It's not clear how long it will take to overhaul the medical scheme industry to ensure affordability and universal access. But indications are that tariffs will stall in the short term and possibly fall in due course. The shake-up may double the number of South Africans with medical aid cover over the next few years.

Mergers and acquisitions are expected to dominate ahead of consolidation, says Metropolitan Health CEO Blum Khan.

Renaissance portfolio manager Khaya Gobodo adds: "The likely direction of corporate activity from this point on is consolidation, in order to provide the benefit of economies of scale. I don't think we'll see significant growth in the number of players, or any growth at all."

Vertical integration of health-care services is another possibility as schemes, hospital groups and others opt for converged solutions to boost revenues. Consolidation and integration are vital as competition grows, not least by the Government Employees' Medical Scheme (Gems).

Overall the number of principal members increased, but this was offset by a decline in the number of dependants, which therefore left the number of covered people at about 7m - where it has been for 10 years. The Council for Medical Schemes reported that membership rose slightly from 6,9m in 2004 when contribution income was R52bn, only to plummet almost 30% to R37bn in 2005.

Metropolitan prides itself on being the biggest winner so far, after securing the Gems account. Its base lifted an impressive 33% to 1,1m in 2005, after snatching the Polmed (medical scheme for the police) contract from Mx Health.

Discovery retained its position as the dominant player and now commands a 27% market share or a total of 1,9m beneficiaries. Bonitas remained a distant second with 7% or 500 000 beneficiaries.

One of the biggest losers in 2005 was Medihelp. After a protracted legal battle it lost out on a R90m administration annual fee from the state for providing health care to retired public servants.

Last year government and other stakeholders laid the theoretical foundations for transforming the industry. Changes are expected to make the sector more customer-centric; more transparent; and curb discrimination that has led to older people being technically forced to take more expensive products because of how the schemes are designed. It is hoped that the new approach will also expedite transformation, narrow the disparities in health care, help create jobs and boost the economy.

To this end, the Council for Medical Schemes (CMS) has strengthened its compliance unit and intensified its scrutiny processes to ensure that members don't pay more than necessary, says council spokesman Pat Sidley, adding that schemes wishing to effect increases above CPI plus 3% will have to make strong motivations to convince CMS.

"We also looked at the process of fair treatment and medical scheme governance last year," Sidley says. "We have constantly been struck by actions emanating from bad governance. Some trustees were getting duped; inappropriate deals were signed; and some money was leaving schemes for unknown reasons. We have also been receiving complaints about nonpayment of claims."

Turning to the debutante scheme, most observers agree that the arrival of Gems is much needed and will help bring about growth while setting the tone for future pricing models.

"Gems' growth is good for the industry," says Old Mutual Healthcare executive Paul la Cock , "potentially increasing the number of people with medical-scheme coverage. However, some open schemes with a large proportion of government employees may have to look at consolidation as these employees migrate to Gems. It's not clear how quickly this migration will take place."

Khan and Gobodo agree that the main hurdle to access is high premiums. These have been pushed up by the high medical-aid inflation rate - between 10% and 15% year-on-year . However, given the more reasonable price hikes recently, medical-aid inflation may move closer to CPI.

Indications are that removing access barriers would attract 5m-7m people. This will push the number of beneficiaries to an impressive 12m, or possibly double the current figure in just five years. However, there is indecision on certain aspects, and scant details on a potential roadmap by the state and other stakeholders. There are fears that the yet-to-be-introduced low-income medical scheme (Lims) may not after all be affordable to the majority of black households.

Lims would to some extent battle it out with an established firm like Discovery, which caters for entry-level consumers with a product designed for people earning up to R6 500/month. The new initiatives are also supposed to galvanise the provision of antiretrovirals to people with HIV .

Says Gobodo: "It's going to be very hard for a farm worker and any other low-income earner. With an already stretched budget, taking even R150/month to put away for medical care is going to be tough, whereas there's already an expectation that the state provides free medical care in public hospitals. I think it's clear that this scheme has to be subsidised and the big question is how this will be done."

Whatever the hurdles, the industry is poised to increase its total gross contribution income pace with the advent of Gems and Lims, while the Risk Equalisation Fund (REF) will ensure that schemes with healthier members subsidise those with older or sicker ones. Khan believes that Gems could breach the 2m mark in a mere three years and expects the REF to be implemented in 2008.

Given the imminent changes to reduce premiums as well as the REF and Lims, the industry is finally opening up and its contribution income looks set to once again breach R50bn.