SOUTH AFRICA: Universal Health Insurance and the Potential for iPMI

In this iPMI Global regional country guides article, iPMI report author and market analyst Ian Youngman provides a mammoth article on universal health insurance in South Africa, and looks at the potential for international private medical insurance (iPMI).

• In a recent interview the CEO of Sanlam surprised listeners by offering support for universal health insurance and private health.
• To those outside of South Africa, the prevailing narrative from healthcare and insurance organisations is of doom and gloom.
• But more considered commentators feel that private healthcare can help improve public healthcare, while health insurers must find ways to work with the new system.
• The two-tier healthcare system of public and private healthcare, with a few having private system simply does not work for providers or customers.
• Let us first get rid of the two myths- universal healthcare will not kill private heath care or private health insurance,
• Yes, it will change both.
• There is much information from interested parties so finding the facts is not easy.
• Ian Youngman has managed to get hold of official information sheets and extracted the useful details.

National Health Insurance: laws

• On 12 June 2023, the National Assembly (NA) passed the National Health Insurance (NHI) Bill.
• The NHI Bill seeks to provide universal access to health care services in the country in accordance with the National Health Insurance White Paper and the Constitution of South Africa.
• The Bill envisages the establishment of a National Health Insurance Fund and sets out its powers, functions and governance structures.
• The fund will purchase health care services for all users who are registered with it.
• The Bill will also create mechanisms for the equitable, effective and efficient utilisation of the resources of the fund to meet the health needs of users and preclude or limit undesirable, unethical and unlawful practices in relation to the fund.
• The NHI Bill was initially tabled in Parliament and introduced to the Portfolio Committee on Health on 8 August 2019 for processing.
• Government considers the passing of the NHI Bill by the National Assembly as a key milestone to ensuring all people in SA have access to a clinic, a doctor or a hospital (public or private) closer to where they live or work without paying when they need the services.

What is the NHI and how will it change the system?

• The NHI is a Fund, paid by taxes, from which the government will buy health care services for all who live in the country from health care providers in the public sector and private sector.
• This means when people feel unwell, they can go to the nearest GP or clinic of choice that has a contract with NHI and not worry about the cost of care.

What are the benefits of NHI?

• South Africa is committed to implement universal health cover for all.
• Access to healthcare is a fundamental right for all.
• The government has the legislative mandate to realize this right.
• The government has the responsibility to implement universal health cover to ensure that all people are able to access health care when and where they need it without suffering financial hardship.
• The public sector has constraint budgets that are not sufficient to provide health care services for the 84% of the population that relies on public sector for health care.
• This results in an overburdened public sector that is characterised by underservicing.
• The private sector, which serves 14% of the population, is characterised by rising costs of care and over servicing without demonstrating much improvement on health outcomes.
• Both sectors need reform to ensure that quality of health is improved.
• The pooling of funds into one fund will improve quality of services and therefore improve health outcomes.
• Extending health cover for all South Africans will improve access to care, quality of care and continuity of care.
• NHI reforms will contribute to the health system having a co-ordinated and well-structured response to burden of disease.
• The NHI Fund will protect individuals from financial hardship when they need to access healthcare services.
• Financial hardships take place when people need to pay out-of-pocket payments such as user fees at facilities and co-payments for individuals insured by medical schemes. Contribution to the Fund will be through prepayment methods such as taxes.
• Services will be paid for by the Fund and the patient will not have to pay at the point of care.
• The fragmented, two-tiered system undermines principles of equity and social solidarity and leads to a health system where resources are distributed unfairly.
• The NHI will promote equitable access to care, and this will be achieved by cross-subsidisation among the population.

Who will be covered under the NHI Fund?

• The fund will purchase services on behalf of SA citizens, permanent residents, refugees, inmates and specific categories of foreign nationals.
• Asylum seekers and illegal foreigners will be covered for notifiable conditions and emergency medical services.
• All children will be covered for all benefits purchased by the fund regardless of nationality.
• Visiting foreign nationals will be covered by their mandatory travel insurance.
• The NHI Fund will purchase services on behalf of all South Africans.

Treatment costs?

