National Health Insurance
Conceptual Framework for the Role of PHI

The OECD initiated the Health Project in 2001 “to address some of the key challenges policy makers face in improving the performance of their countries’ health systems.” The three-year initiative provided substantial comparative information on the role of private health insurance across the OECD. “Governments in several OECD countries have used or considered using private health insurance (PHI) as a policy lever to promote certain health system goals, such as reducing financing pressures on public health systems, promoting individual choice and improving efficiency.”

In almost all OECD countries, private health insurance covers “ ‘small risks’, ancillary and supplementary services such as dental and optical services, choice of provider, upgraded hospital accommodation, and luxury services. Often, these services are not provided, or only partly reimbursed, by public coverage systems. Coverage of home care, alternative medicine, long-term care and pharmaceuticals vary in relation to the generosity and structure of public health insurance.” Thus in OECD countries the role of PHI is essentially a tier 4 issue. In South Africa, however, the current minimum package is only roughly half of expenditure on healthcare and PHI could be used for cover in tier 2 and 3.

The diagram below provides an overview of the role PHI can play in health systems.

Figure 8: Possible Roles for Private Health Insurance

Terminology used in the OECD is as follows:

• Primary PHI: the only available access to basic health cover where individuals do not have public health insurance.
• Principal PHI: where the social security scheme does not apply. Could be employer or union-based compulsory schemes.
• Substitute PHI: substitutes for public cover or employer cover.
• Duplicate cover (Parallel PHI): cover already included under public insurance. Does not exempt individuals from contributing to public health insurance. Can offer access to different providers or levels of service.
• Complementary cover: covers all or part of the costs not otherwise reimbursed (e.g. co-payments).
• Supplementary cover (Top-up Insurance): cover for additional health services not covered by public scheme. May include services not covered by public system such as luxury care, elective care, long-term care, dental care, pharmaceuticals, rehabilitation, alternative or complementary medicine, or superior hotel and amenity hospital services.

The June 2009 NHI proposal is for medical schemes to be “duplicate PHI cover”. This will make medical schemes even more unaffordable than at present and the decline in membership could be very rapid. Initial and preliminary research suggests the numbers could decline from nearly 8 million lives to less than 1 million.  

Another possible position is for medical schemes is to provide “substitute cover” where people may choose to belong to NHI or a medical scheme providing the equivalent to NHI as a minimum set of benefits. The medical scheme could also offer “supplementary cover” not otherwise included in the NHI package. The precise form that private health insurance is to take alongside a public health service still needs to be a matter of much research and debate amongst all stakeholders.

Contact Details:

Innovative Medicines SA
Val Beaumont

P.O. Box 2008
Houghton, 2041

Tel: +27 11 880-4644

Fax: +27 11 880-5987

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