Why the pandemic is lowering medical insurance inflation

Kathryn Bankart, Elise Green, Dineo Lekgeu, Koketso Mano and Mpho Rapapali

No 11032, Occasional Bulletin of Economic Notes from South African Reserve Bank

Abstract: Medical insurance inflation is one of a few CPI components with inflation rates persistently above the midpoint of the target range. Since 2017, headline inflation has averaged 4.4%, while health insurance inflation has averaged 9.3%. The drivers of high inflation for this category include aging, shrinking membership pools as well as sub-optimal regulations. Health insurance inflation is expected to slow sharply during 2021, however, from 9.5% to around 5%. This is because medical schemes have accumulated large surpluses during 2020, as members responded to the COVID-19 pandemic by avoiding medical facilities wherever possible. It is likely that medical insurance inflation will rebound from 2022, once the excess reserves built in 2020 are used up, given that the structural drivers of high medical insurance have not changed.

Date: 2021-10-06
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