Medical aids launch major challenge to the NHI

The South African Health Funders Association (HFA) has launched a major court bid challenging the constitutionality of the entire National Health Insurance (NHI) Act.

This is one of the first and biggest cases challenging the constitutionality of the entire scheme, with more expected to follow.

The HFA in a non-profit organisation that represents major companies involved in medical schemes and private healthcare in South Africa.

It represents 20 medical schemes and 3 administrators, including healthcare giants like Discovery and Momentum, collectively covering 46% of the private healthcare market.

It said it launched the court action on behalf of the approximately 9.1 million medical scheme members in South Africa.

The group stressed that it fundamentally supports the principle of universal healthcare, and is willing to work with the government to develop sustainable plans, but the NHI is not the path.

“In its current form, and without private sector collaboration, the NHI Act is fiscally impossible and operationally unworkable, and threatens the stability of the economy and health system impacting everyone in South Africa,” it said.

At the core of its legal challenge, the HFA said that the NHI’s operation model violates the constitutional right of citizens to choose how to access or fund healthcare beyond what the state provides.

The NHI Act centralises control of all healthcare financing in a single, state-run fund, removing the ability of medical schemes to offer cover for healthcare services reimbursable by the NHI.

The laws are still filled with uncertainties relating to this, with zero indication from the state what the NHI will actually cover, or how much it is going to cost.

Nevertheless, it has codefied the end of medical aids in the country as they stand through section 33 of the Act.

The HFA said further that independent economic modelling has shown that funding the intended benefits in the current NHI framework, as set out by the government, would also require unprecedented increases in tax.

“What’s more, the proposed model offers no guarantee of improved outcomes, while restricting the mechanisms that currently drive quality and innovation in healthcare,” it said.

But the group is not challenging sections of the Act, it is challenging the Act in its entirety. It is doing so on the following grounds:

1. The NHI Act is irrational, having been signed into law without any costing or modelling for what will be a complete structural overhaul of the entire healthcare system.
2. The NHI Act results in an unreasonable and unjustifiable infringement of the right of existing medical scheme beneficiaries to access healthcare by severely limiting their options.
3. The NHI Act contravenes the state’s obligation to adopt reasonable measures to realise the constitutional right of everyone to access healthcare within available resources.
4. The NHI Act gives the Minister of Health sweeping, unchecked powers, which is unconstitutional.

If the case fails to have the entire Act declared unconstitutional, the HFA has asked that parts of Sections 7, 31, 33, 49 and 55 be declared unconstitutional and invalid instead.

Irrational, unreasonable and unconstitutional

Representing health funders like medicial aids, it is understandable that the HFA’s court bid has homed in on section 33 of the Act.

Section 33 of the NHI Act states that “once National Health Insurance has been fully implemented as determined by the Minister through regulations in the Gazette, medical schemes may only offer complementary cover to services not reimbursable by the Fund”.

The HFA said that the provision is an effective ban on obtaining health services outside of the NHI, prohibiting medical aids from funding services regardless of quality, availability, or cost.

The group said that the vast majority of South Africans cannot afford to self-fund medical expenses and rely on public healthcare or pre-funded options through private medical schemes.

With section 33 being an effective ban on private funding, the NHI removes a layer of security that millions of South Africans depend on to access healthcare.

“The outcome is irrational, unreasonable and unconstitutional,” the HFA said.

The irrationality of the scheme only becomes more apparent when funding is explored further.

The premise of the NHI is that all healthcare will be funded by the state, removing the need for private funding through medical aids.

However, independent economic modelling has shown that the NHI is impossible to fund.

For NHI to fund a level of care equivalent to what medical scheme members currently receive, as the government has indicated is the intention, the modelling shows that personal income tax would need to increase by 2.2 times, a 115% increase in tax.

This would move the current average rate of 21% to an average of 46% of income.

“This would push marginal tax rates in the lowest income bracket from 18% to 41%, and in the highest bracket from 45% to 68%,” the HFA said.

While VAT is not mentioned in the NHI Act as a means to raise funding for NHI, HFA has estimated for illustrative purposes that VAT would need to be increased from 15% to 36%, which is completely unrealistic.

The full founding affidavit can be read below: