Discovery on the NHI and future role of medical schemes

by WeCare Marketing
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Discovery Health says it is studying the contents of the new National Health Insurance Bill, published last week, and what it will mean for medical schemes in South Africa, at a time when its share price has slumped by the most since December 2015.

The medical scheme administrator said that it is still going through the bill in detail – and while it agrees with the need for all South Africans to have access to quality healthcare, it has also raised some concerns around the role of medical aids as contained in the bill.

Discovery is by far the largest open medical aid scheme in the country, accounting for 56% of all beneficiaries in that sector and 31% of the overall market. According to the latest Council for Medical Schemes (CMS) report, it currently has around 2.8 million beneficiaries.

In an emailed statement to BusinessTech, the company said it welcomes the publication of the NHI Bill as it provides more clarity on the implementation of the policy objective of Universal Health Coverage (UHC) and the establishment of the NHI Fund.

“We support the drive towards ensuring that all South Africans have access to quality health services based on need rather than affordability and we welcome the minister’s collaborative approach in working towards this objective,” it said.

“We believe that the publication of the NHI Bill creates a very important opportunity for active collaboration between the Department of Health and the private healthcare sector, to ensure that the assets, skills, and experience available in the private healthcare system are maximally leveraged to ensure the success of the NHI rollout.”

Discovery shares hit

Discovery’s shares have tanked on the JSE this week, which has been largely ascribed to the NHI Bill and its expected effects on the private healthcare industry in South Africa.

The group’s stocks fell as much as 11% Monday before paring the decline to 5%. At its lows for the session, Discovery was heading for its worst two-day plunge on record.

Deputy Chairman at Sasfin Securities David Shapiro described the decline as a ‘shock’ or a ‘panic’ in the sector, which affected other healthcare groups such as Dis-Chem, Aspen Pharmacare, Netcare and Mediclinic (which all traded weaker post the release of the NHI Bill).

However, he said the drop was difficult to pinpoint, because “no one really believes the NHI will happen soon”.

According to Olwethu Notshe, a portfolio manager at Sentio Capital in Johannesburg, the NHI Bill is quite pointed in terms of how health insurers will be impacted.

“The proposed wording of the (NHI) bill suggests that health insurers like Discovery will not be able to cover the same illnesses or procedures that the NHI covers, so this will significantly infringe on the health business of Discovery.”

Future of medical aids 

As the bill is ‘very detailed’, Discovery said that it plans to continue working through the bill before making comments on some of its key aspects.

“It is important that the initial focus is on priority projects where there are vulnerable groups in dire need of improved access to care such as the areas of cancer treatment and mental health,” it said.

“We also support the focus on primary and preventative care as the foundation of UHC.”

Despite this reluctance to comment, Discovery indicated that it did have concerns about the future of medical aids in South Africa.

“In terms of the future role of medical schemes, we are studying the details of the bill as these are not entirely clear, and we will engage with the minister of Health and the Department of Health to understand the implications of the bill before commenting in detail,” it said.

According to the bill, under the NHI, medicals aids would have a significantly reduced role in South African healthcare, only able to provide ‘complimentary’ or ‘top-up’ coverage for services that are not covered by the NHI.

The NHI director general previously stated that this is because it would be inappropriate for the state to legitimise buying cover for services that are already covered by the NHI.

Analysts and commentators have argued that this would effectively destroy the medical aid industry in South Africa – where the possible membership pool of private medical aids would be incredibly limited, and end with the result of making these schemes completely unaffordable to all but the very rich.

Private hospitals, too, would suffer as a consequence, which could result in thousands of jobs being lost.

Discovery said it also takes exception to this specific aspect of the bill.

“We firmly believe that once South Africans have contributed to the NHI, they should have the freedom to purchase cover through medical schemes for any healthcare services, including those provided by the NHI, should they wish to do so,” it said.

Discovery added that it plans to work constructively with the minister and the Department of Health to obtain clarity on various aspects of the NHI Bill, and will work to contribute towards the successful implementation of the NHI system.


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