How will NHI impact employers and employees?

The President signed the NHI Bill into law on 15 May 2024 just before the general election on 29 May 2024, ignoring requests from stakeholders to send it back to parliament. This was mainly due to public comment not being incorporated in the final Bill.

The stated purpose of the NHI Act is to eradicate inequalities regarding access to healthcare, says law firm Cliffe Dekker Hofmeyr, but the practical implications are unclear at this stage.

“It may mean that employees will have to contribute towards the NHI Fund and elect to contribute to a private medical aid scheme to access healthcare services excluded from the Fund.”

However, 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.

What implications can employers and employees can expect? “The point of departure from an employment perspective is the funding of the NHI Fund. The NHI Act lists three primary sources of funding for the Fund.

How will NHI be funded?

“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.”

South African employers compete with local as well as 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.

However, 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, the law firm says.

“With the implementation of the NHI Act, the membership benefits of private medical aid schemes will be limited significantly as the Act prohibits private medical aid schemes from offering services already covered by the Fund,: Cliffe Dekker Hofmeyr warns.

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Private medical aid schemes will only offer extra services not covered by the Fund. The Fund will pay for healthcare services for eligible people from accredited healthcare service providers.

Who will be excluded from NHI?

However, these people will be excluded from the ambit of the Fund:

• people with no right to healthcare services bought 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.”

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The “formulary” comprises the Essential Medicine List and Essential Equipment List, as well as a list of health-related products used to deliver healthcare services approved by the minister of health in consultation with the National Health Council and the Fund.

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Implications of NHI Act for employers

What will the impact of NHI on employers be? Cliffe Dekker Hofmeyr says the practical implications of the hybrid healthcare system remain 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 regarding the Fund contribution. Employers that contribute towards their employees’ medical aid benefits may potentially continue to contribute towards the Fund as well as private medical aid schemes. Any extra costs will likely affect profitability.”

Finally, the law firm says, 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 employers offer.”