National Health Insurance
Anti-selection in Voluntary Medical Schemes
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In considering the price of healthcare for a National Health Insurance system, evidence from the voluntary environment and the current public sector needs to be used with extreme caution if it is not analysed by age and gender. There is substantial evidence of anti-selection by members of medical schemes in the voluntary environment. The graph below compares the age and gender profile of medical schemes with the shape of the total population and the families that could be covered at various phases of mandatory health insurance.
 Figure 6 : Standardized Age Profiles for Phased Implementation of Mandatory Insurance
Medical schemes have a “twin-peak” age profile, showing that young working age people have remained outside the voluntary health insurance system while older working age and retired people have joined medical schemes in significant numbers. The effect of remaining outside the system is very marked for young working men. The introduction of GEMS since 2006 has increased the numbers of working women covered as the State employs significant numbers of women as teachers and nurses.
The graph shows that the age profile will alter substantially as the reforms to create a mandatory system of National Health Insurance are implemented. The impact differs substantially by gender with many more young working men becoming eligible for health insurance if there is mandatory cover from the tax threshold. There are also a significant number of young men earning below R2,000 pm in 2005 Rand terms who do not currently have health insurance cover.
Figure 7 shows clear evidence of anti-selection in the voluntary environment by women in the child-bearing years. The minimum benefit package includes almost all maternity care and thus it has become a common phenomenon for women to join a medical scheme to have their children and to leave if the children are healthy.
 Figure 7 : Proportion of Female Lives during Phased Implementation of Mandatory Insurance
McLeod & Grobler 9 found that the total number of children expected to be born in South Africa in 2005 was 22.8 per 1,000 women. In an extensive study covering 63% of the medical scheme beneficiaries in 2005 the number of children was found to be 26.4 per 1,000 women in medical schemes. This fertility in medical schemes has been found to be on the low side compared to actual experience since 2005, suggesting that anti-selection by pregnant women has been widespread.
The extent of anti-selection by those with chronic disease can only be speculated but the patterns of disease by age show unusual bulges in the young adult years for some severe diseases like multiple sclerosis, suggesting that families with someone with an expensive disease would try to join a medical scheme.
The Medical Schemes Act of 1998, effective from January 2000, instituted waiting periods in medical schemes to provide some measure of protection against anti-selection but these do not seem to have been effective for disease requiring expensive treatment. There is anecdotal evidence that older people with chronic renal failure needing dialysis are encouraged to join medical schemes in order to get dialysis in the private sector, as limited resources in the public sector have meant severe rationing by age with dialysis not typically provided over age 60. Dialysis in the public sector is offered to bridge the known 12 month waiting period that the medical scheme will apply. The impact on a medical scheme is substantial: the industry community-rate for all medical scheme members was estimated using an age-gender profile from mid-2008 to be R310.50 10. A healthy 60-year old male is expected to cost R583.28 per month but one with chronic renal failure needing dialysis is expected to cost R19,291.96 per month. The net effect is that the community rate for all members of medical schemes must increase to cover the costs of this anti-selection.
Anti-selection in insurance arises from the insured knowing more about their condition than the insurer (or medical scheme in this case). An extreme example from short-term insurance is someone telephonically arranging cover for fire damage while a fire is approaching the house. In healthcare, anti-selection can occur if a diagnosis is suspected or expected and thus there is an almost certain need for healthcare at the time the person joins a medical scheme.
The rules are complex but in essence someone who transfers from another medical scheme and joins a new one has no waiting periods for minimum benefits. Someone who has not been on a medical scheme recently is required to wait for a period of three months before receiving minimum benefits and there may be a 12 month exclusion for any pre-existing condition.
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