The Health Funders Association (HFA), which represents about 46% of the private healthcare market in South Africa, has launched a legal challenge against the National Health Insurance (NHI) Act.
The NHI’s application, filed in the High Court in Pretoria on 4 June, is based on constitutional grounds and marks the sixth legal challenge to the NHI Act.
“South Africa needs a healthcare system that delivers equitable, quality care to all. We fully support that vision,” said Thoneshan Naidoo, the chief executive of the HFA. “However, 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.”
Naidoo said that notwithstanding the litigation, the HFA is committed to constructive engagement with the government to build a more inclusive, financially viable, and constitutionally sound path to universal health coverage.
“This legal challenge is not our preferred course, but it is a necessary one to protect our economy and the future of healthcare for all South Africans,” he said.
The HFA’s application follows legal challenges launched by trade union Solidarity, the Board of Healthcare Funders (which represents medical schemes, administrators, and managed-care organisations), the Hospital Association of South Africa (representing most of the country’s private hospitals), the South African Private Practitioners Forum (representing private healthcare professionals), and the South African Medical Association (representing practitioners in the private and public sectors).
The HFA represents 20 medical schemes, including Discovery Health, and three administrators, covering about 4.1 million beneficiaries.
The HFA’s challenge to the NHI Act focuses on four key concerns:
- The HFA argues the Act is procedurally and substantively flawed. It claims the legislation is not a reasonable measure in terms of section 27(2) of the Constitution, which obliges the government to progressively realise the right to healthcare.
- Section 33 of the Act confines medical schemes to offering only complementary healthcare cover not provided by the NHI. The HFA asserts this restriction constitutes an effective ban on private healthcare services outside the state system, thereby infringing on individuals’ right to access healthcare.
- The Act unconstitutionally delegates legislative authority to the Minister of Health, undermining the principle of the separation of powers between the executive and the legislature.
- According to the HFA, the government has admitted in separate litigation brought by Solidarity that no thorough costing exercise was undertaken before introducing NHI.
‘Fiscally impossible’ tax increases
To support its claims about NHI, the HFA commissioned research from Genesis Analytics, an independent economic consultancy with experience in more than 115 countries.
Genesis’s report demonstrates that the NHI Act requires unsustainable tax increases and will reduce healthcare access for medical scheme members.
For modelling purposes, Genesis assumed a 45.5% cost efficiency if all healthcare funding were centralised at the state level (savings from reduced administration, monopsony power, and eliminating over-servicing). This would reduce per capita expenditure on health from R28 150 to R15 342. Nevertheless, multiplying this by South Africa’s 2022 population of 61 356 168 would result in a comprehensive NHI system costing R941.3 billion a year. This represented a 77% increase over South Africa’s combined public and private healthcare expenditure of R532.2bn in 2022.
Furthermore, this would result in healthcare expenditure accounting for 22% to 33% of total annual government expenditure, well above any global standard and with no additional allocation to other critical areas of government expenditure.
Financing such a system would require drastic tax increases. The average personal income tax rate would have to rise from 21.3% to 47.5%. The lowest tax bracket’s rate would increase from 18% to 41.4%, and the highest from 45% to 68.4%.
“Such tax increases are fiscally impossible, particularly given South Africa’s narrow personal income tax base of 7.4 million taxpayers,” the HFA said.
Individual taxpayers with no dependants would see their after-tax income fall by between 12% and 33%, while four-member households in all but the lowest tax bracket would see after-tax income drop by 13% to 27%. A household earning R92 000 annually would benefit slightly with a 28% increase in after-tax income because it would no longer have to pay for private medical cover.
A payroll tax of 25.5% will also be required if income tax is not the sole funding mechanism. VAT, although not mentioned in the NHI Act, will have to rise from 15% to 36% to cover costs.
The HFA said the steep tax increases required to fund NHI would reduce disposable income, curb consumer spending across all sectors of the economy, and might trigger an exodus of high-income taxpayers. At the same time, destabilising the private healthcare sector would deter investment, put jobs at risk, and slow GDP growth in a sector that contributes more than 4.3% to South Africa’s GDP.