• All users will be able to access health care services without paying anything at the point of care, regardless of their socioeconomic status.
• The NHI Fund will pay the clinic, GP or hospital.
• Patients will not pay anything when receiving care.
• This is to make sure that everyone is able to receive health care services when they are sick, at a facility close to them (as long as the facility has a contract with the NHI Fund).

Registration?

• People will register with the NHI Fund when they go to a clinic, GP or hospital that has a contract with the NHI for the first time.
• They will not need to register again when they go to any other clinic, GP or hospital because the NHI system will make sure that records are available at every contracted health care provider.
• There is no fee payable for registration.
• People will need an ID book, passport, or other identity document to register.
• Fingerprints will be taken and put on the NHI Fund system. Fingerprints are a way to prevent fraud and identity theft.
• If unconscious, the provider can still find records using fingerprints.
• Each time they attend a clinic, GP or hospital they will need to present proof of identity.

Will individuals be able to use facilities of their choice?

• The NHI aims to make health care more accessible to all South Africans.
• Individuals will be able to access NHI-contracted GPs, clinics or hospitals closest to them, whether in the public or private sectors. 
• Biometric identification will be used in facilities under the NHI reform.
• This is to ensure that all users have a portable health record that can be accessed under all circumstances anywhere in the country.

What services will be provided under NHI?

• NHI will purchase comprehensive personal health service benefits from NHI-contracted public and private health facilities.
• NHI has no intention to choose between diseases in order to remain sustainable.
• The range of cover of benefits will be much better than under the current private system.
• The service benefits include services provided at primary, secondary, tertiary, specialized and quaternary levels.
• The Benefits Advisory Committee will determine which benefits are medically necessary benefits and this will include:
• Primary Health Care services: visits to clinics, community health centres and accredited multi-disciplinary group practices and centres at a non-specialist level, community health care outreach workers, integrated school health services,
• Hospital services: outpatient and in-patient visits at all accredited hospital levels, using a referral system (requiring a letter from a PHC centre/ provider unless in case of emergency)
• Rehabilitation health services
• Palliative care
• Mental health services
• Emergency medical services
• Transport for patients who are referred to and from another health facility.
• Medicines and medical devices specified on the essential medicine list and essential equipment list.
• Diagnostic procedures specified in the treatment guidelines and protocols.

Will the NHI provide adequate cover compared to current medical scheme benefits?

• Yes, the NHI benefit package will be comprehensive.
• NHI benefits are not confined like most current medical scheme benefits.
• In the present system of medical schemes, in a desperate attempt to contain the escalating prices, a lot of benefits have been reduced.
• The system is characterized by co-payments for costs that the medical scheme is not prepared to pay for because they are regarded as too expensive, and the cost is simply pushed back to the patient.
• Service providers like private hospitals and specialists then resort to sending individual patients legal letters of demand to pay what their medical schemes are refusing to pay.

Where will the funding for NHI come from?

• National Treasury will determine the sources of funding for NHI and be approved by Cabinet.
• Treasury will also determine when any dedicated NHI contributions are introduced or changed in line with the fiscal and economic environment.
• NHI will be funded through a mandatory pre-payment system and other forms of taxes collected by SARS and allocated to the Fund by Parliament.
• Based on the NHI Bill, NHI will be predominantly funded through general revenue allocations, supplemented by: (1) a payroll tax payable by employers and employees and (2) a surcharge on individuals' taxable income.
• The financial impact of the NHI taxation system must not create an increased burden on households compared to the current system.
• Out-of-pocket payments such as co-payments and user fees will not be used to generate additional funding for comprehensive health care services to be covered under NHI. This ensures that healthcare services are delivered free of charge at the point of service and that the most vulnerable are not denied access.

Can people opt out?

• There will be no option for opting out of NHI for eligible people.

Is NHI an affordable system?

• The World Health Organization has stated that countries must pursue universal health coverage with the current resources allocated for health and what countries are able to afford.
• The NHI will redistribute money from the current multi-payer system of nine provincial health systems, tax rebates, levies, conditional grants and consolidate into one Fund.
• The pooling into one risk pool will ensure appropriate cross-subsidization between the young and old, rich and poor, healthy and unhealthy.
• The Fund as a single payer and strategic purchaser will be able to negotiate prices for services and health products on behalf of the country.

