South Africa has a patchwork health insurance system with many key pieces missing. A state scheme exists that provides free healthcare. Its footprint is limited though; it excludes anyone earning more than R6000 a month ($518). Private insurance is available to those who earn more, but it is expensive and often comes in low on reimbursement. Cheaper, less generous policies are on the market, as are policies designed to make up for shortfalls. However, both of the options are under threat by state regulators. They are likely to be limited in the future, while some types of cover may soon be made illegal altogether.
A comprehensive national system has been many years in the works for many years, with a number of pilot projects currently in place, and once it is up and running, the impact should be noticeable both in terms of health access as well as insurance coverage. So far very little has been accomplished in terms of actual implementation. It is not at all clear if and when the programme will be up and running. For many South Africans, health insurance is a challenge, and that may remain the case for some time.
A Long Road
A national health scheme has been discussed for decades. It was first suggested in 1935 and was again mentioned in 1942, when a comprehensive national study was carried out. But the follow up never progressed beyond the pilot stage. While the National Party was in power, the subject received little attention, although in the 1980s reforms were introduced that allowed for the development of private health insurance. The hope was to allow for the growth of a non-governmental system that was affordable to everyone.
When the African National Congress (ANC) came to power after the end of apartheid, however, the attitude towards health care changed considerably. The ANC supported the idea of government looking to develop a social health insurance system, with very little in the way of private sector participation.
In the years that followed, a number of attempts were made to push such a programme forward, but these efforts were largely unsuccessful, and were affected by broader efforts at liberalisation. This lack of progress was the consequence of a number of forces and factors. Policies that emphasised liberalisation got in the way, as did pressure from the private sector and a lack of the political will. The country also lacked the capacity to implement the necessary equalisation fund. In 2007 another commitment was made to launch a comprehensive system, reflecting the politics of the time. In 2009 a Green Paper was issued further defining the policies and a precise schedule was laid out for implementation.
Yet in the years since, little has been accomplished. The legislation necessary to get the programme working has been stalled, and other necessary measures have not been implemented. Much of the delay is due to issues beyond the control of the government or politicians. Due to economic difficulties at the national level, efforts are being made to keep expenditures under control during a period of slowing growth. The budget for health is, and will continue to be, under pressure, making it difficult to commit funds necessary for a functioning state health system. The realisation of the programme was initially seen as a 15-year project, but conditions now suggest that even this timeline might be ambitious.
Some limited measures are in place and do mandate certain benefits for those who need them. The National Health Act of 2003 makes access to emergency care a right, for example, and requires health-care be provided for free for certain people under certain circumstances. But what is in place falls far short of a comprehensive national health system and now the state and the regulators are turning their attention directly toward other types of policies.
Available Options
A number of options do exist for medical insurance coverage. Citizens who exceed the maximum income level for public assistance can buy a Medical Aid Scheme, and on paper these products are abundant, well managed, adequate and popular. The major insurers, such as Discover, Liberty and MMI, offer these plans, and about 100 are available in the market. Product development is quite advanced, with insurers selling many tiers of coverage to suit a diverse range of priorities and budgets. Momentum, an MMI company, has at least five policy levels, from packages with limited benefits and a closed network of hospitals to packages that have no caps and allow clients to go to any provider.
Yet critics and customers say that these policies are insufficient and may be flawed in terms of overall design. Medical Aid Schemes currently only make reimbursements for services to policy limits, and in many cases they come up short, leaving individuals with medical bills even when covered. These policies are also becoming increasingly expensive, and this has driven customers to look elsewhere. A programme that was meant to offer comprehensive and stable coverage has become essentially insufficient, offering only partial protection and potentially exposing individuals to significant cost risks.
To cover the shortfall, other types of policies are available, and these options are quite popular. Customers can purchase gap coverage, which helps pay the difference between the Medical Aid Scheme reimbursement rates and the actual cost of care. The market also has daily indemnity policies, which simply pay a fixed amount for the number of days a person is hospitalised. These policies attract a wide range of customers. Middle-class customers who want to avoid unexpected costs buy them as well as poorer individuals who are qualified for free state aid but would be in financial trouble if they were responsible for bills beyond those covered.
These policies are also purchased by some people as their only form of health insurance. Daily indemnity cover is of interest to the young and healthy, and those who probably do not need comprehensive insurance but still want some limited protection. Others, meanwhile, are too rich for state coverage but too poor to afford a medical aid scheme. For this demographic, a daily indemnity programme can provide a measure of protection at a low cost.
It’s Complicated
Health programmes are overseen by a variety of groups and classified in a number of ways. Cash plans can be either short or long-term policies and are regulated by the Financial Services Board (FSB). Gap cover is considered short term and is also regulated by the FSB. The Council for Medical Schemes specifically regulates medical aid schemes. Significantly, these schemes work in favour of the insured. They are not-for-profit and pay out 75-90% of their premiums as benefits. That compares with hospital cash plans, which are for-profit and only pay out 20-35%, and gap policies, which are also profit making and return 35-50% of premiums as benefits.
Despite the fact that such a large portion of the premiums are kept by the companies, the commercial schemes are particularly attractive. Their premiums are low and their policy designs are innovative. While they only cover part of the expenses incurred, people can usually find a programme that meets their needs in terms of budget and risk profile. Individuals pay about R100-130 ($8.64-$11.23) a month for cash and gap plans as opposed to the near R800 ($69.12) price for proper medical aid schemes.
Future Regulation
The commercial programmes are not seen as being ideal, and they receive considerable criticism from public health observers. They are not comprehensive health policies, as they can leave patients dramatically uncovered in some areas, and are also not designed with a view to complete and permanent coverage. The sector is also worried that these programmes could begin to weaken the medical aid schemes. The policies, while not offering very much in return for the premiums, can be relatively attractive and are starting to compete heavily with the more expensive, actual, medical programmes. They are also tending to attract the most healthy in the market – as these people can accept the most risk – and thus leave the nonprofit programmes with the relatively unhealthy. This self-reinforcing dynamic has the potential to drive up the premiums of the medical aid schemes and possibly push them into a serious downwards spiral. As rates go up, more healthy people leave the programmes, making them even less sustainable.
Due to these concerns, the South African Treasury has been working on regulations that will significantly change the way commercial policies are sold. Already, the Medical Aid Schemes charge a premium for those people who sign up after a certain age. The late joiner penalty ranges from 5% to 75%. Whatever the regulatory changes coming, the industry is seeing new investment, and demand will continue to grow as people begin to seek ways to cover their health and shift some personal risk to insurers.
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