Towards Social Health Insurance for South Africa

01 February 2007 Heidi Kruger, Board of Healthcare Funders

The medical schemes industry in South Africa has experienced no real growth in coverage in the last two decades with membership stagnating at approximately 7 million lives. But the spend within the private healthcare sector has increased significantly, sitting at approximately R50 billion for 2006.

In stark contrast, with a spend of roughly R36 billion, the public health sector provides healthcare for the remaining 84% of the population.


Several reforms contained in the Medical Schemes Act of 1998, such as the concept of community rating, voluntary enrolment and prescribed minimum benefits were implemented. But despite these changes, a lack of efficiencies in both the private and the public sector keeps South Africa at the bottom of the rankings. In 2000, the World Health Organisation ranked the South African Health system 175th of the 191 countries reviewed on aspects such as responsiveness; fairness of contribution; levels of health achieved; and the overall health system achieved compared to health system expenditure.

Social solution

It is no wonder then that government is at pains to pursue its goal of a Social Health Insurance (SHI). The objective is to cover up to 15 million lives, through income cross-subsidisation, risk cross-subsidisation, mandatory cover, the development of low income schemes and addressing allocative inefficiencies in the private sector.

To pave the way for SHI, the Medical Schemes Amendment Bill, which amongst other things, gives effect to the establishment of a Risk Equalisation Fund (REF), proposes tighter governance measures within schemes and which allows for the establishment of schemes for lower income beneficiaries.


Although the first steps towards the creation of a Social Health Insurance system through income cross-subsidisation and risk cross-subsidisation have already been taken, this Bill is intended to provide the legal framework to enable the creation of further steps, such as the establishment of a Risk Equalisation Fund. The REF aims to equalise risk amongst medical schemes and force competition on the basis of efficiency and not the risk profiles of members. The process has been running for two “shadow” years and is expected to be implemented fully within the next few years.

Corporate governance

Certain provisions of the Bill have implications for the corporate governance of medical schemes, relating to procedures for the electing of trustees, the composition of the Board of Trustees and the eligibility of individuals to be Trustees of medical schemes. This legislation, which will provide Trustees with greater powers and responsibility, means that adequate information and training is vital.

Basic benefits

A further requisite for SHI in South Africa is the provision of a basic set of healthcare benefits, and this Bill also covers issues relating to healthcare benefits and makes provision for the establishment of lower income medical schemes. Under the proposed amendment, the Minister of Health will be empowered to prescribe variations to regulations pertaining to medical scheme products which cater specifically for low income persons. This is expected to encourage membership growth - vital if the industry is to grow.

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