What is being done to improve public sector facilities?

• There are initiatives underway to improve the conditions of public facilities.
• The Department of Health has allocated R7.2 billion over three years to facilitate maintenance, refurbishment, upgrades, replacements of infrastructure or new infrastructure.

Will the NHI destroy the private sector?

• No, the NHI will not destroy the private sector.
• The private sector has different role players, and they are.
• 1health care providers (GPs, specialists, pharmacies and hospitals).
• 2 suppliers of goods (heath products like medicines, devices and diagnostic devices).
• 3 funders (medical schemes) and
• 4 administrators.

What role do private health care providers play in the NHI?

• Private health care providers will continue to operate privately under NHI.
• The NHI is not going to abolish or do away with private health providers.
• NHI will not allow health care providers to set their own fees for NHI funded benefits.
• The Fund will set the fees that it will pay to private doctors, hospitals and others on your behalf.
• Private General Practitioners will be a part of multi-disciplinary networks in their communities and will be paid by the NHI Fund using a capitation model.
• The private health sector providers will benefit from the opportunity to contract with NHI to provide health services to the broader public, rather than the small proportion for which they currently provide services.
• Private hospitals will see patients referred by primary health care providers in both public and private sectors and the NHI Fund will settle the bill at the prescribed rates.

What happens to Medical Benefits Schemes- PMI?

• The business models of private funders and their administrators will change over time.
• Once the NHI Fund covers a benefit, the medical schemes may not cover the same benefits.
• This means that their membership fees must be reduced, and some will be too small to survive so they will consolidate with others to maintain a viable risk pool for the benefits that they may still cover.
• Administrators of medical schemes will no longer manage over 250 options, meaning the complexity of their services will be greatly reduced.
• Once implemented, medical aid schemes won’t be able to offer any health services already offered by the NHI.
• Medical schemes will only offer extra services not covered by the NHI.
• Medical Aid schemes will remain a voluntary arrangement for those who choose to contribute to them, but they will only cover any additional benefits that the NHI Fund does not pay for, so they should be significantly cheaper.

How does the NHI affect those who are currently insured by medical schemes?

• The Fund will be implemented over phases and over many years.
• Regulations will be published to address the phased implementation of the NHI Fund and phased implementation of service benefits as the money is moved to the Fund.
• Medical schemes will be given notice on the type of services that they will no longer be able to cover.
• Will private health care providers be forced to contract with NHI?
• Not at all.
• Contracting with the NHI Fund gives the health care provider an opportunity to offer health care services to a designated population (significantly more patients than currently).
• Patients who consult with providers who are not contracted with NHI will pay cash for the providers’ services.
• Patients will only be able to use their medical schemes to pay for benefits not covered by the Fund with non-NHI contracted providers.

What will happen in the first few years of NHI implementation?

• The transitional arrangements for the NHI for the period 2023-2026 include:
• Continuing with the health system strengthening initiatives including human resource planning.
• Development of NHI legislation and amendments to other legislation.
• Establishing institutions that must be the foundation for a fully functional Fund.
• Purchasing of personal health care services for vulnerable groups such as children, women, people with disabilities and the elderly.
• Establishment of the Fund as a Schedule 3A entity as contemplated.

Analysis

• In this massive decade long project, it is not a surprise that as yet, IPMI has not been decided.
• It may be allowed.
• Or it may only be allowed- as in other countries- only as a supplementary cover.
• Insurers that offer IPMI now need to have a strategy taking into account the various options for the future.
• The standard cover will be basic so IPMI – if allowed- will have potential.
• Travel insurance is not compulsory for visiting foreign nationals, but the implication is that it will be so in the future.
• The status of expats and foreign residents is unclear as to their inclusion or exclusion in NHI.

About the Author

Ian Youngman is an independent writer and researcher specialising in insurance. He writes regularly for a variety of magazines, newsletters, and on-line services. He publishes a range of market reports, and undertakes research for companies. To read his latest report, International Health Insurance 2023, please click here, or visit the REPORTS section of iPMI Global.