Thus, the latest rate hike increases monthly payments by 317 rand for a household with both debts.
If we add an illustrative increase of 400 rand to the 5,000 rand medical contribution, these three increases together require an additional 717 rand monthly, or about 8,600 rand annually. This does not include any price increases on food, electricity, municipal charges, insurance, or other household expenses.