The Impact of NHI for Employers

On 15 May 2024, the President signed the National Health Insurance Bill. The National Health
Act 20 of 2023 (NHI Act) will take effect on a date proclaimed by the President in the
Government Gazette. The stated purpose of the NHI Act is to eradicate inequalities regarding
access to healthcare.

The NHI Act outlines a phased approach to implementation and transitional arrangements.
Ultimately in the future, the full implementation and operation of the NHI Act may have tax
and medical health cover benefits implications for employees and employers.
What are the implications for employers and employees?

The point of departure from an employment perspective is the funding of the NHI fund (Fund).
The NHI Act lists three primary sources of funding for the Fund. In particular, the NHI Act
proposes introducing a payroll tax on employees, raising personal income tax, and ultimately
redirecting most of the roughly R250 billion spent on private medical aid schemes to the Fund.
South Africa has a skills mismatch and the race for talent is fierce. Employers in South Africa
compete with both local and international competitors in a shallow talent pool for workers who
have valuable, industry-specific skills.

To attract and retain employees, employers often offer perks such as private healthcare. The
NHI Act may in time require employers to think of alternative creative perks to attract
employees due to the dilution of the benefit of private medical health insurance.

With the introduction of the NHI Act, the membership benefits of private medical aid schemes
will be significantly limited as the NHI Act prohibits private medical aid schemes from offering
services that are already covered by the Fund. Private medical aid schemes will only offer extra
services that are not covered by the Fund.

The Fund will pay for healthcare services for eligible people from accredited healthcare service providers. These people will, however, be excluded from the ambit of the Fund:

  • people with no right to healthcare services purchased by the Fund in terms of the NHI Act;
  • people who violate the referral pathways prescribed by a healthcare service provider or health establishment;
  • people who seek services not considered medically necessary by the Benefits Advisory Committee; or
  • people who seek treatment that is not included in the “formulary.” The “formulary” comprises the Essential Medicine List and Essential Equipment List as well as a list of health-related products used in the delivery of healthcare services as approved by the Minister of Health in consultation with the National Health Council and the Fund.

The practical implications of the hybrid healthcare system remains unclear, and it may mean
that employees will have to contribute towards the Fund and elect to contribute to a private
medical aid scheme to access healthcare services excluded from the Fund. It is envisaged that
the employer’s role in this regard will be like that of the Unemployment Insurance Fund model
in respect of the Fund contribution.

Employers that contribute towards their employees’ medical aid benefits may potentially
continue to contribute towards both the Fund and private medical aid schemes. Any extra costs
will likely affect profitability.

Finally, employers would be expected to update their health policies and benefits to reflect the
coverage offered by the Fund and their chosen medical scheme, if any. It is important to note
that for now, and until the NHI Act can be implemented, the status quo remains and there is no
immediate impact on private medical aid schemes, members of private medical aids, and
private medical healthcare benefits offered by employers.

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