Medical scheme members would face a 43% reduction in the level of healthcare services relative to what they currently receive. This stems from the prohibition of medical scheme coverage for NHI-provided services, forcing them to rely on a strained public healthcare system.
The analysis found that this prohibition was not necessary to achieve the equity objectives of the NHI Act. In fact, the prohibition would channel public resources into higher-income earners and could deliver worse outcomes for the currently uninsured.
The analysis further showed that allowing medical schemes to continue funding a wide range of services as part of NHI was in keeping with international best practice and would deliver better outcomes for South Africa’s uninsured population.
The HFA said the NHI Act’s prohibition on supplementary private cover contrasts sharply with international models cited by Health Minister Dr Aaron Motsoaledi. Countries such as Brazil, Indonesia, Mexico, China, Costa Rica, Ghana, Turkey, and Thailand all permit parallel private healthcare schemes within their universal coverage frameworks.
Most beneficiaries aren’t white
The Genesis analysis of the country’s 9.1 million medical scheme beneficiaries debunks the notion that they are mainly white and wealthy. Only 32% are white, while 68% are African, coloured, or Indian – with 51% being African.
Additionally, 83% earn less than R37 500 a month and 44% earn less than R16 000 a month, yet medical scheme beneficiaries contribute about 74% of personal income tax.
Of working beneficiaries, 46% are public sector employees, and 67% are members of a trade union. NHI would therefore disproportionately impact working-class households who currently rely on medical schemes for quality care.
The planned removal of the medical scheme tax credits during the transition to NHI would render medical schemes unaffordable for 500 000 to 840 000 individuals.
During the transition to NHI, healthier individuals may leave medical schemes, raising costs for remaining beneficiaries and destabilising the system.
Healthcare system limitations
Genesis’s analysis also shows that the monopsony purchasing power centralised in the NHI Fund could reduce the availability of medicines and health services, thereby diminishing access to care.
It is further projected that achieving the NHI’s vision would require more than 286 000 additional healthcare professionals – more than doubling the number of general practitioners, nurses, and pharmacists, and tripling the number of specialists. NHI will therefore place significant pressure on healthcare workers, and addressing these capacity gaps will require significant time and investment.
“We simply don’t have the skilled people needed to deliver the NHI,” said Naidoo. “And by driving down service tariffs, the NHI risks accelerating the emigration or exit of healthcare professionals from the sector altogether.”
With the demand for NHI services exceeding supply, rationing – such as longer wait times, limited treatments, and medicine shortages – will become a daily reality, mirroring issues already present in the public sector and in other national health systems – for example, the National Health Service in the United Kingdom.
Policy alternative: NHI+
In response to the NHI Act, the HFA has proposed an alternative model called NHI+, which it describes as a faster, more affordable, and lower-risk route to achieving universal health coverage. This hybrid multi-fund model incorporates state and private funding mechanisms.
The HFA’s proposed model allows the NHI Fund and medical schemes to operate in tandem, preserving individuals’ freedom to choose supplementary private cover. Public resources are focused on those most in need, while regulated competition supports innovation, efficiency, and cost control.
The model envisages NHI and medical schemes jointly covering a core set of healthcare services, delivered by both public and private providers.
All taxpayers would contribute to the NHI Fund directly or through mandatory contributions to medical schemes. The Fund would also receive allocations from general tax revenues.
The model includes risk-equalisation features where medical schemes would subsidise the NHI Fund, thereby redistributing resources in favour of lower-income, uninsured individuals.
According to Genesis, the NHI+ model would result in an 8% increase in healthcare resources available for the 46.7 million people living in households earning less than R30 000 a month. This increase would be achieved by shifting older, high-need patients to medical schemes and freeing up NHI resources for others.
“HFA is not seeking to preserve the status quo. We believe meaningful healthcare reform is essential to improve affordability, quality and access, and we have consistently sought constructive engagement with policymakers,” said Naidoo.
