Johannesburg - South Africa's plan to overhaul healthcare
and give the poor greater access to medical services could eat into profits of
domestic insurers if one of the biggest reforms by the government since 1994 is
Under the national health insurance plan (NHI) being discussed by
the government and other parties in the healthcare sector, every South African
will be forced to pay into the scheme, regardless of whether they already have
"People are saying that they are going to be paying an
additional tax; we don't see it as an additional tax, all we see is the
re-directing of their medical aid contributions into the fund (NHI)," said
Anban Pillay, the health department's head of financial planning and health
While the nation's more than 100 private health insurance
providers are still expected to have a place, they would be forced to offer
better value than what the government insurance would be providing.
"I definitely think that when the NHI is fully
operational the number of people paying into their own private medical schemes
will decrease significantly," Pillay told Reuters.
But economists see many staying in private schemes, even if
they are forced to pay for NHI, unless the government can quickly fix failing
public hospitals that are short of staff, equipment, medicine and beds.
But Pillay said: "The only reason why people would want
to spend their money on private insurance is if they want additional services
not offered under NHI."
South Africa's R90bn private health insurance sector serves
just over 8 million of the country's nearly 50 million people.
NHI will likely drive up costs for employers who would be
forced to pay for the government plan and could face a backlash from staff if
they drop coverage under private plans.
The industry is dominated by Discovery Holdings [JSE:DSY], MMI
Holdings [JSE:MMI], Government Employees Medical Scheme and several unlisted firms such
as Bonitas Fund.
Discovery, the country's biggest health insurer, said it
does not expect any specific impact of the plan on medical scheme contributions
in the foreseeable future.
"(But) as the NHI system emerges over time, it is
possible than medical scheme products and coverage will adapt to changing
environment," said Jonathan Broomberg, head of the Discovery's health
The plan, which is expected to be phased in over 14 years,
is unlikely to hit medical schemes in its first few years as the focus would be
on hospital infrastructure.
"Certainly in the short to medium term it's unlikely to
have any impact on the revenues. In the longer term, there will likely be an
impact on the revenues to the degree that they lose membership," one
healthcare analyst said.
Analysts also say many people would eventually face the
decision on whether to pay for the public and private plans.
"It really depends on how much you'll pay on into the
NHI fund," said Mathew Menezes, a healthcare analyst at Avior Research.
"If the state says I have to pay R1 000 on NHI and I
also have to pay R2 500 on my own private scheme, then I have to start thinking
about how I can cut costs."