South Africa’s second-largest medical scheme, Bonitas, has terminated its long-standing administration relationship with Medscheme, ending a partnership that has been in place since 1982. According to Business Day, the scheme has appointed Momentum to handle administration and Private Health Administrators (PHA) to manage care services for all its options except Boncap, its low-income plan.
The decision represents a significant loss for Medscheme and its parent company, JSE-listed Afrocentric, as Bonitas is one of its largest clients. Bonitas has more than 374,000 principal members and around 750,000 beneficiaries, making it a central contributor to Medscheme’s administration book. The shift alters the competitive landscape of the medical scheme administration market, which is dominated by a small number of large players that depend heavily on long-term contracts for scale and profitability.
Bonitas’s move follows an unsuccessful court application by Medscheme in December to block the scheme from issuing a tender for new administrators and managed care providers. The application sought an urgent interdict pending the outcome of a forensic investigation by the industry regulator, but the court ruled that the matter was not urgent and set it down for March. As reported by Council for Medical Schemes, the investigation focuses on procurement processes related to Bonitas’s earlier appointment of PHA to administer Boncap, which had previously been managed by Medscheme.
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On Thursday, Bonitas confirmed that it had concluded new contracts for its remaining options, with Momentum taking over administration and PHA assuming responsibility for managed care. The scheme said the regulator requires trustees to regularly benchmark service provider contracts rather than rely on evergreen arrangements, which can entrench costs and reduce accountability. Bonitas indicated that its tender process was aligned with this requirement, particularly as Medscheme’s five-year contract was due to expire in May.
The scheme said it had issued a request for proposals to assess the market and identify opportunities to reduce non-healthcare expenditure. Administration and managed care fees form part of the non-healthcare cost base that directly affects member contributions, making procurement decisions increasingly sensitive in an environment of rising healthcare inflation and pressure on household budgets. Bonitas declined to disclose the commercial terms of either its outgoing or incoming contracts.
Afrocentric informed shareholders via a stock exchange announcement that Bonitas had proceeded with awarding the contracts despite the pending legal proceedings. According to Afrocentric, the group will await the outcome of the court process before determining its next steps and providing further guidance to investors. The loss of Bonitas is likely to weigh on Medscheme’s revenue outlook, given the scale of the account and the limited pool of schemes large enough to replace it.
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Medscheme had not responded publicly at the time of publication, but has previously said its legal action was motivated by concerns over governance, ethics and statutory obligations to Bonitas members. The company has also pointed to media reports alleging procurement irregularities involving senior Bonitas executives and trustees as contributing to its decision to challenge the process.
The dispute underscores growing scrutiny of governance and procurement in the medical schemes sector, where regulators have increased oversight of administrator relationships and cost structures. It also highlights the strategic importance of large scheme mandates for administrators, at a time when consolidation and cost containment are reshaping the industry. For Bonitas members, the transition will be closely watched for its impact on service continuity, contribution levels and long-term scheme stability.