1. Affordability of Health Insurance
National Health Insurance Policy Brief 9
Affordability of Health Insurance
28 February 2010

2. Income and Social Security
Considering whole population, 74.3% do not have any earnings. Roughly 1/3 of those are children under age 20 and 1/3 are receiving some social grant. Only 9.0% of the population earn above the tax threshold.
Source: Using GHS2008 data from StatsSA

3. Income and Social Security
Whole population by age and gender: 74.3% do not have any earnings and 24.6% are receiving some social grant. Only 9.0% of the population earn above the tax threshold.
Source: Using GHS2008 data from StatsSA

4. Income and Social Security
Whole population by age and gender: 74.3% do not have any earnings and 24.6% are receiving some social grant. Only 9.0% of the population earn above the tax threshold. Fewer women are earning and proportionately more are in receipt of the Old Age Pension.
Source: Using GHS2008 data from StatsSA

5. Income and Social Security Medical Scheme Membership
There are significant numbers of people earning above the tax threshold but not on medical schemes in the voluntary environment: estimate million. There are million who earn above the tax threshold and are on medical schemes.
Source: Using GHS2008 data from StatsSA

6. Income and Social Security Medical Scheme Membership
Only 59.5% of people earning above tax threshold are on medical schemes in the voluntary environment.
Source: Using GHS2008 data from StatsSA

7. Income and Medical Scheme
At the highest income levels, some 80% of people are on medical schemes. This reduces to just under 40% just above the Tax Threshold of R3,833 per month in Average is 59.5% for all groups earning above the Tax Threshold.
Source: Using GHS2008 data from StatsSA

8. Income and Medical Scheme
There are large numbers of people in the two income bands just above the tax threshold who are not yet on medical schemes. Potentially, million people earning between the Tax Threshold and R6,500 per month. Family members are not included in this calculation.
Source: Using GHS2008 data from StatsSA

9. Households and Medical Scheme Coverage
If everyone in a household where there is currently at least one medical scheme member were to join, total coverage would increase from million to million or an increase of million people.
Source: Using GHS2008 data from StatsSA

10. Households earning above Tax Threshold and Medical Schemes
If everyone in a household where there is currently at least one person earning above the tax threshold were to join, total coverage would increase from million to million or an increase of million people (a doubling of membership).
This is an upper estimate as the definition of cover is all members of the household and not the “insurable family”. Over 65s only covered if risk equalisation implemented.
Source: Using GHS2008 data from StatsSA

11. Illustration of Affordability
Family of four: two adults and two children.
Earning an illustrative level of income.
Eight income groups.
Purchasing typical health insurance products in the market in 2007.
One person earning and paying income tax.
Using 2008/9 income tax tables, revised to 2007.
Social security contribution for health of 4.1% of income.
Covers existing Prescribed Minimum Benefits.
Extra social security contribution for extra R10 of benefit package is 0.53% of income.
Flexibility to look at other family structures (important for tax and subsidy incidence).
Flexibility for different year for tax treatment.

12. Current Affordability Problems
Comprehensive package unaffordable except for highest income. People self-select to packages that are more affordable, largely because of reduced benefits. Demographic effect as well: younger and healthier in low cost packages.
Source: McLeod and Grobler (2009), The role of risk equalization in moving from voluntary private health insurance to mandatory coverage: the experience in South Africa

13. Current Tax Subsidies for Health
Tax break has no impact on people earning below tax threshold. Has biggest impact for highest income group.
Source: McLeod and Grobler (2009), The role of risk equalization in moving from voluntary private health insurance to mandatory coverage: the experience in South Africa

14. Remove Tax Break and Replace with Per Capita Subsidy
This has a dramatic impact for those earning below the tax threshold. The proportion of income may still be too high to be affordable but with some help from employer cover is now within reach.
Source: McLeod and Grobler (2009), The role of risk equalization in moving from voluntary private health insurance to mandatory coverage: the experience in South Africa

15. Remove Tax Break and Replace with Per Capita Subsidy
Shaded blocks represent a decrease in affordability compared to the current situation in section B.
Source: McLeod and Grobler (2009), The role of risk equalization in moving from voluntary private health insurance to mandatory coverage: the experience in South Africa,
as presented to ASSA 2009 Healthcare Conference

16. Per Capita Subsidy, REF and Income Cross-Subsidy
Affordability can be improved for lower income groups by implementing income cross-subsidy and Risk Equalisation Fund together.
Source: McLeod and Grobler (2009), The role of risk equalization in moving from voluntary private health insurance to mandatory coverage: the experience in South Africa

17. Source: McLeod and Grobler (2009), The role of risk equalization in moving from voluntary private health insurance to mandatory coverage: the experience in South Africa, as presented to ASSA 2009 Healthcare Conference

18. Innovative Medicines South Africa (IMSA) is a pharmaceutical industry association promoting the value of medicine innovation in healthcare. IMSA and its member companies are working towards the development of a National Health Insurance system with universal coverage and sustainable access to innovative research-based healthcare.
Contact details: Val Beaumont (Executive Director) Tel: Fax:
Innovative Medicines SA (IMSA) Cell:
PO Box 2008, Houghton, South Africa

19. Professor Heather McLeod
Material produced for IMSA by
Professor Heather McLeod