The NHI may seem like a simple way for employers to provide health care to their workers, but it’s actually not.
The NHI Bill does not specify how the national insurance plan will be funded. The NHI Bill’s Minister of Health doesn’t make this decision. Finance Minister and National Treasury decide. The Constitution requires the Minister of Finance to prepare and introduce a Money Bill in Parliament before NHI can be financed. No Money Bill exists yet.
Section 49 of the NHI Bill states that Parliament yearly appropriates funds to the Fund. General tax revenue, “payroll tax (employer and employee),” and “a surcharge of personal income tax” will fund this. Payroll taxes are different from SARS-deducted employee income taxes. Above personal income tax. Theoretically, employees and employer’s split payroll taxes, but not equally. Payroll taxes can raise employer labor expenses, increase unemployment, and transfer formal to informal employment.
NHI may not save medical aid-subsidising employers. The Bill mentions a payroll tax because the government knows many companies subsidize medical scheme membership. The NHI Bill will funnel private medical program benefits into public NHI funds. The medical program provisions in the Bill limit their health care coverage. Since payroll taxes affect both employers and employees, employers may pay more in taxes than medical aid subsidies. Payroll taxes are complicated and may rise annually as NHI grows.
Eight years later, the Colombian government tried to lower payroll taxes to grow formal employment and social security tax base. In high labor informality, payroll taxes affect employment and wages, according to a 2014 Journal of Labour and Development paper. Informality is ubiquitous, especially in developing nations, and numerous causes can explain it.
However, taxes and social insurance contributions are often cited as a major cause of informality. Based on this fact, governments may reduce taxes, particularly payroll taxes, to encourage labor formality and expand social insurance coverage. Some regions may find this particularly difficult.
Another study referenced by the same authors estimated that 56% of Latin American wage workers do not pay labor taxes for social insurance services like health and pensions. Their findings imply that the tax reform would have a minor impact on employment but a large labor reallocation across occupations and formality status. They predicted that the measure would boost employment by 0.3–0.5%. Formal employment would increase by 3.4–3.7% and informal employment by 2.9–3.4%.
The authors predicted a 4.8–4.9% net salary gain for formal workers after the tax reform. This last result revealed that the Colombian labor market has a strong pass-through impact, therefore lower payroll taxes may raise formal worker earnings.
They say that if the Colombian fiscal reform was to increase labor formality, the tax and transfer system must be dynamically consistent in the near future. Otherwise, a fiscal reform with medium-term transfers to informal employees might return the economy to its pre-reform informality.
Employees may pay more for NHI benefits if a payroll tax and personal income tax surcharge are combined. A drop in disposable income for most workers might push them into poverty and increase labor pressure on companies to raise wages and salaries. Labor-driven strikes cost companies and interrupt production, lowering revenues.
According to Fedderke’s 2021 essay, the South African labor market has significant and chronic unemployment and low job creation. Pricing power in output markets, labor supply and demand side rigidities, and excessive real wage cost rises have caused a sluggish labor market in low-growth economies. Economic development and actual labor cost reductions are policy goals.
The Minister of Finance can raise VAT without NHI Bill approval under Section 49. Employers will pay if VAT rises fund NHI. If passed, the NHI Bill might prevent all employees from receiving private health care. Section 57(2)(b) of the National Health Bill only allows “selective” private health care contracting.
Thus, even if private health care providers agree to deal with the NHI Fund, not all of them will. This means that the Fund may try to steer people to public health providers and limit access to private health care providers.
By restricting medical schemes, the NHI Bill encourages out-of-pocket health care spending.
Some of these provisions include mandatory referral pathway requirements, limited medicine availability due to a mandatory Formulary based on the government’s Essential Medicines List, delays in access to care due to selective contracting of private healthcare providers, access to certain health care services being potentially restricted entirely to public health sector establishments like central government hospitals, and a legal requirement for referral pathways.
GPs, physiotherapists, psychologists, dentists, and others may become cash-only practices without complete medical program coverage. Many employees would lose their services. If they get NHI Fund contracts, private hospitals will have to serve more patients than they can. Should medical schemes not cover costs, they will also investigate private health care financing options. Private finance, unlike medical scheme coverage, will likely be profitable.
Even if allowed, alternative private finance for private hospitals may be prohibitive for most employees. Access to a waiting list is not health care, because medical delays reduce worker productivity.
Medical aid membership, especially employer-subsidised, is an essential work perk. Medical assistance membership lets employees avoid public health care. Fast, assured health care in the private sector decreases stress, eliminates the need to take days off work to wait in long lines for themselves and their children, and guarantees a level of care that is lacking in the public sector.
