Discovery CEO Adrian Gore says medical inflation is likely to come down in line with general inflation, but warns that the upward trend in premiums still persists.
This year, premiums across medical aid schemes have increased by between 9.3% and 12.8% with providers saying this is driven by ageing populations, increasing chronicity, and escalating technology costs.
What happens is medical costs go up above inflation, and other things go up below inflation, and inflation is the average. That’s how it works. But I’m hoping that if you look at how we are operating, we can deliver better quality care at a low inflation rate
— Adrian Gore, Discovery CEO
“I see medical inflation coming down in line with what we see in the general decline in inflation. But I still think you’re going to see medical inflation at CPI plus 3% to 4%,” said Gore.
“I think that’s kind of how it is and how much it can change unless we have structural change elsewhere. What happens is medical costs go up above inflation, and other things go up below inflation, and inflation is the average. That’s how it works. But I’m hoping that if you look at how we are operating, we can deliver better quality care at a low inflation rate.”.
Early this month, the Council for Medical Aid Scheme recommended that the contribution increase and cost assumptions for tariff increases for the 2026 benefit year be limited to 3.3%, plus reasonable utilisation estimates, “to ease the financial strain on members of medical schemes and the risk of losing health insurance”.
It said annual medical scheme contribution rates “have consistently increased at a higher rate than consumer inflation”, and was concerned by this trend as it places a significant financial burden on members.
In March Discovery, which has 3.98-million members signed to its scheme, launched personalised health actions aimed at getting members healthier as it looks for ways to manage medical inflation and reduce costs.
“Getting people engaged and bringing chronicity down has a massive effect on healthcare costs. So we’re all fighting every single angle to try and find a way to make it more affordable,” said Gore.
Discovery wants to double its business in the next five years, driven by its banking operations. It expects profits to grow by 15%-20% every year until 2029. In the year to June, the business grew 29% as Discovery Bank reported its first profits.
“This year we grew 30%, I think we’ve popped out of the growth corridor, we’ll come back in again, you know. So there’s some momentum in what we’ve done… we think over the five-year cycle, we should grow by between 15% and 20%. That will be an incredible accomplishment, given our size, that’s a massive growth rate, almost double (the business) in five years.”
Gore said most of the growth will come from Discovery Bank, which grew total clients by 30% to 1.2-million, and deposits by 26% to R23.3bn. “The bank getting scale is a very important piece of how the South African business will grow.
“So, the bank is the fastest-growing in the country now, and if it continues that way, we’ll see that profit. It’s turned to profit now and growing strongly. The global businesses should grow as well. We do a lot of exciting stuff globally. So, you bring them together, you do get the potential to grow strongly, but it’s a very, very demanding vision, not simple.”
Discovery also operates in China and the UK. It is eyeing 2-million Discovery Bank clients and R3bn in profits in financial year 2029.
Keagan Higgins, investment analyst at Anchor, said: “We have long held the view that once Discovery’s investment cycle ended or at least slowed, we would see earnings growth accelerate and returns rise — and these results show that turning point has now arrived.”
He said the company’s profit guidance reflects “confidence that the end of its investment cycle will translate into more consistent earnings growth”.
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