Health Funders Association: Mandatory Medical Aid for SA Proposed

• The Health Funders Association (HFA) proposes mandatory medical aid contributions for employed South Africans to reduce costs and strengthen the risk pool.
• HFA CEO Thoneshan Naidoo states that medical schemes are 20-30% more expensive due to the lack of mandatory membership, a regulation requested 25-30 years ago.
• Up to 40% (25 million) South Africans use private healthcare, with 16 million paying cash instead of being medical scheme members.
• The HFA suggests targeting 200,000 individuals earning over R750,000 who currently lack medical aid as an 'easier enrolment opportunity'.
• Modelling indicates that recruiting 9 million new members could cut expected benefit costs by 12-13%.

The HFA argues that compelling millions more South Africans to join medical schemes could substantially reduce average costs and strengthen the overall risk pool, thereby tackling the persistent challenge of South Africa medical scheme affordability.

The Health Funders Association (HFA) has released a new report advocating for a significant shift in South Africa's healthcare funding model: the introduction of mandatory medical aid contributions for employed individuals. This proposal, championed by HFA CEO Thoneshan Naidoo, aims to address the escalating costs of medical schemes and bolster their long-term sustainability. The HFA argues that compelling millions more South Africans to join medical schemes could substantially reduce average costs and strengthen the overall risk pool, thereby tackling the persistent challenge of South Africa medical scheme affordability.

The current system faces a critical dilemma: medical aid is increasingly expensive, deterring many potential members, particularly younger and healthier individuals. This trend, however, undermines the system's viability, as a broad and diverse membership base is essential for distributing risk and keeping premiums manageable. The HFA's report suggests that the absence of mandatory membership for employed people has made medical schemes 20% to 30% more expensive than they would otherwise be, highlighting a regulatory gap that was first identified and requested some 25 to 30 years ago.

The HFA's rationale for a compulsory medical aid proposal in ZA is rooted in current healthcare utilisation patterns. While approximately nine million South Africans are registered medical scheme members, a substantial portion of the population, estimated at 40% or 25 million individuals, already accesses private healthcare services. Crucially, an additional 16 million people within this group pay for private care out-of-pocket, often under the assumption that they are young and healthy enough to forgo formal medical scheme membership.

This segment of cash-paying users represents a significant untapped resource for the medical scheme risk pool. The HFA points to the unpredictable nature of health crises, citing a case where the highest recorded neonatal cost within a medical scheme reached just under R10 million for a child hospitalised for 309 days. Such extreme costs underscore the financial vulnerability of individuals without cover, even those who initially believe they can manage without it. Integrating these cash-paying users into medical schemes would broaden the base, allowing for better risk distribution and contributing to medical aid cost reduction South Africa.

Acknowledging the complexities of affordability, the HFA proposes a progressive implementation of mandatory contributions, framing it as a "what if" scenario rather than a rigid, immediate mandate for all. Thoneshan Naidoo of the Health Funders Association stresses that it would be challenging to impose contributions on individuals earning around R100,000 annually, as they often face difficult trade-offs between essential needs like food, education, and healthcare. Instead, the HFA identifies a more immediate and feasible enrolment opportunity among higher-income earners.

Data indicates that approximately 200,000 individuals earning above R750,000 annually do not currently belong to medical schemes. Targeting this demographic first could provide a more manageable entry point for a broader mandatory system. The HFA's modelling suggests that successfully recruiting an additional nine million members, particularly those above the tax threshold, could lead to a significant reduction in expected benefit costs, potentially cutting them by 12% to 13%. This phased approach aims to gradually expand the membership base while mitigating the financial burden on the most vulnerable.

The HFA report on medical scheme membership presents a compelling argument for a structural reform that could fundamentally alter the landscape of South African healthcare funding. By advocating for mandatory contributions, particularly from employed individuals who currently pay cash for private services, the association seeks to create a more robust, equitable, and ultimately more affordable medical scheme environment. This initiative is presented not as the sole solution but as a crucial, missing regulatory piece that could unlock significant efficiencies and cost savings across the sector.

Should such a compulsory medical aid proposal in ZA gain legislative traction, it would have far-reaching implications for individuals, employers, and the broader economy. It represents a strategic effort to ensure that the benefits of private healthcare are more widely accessible and sustainably funded, moving towards a system where the collective strength of a larger membership base can cushion against the high costs of individual medical emergencies and chronic conditions.

Lawyers advising employers and compliance officers should monitor potential legislative developments stemming from the HFA's proposal for mandatory medical scheme contributions. This could introduce new compliance obligations for employers regarding employee benefits and deductions, particularly for higher-income earners, necessitating proactive legal and HR strategy adjustments.

Source: Original reporting via Moneyweb