The government's plan to reform retirement funding and establish a mandatory social security structure will potentially provide "great impetus" to bringing about a social health insurance (SHI) system, a senior National Treasury official told the Board of Healthcare Funders (BHF) conference this week.
Under such an SHI system, South Africans who can afford it will be compelled to pay for a certain level of medical scheme cover, which will include certain basic benefits.
The cost to schemes of providing these basic benefits will be equalised so that schemes with a large number of older, sicker members will not have to charge members more. Members could be made to pay for this basic cover in line with their incomes, with higher-income earners paying more for basic cover.
In February this year, the government unveiled its proposals to set up a state-run, national retirement fund to which all employed people will be forced to contribute a certain level of their earnings. Beyond this, you will still be able to make voluntary contributions to your own retirement fund.
The national retirement fund will guarantee you at least some income in retirement because you will not be able to withdraw the money from the fund before you retire, even if you change jobs.
The state-run fund will make up the mandatory savings component of the social security system, and the government is also proposing a wage subsidy to lessen the effect of the forced contributions on low-income earners. In addition, part of the contributions to the national fund will be used for death and disability, as well as unemployment, insurance.
Dr Mark Blecher, the director of social services (health) at the National Treasury, told the BHF conference that these reforms are perhaps some of "the most important and far-reaching social reforms of this second decade of democracy".
He says the first elements of this new contributory social security system will be implemented from about 2010 or 2011.
Blecher says the current social security proposals do not include an SHI component, but it is highly likely that the new contributory social security system will provide "a backbone for far more rapid progress towards SHI research and development, both conceptually/ideologically and practically from an information and financial systems perspective".
He says three steps towards SHI are "early potential areas of reform". They are:
- Low-income medical schemes.
In order for SHI to be feasible, medical schemes must be affordable, and to achieve this, low-income schemes are a necessity.
The Department of Health commissioned the low-income medical schemes (Lims) investigation to determine how medical schemes can meet the needs of low-income earners and to identify any policy changes required to encourage low-income earners to join existing schemes.
The investigation, which was completed last year, looked at the possibility of low-income medical schemes providing a reduced package of prescribed benefits and the possibility of a government subsidy for these schemes.
Thabo Rakoloti, the director of private-public partnerships at the Department of Health, told the BHF conference that the department hasn't yet taken a policy stance on the outcome of the Lims investigation.
- The funding of post-retirement medical benefits.
Blecher says the trend among employers to reduce the medical benefits offered to former employees after they retire is a concern for policymakers, because after retirement you are more likely to experience ill health.
He says there is the potential to link this issue to the retirement reforms, and an option would be for part of your social security contribution to assist in providing a post-retirement benefit.
Professor Heather McLeod, of the department of public health and family medicine at the University of Cape Town who has worked on the SHI proposals being considered by the government, says it is estimated that SHI will cost between three and 3.8 percent of income and subsidising the cost of providing basic benefits to people over the age of 65 would add only 0.1 percentage points to this cost.
- The risk equalisation fund (REF).
The aim of the REF, which is expected to start operating in 2009, is to equalise the cost of providing the prescribed minimum benefits between schemes.
This will benefit schemes with many older, sicker members, which could receive money from the REF, while schemes with younger, healthier profiles may have to pay into the fund. Blecher says it is possible that future reforms could result in the funding for the REF being collected through the social security contributions.