The article by Solanki et al. critically examines the implications of South Africa’s newly enacted National Health Insurance (NHI) Act. It focuses on the future of private health funding during the NHI transition. The authors analyze sectoral trends from 2007 to 2022. They present two divergent reform scenarios: a passive trajectory where current challenges persist, potentially rendering the private sector unsustainable before NHI is fully operational, and an active approach involving regulatory and policy reforms to maintain sector viability and support a smoother transition to universal coverage.
Addressing Sector Fragmentation and Rising Costs
Central to the article’s analysis is a detailed review of the private health funding sector’s performance over the past 15 years. The sector underwent significant consolidation, leading to a reduction in the number of medical schemes by 40%. Open schemes declined by 56.1%, and restricted schemes by 32.1%. This consolidation aimed to address fragmentation and strengthen risk pooling. However, it also coincided with persistent challenges. Membership grew mainly in restricted schemes, notably the Government Employees Medical Scheme (GEMS), while open scheme membership slightly declined. The average age of beneficiaries increased, raising the pensioner ratio from 6.2% to 9.3%. This contributed to increased morbidity, mortality, and expenditure pressures.
The article reports that healthcare spending and contributions consistently rose faster than inflation. Average health expenditure increased by 8.1% annually, while contributions rose by 7.5%. Both significantly outpaced the Consumer Price Index (CPI) average of 5.5%. Despite regulatory measures aimed at containing non-healthcare expenditure increases below CPI, the sector’s affordability and sustainability deteriorated. The 2019 Health Market Inquiry (HMI) attributed sectoral inefficiencies to regulatory failures. These included incomplete frameworks, poor risk management, and lack of incentives for funders to prioritize value for money or consumer interests. These failures led to higher costs and complexity for consumers.
Attempts to address these shortcomings through legislative amendments since the 1998 Medical Schemes Act have largely stalled. Proposed reforms in 2008 and 2018 did not pass Parliament. The authors note that the inertia in implementing both NHI and private sector reforms is compounded by weak governance, stakeholder discord, and slow policy execution. This sets the stage for further inflationary pressures and eroding financial risk protection for scheme members.
The article contrasts two policy approaches for managing the sector during the NHI transition. The passive scenario envisions continued regulatory neglect. This risks accelerating the sector’s decline, characterized by declining membership, higher costs, increased out-of-pocket spending, and a potential surge in demand on public services before NHI coverage is fully realized. This scenario poses a major systems risk. If private capacity collapses prematurely, it could overburden the public sector and erode service quality and access precisely when universal coverage is being sought.
By contrast, an active reform agenda would prioritize the sustainability of private health funding through targeted regulatory interventions and strategic redirection of government-linked funding. Critical measures include phasing out medical scheme tax rebates and redirecting these resources (worth approximately ZAR 30 billion) to support NHI financing. This move is politically contested due to the relief these rebates provide to lower- and middle-income members and the elderly. Another measure is consolidating government employee medical schemes and progressively shifting employer-employee contributions (totaling over ZAR 60 billion in 2022) toward NHI. This ensures compliance with labor and public sector bargaining provisions. Strengthening regulatory oversight of major sectoral bodies, such as the Council for Medical Schemes (CMS) and Health Professions Council, is also key. This would address HMI-identified governance failures. Implementing risk-sharing mechanisms and establishing a supply-side regulator, alongside piloting alternative provider payment models and integrated care pathways, can support innovation and efficiency during the transition.
The authors highlight that the feasibility and timing of these reforms hinge on navigating complex political, fiscal, and administrative hurdles. This is especially true in the context of South Africa’s Government of National Unity and ongoing legal challenges to the NHI framework.
Implications for Health Economics and System Viability
The findings of this article have far-reaching implications for Health Economics and Outcomes Research (HEOR), market access, pricing, and reimbursement strategies in South Africa. The sector’s historical trends highlights the need for robust regulatory and policy frameworks. These must manage risk, promote competition on value, and ensure affordability. Failure to implement active reforms could result in a crisis of access and catastrophic financial risk for millions currently protected by private insurance. It could also jeopardize NHI rollout by stripping the system of essential private-sector capacity.
From a pricing and reimbursement perspective, the transition to NHI presents both challenges and opportunities. The redirection of tax and employer contributions could significantly alter the flow of funds in the health system. This affects the incentives for both payers and providers. If not carefully managed, these shifts could destabilize both insurance markets and provider networks. This could lead to service disruptions and increased out-of-pocket costs.
To maximize system sustainability, the article advocates for a deliberate, phased approach to reform. This should simultaneously advance NHI goals and preserve a viable, accountable private sector. Introducing risk-sharing and alternative payment models, strengthening regulatory bodies, and prioritizing pilot projects for integrated care can create essential “learning laboratories” for policy experimentation. More broadly, the success of health financing reform will depend on political will, intersectoral consensus, and ongoing monitoring and evaluation. These ensure that reforms deliver fiscal sustainability and equitable health outcomes.
In sum, the article provides a comprehensive assessment of the crossroads facing South Africa’s private health funding sector under the NHI Act. It highlights the critical importance of proactive, evidence-based reforms for achieving a viable and equitable path to universal health coverage.
