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 implementation 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.