Social Security Commission
National Medical Benefit
Fund
Actuarial Report on the Design of the NMBF – Final draft
Actuarial & Analytical Solutions (A&AS) at Deloitte
July 2012
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Contents
Executive Summary ...................................................................................................................................... 3
1.
Introduction ........................................................................................................................................ 9
2.
Legal Framework for the NMBF ....................................................................................................... 11
3.
4.
2.1
Social Security Act .................................................................................................................. 11
2.2
Constitution ............................................................................................................................. 16
Health Insurance Models and Funding Models ............................................................................... 17
3.1
National Health Insurance (NHI) Model .................................................................................. 17
3.2
Bismarck Social Health Insurance (SHI) Model ..................................................................... 17
3.3
Beveridge Model ..................................................................................................................... 18
3.4
Out-of-Pocket (OOP) Model ................................................................................................... 18
International literature and country experience ............................................................................... 20
4.1
The Advantages and Disadvantages of NHI .......................................................................... 20
4.2
The Advantages and Disadvantages of SHI (Bismarck model) ............................................. 20
4.3
The Advantages and Disadvantages of the Beveridge Model ............................................... 21
4.4
Achieving Universal Coverage ............................................................................................... 22
4.5
Implementation of SHI: Lessons Learnt ................................................................................. 23
4.6 Country experience within the informal sector ........................................................................... 34
5.
6.
7.
Collection Methods .......................................................................................................................... 36
5.1
Tax collection system in Namibia ........................................................................................... 36
5.2
Current collection methods by medical aid schemes ............................................................. 37
Demarcation between Health Insurance and the NMBF ................................................................. 39
6.1
Health insurance vs. medical aid ............................................................................................ 39
6.2
Demarcation in Namibia ......................................................................................................... 39
6.3
What does this mean for NMBF? ........................................................................................... 40
Overview of the Healthcare Environment in Namibia ...................................................................... 41
7.1
Overview ................................................................................................................................. 41
7.2
Public Sector........................................................................................................................... 42
7.3
Private Sector ......................................................................................................................... 42
8.
Policy objectives of the NMBF ......................................................................................................... 45
9.
Situational Analysis for SHI ............................................................................................................. 47
9.1
Payroll Deduction i.e. Employee Taxation .............................................................................. 49
9.2
Unemployment........................................................................................................................ 49
9.3
Labour market structure ......................................................................................................... 50
9.4 Burning health priorities and need: curative care or basic preventative care and health
promotion? ....................................................................................................................................... 50
9.5
Projected GDP growth ............................................................................................................ 52
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10.
Design Considerations for the NMBF .............................................................................................. 54
11.
Macro-economic factors impacting the NMBF ................................................................................. 76
11.1 Population Demographics ...................................................................................................... 76
11.2 Economy ................................................................................................................................. 78
11.3 Other influences...................................................................................................................... 79
11.4 Social trends and technology ................................................................................................. 80
12.
Administration of the NMBF ............................................................................................................. 81
12.1 Technical requirements .......................................................................................................... 81
12.2 Model options ......................................................................................................................... 83
13.
Investment Strategy ......................................................................................................................... 87
14.
Stakeholder considerations ............................................................................................................. 88
15.
Design of the NMBF......................................................................................................................... 91
15.1 Overview: Defining a target population .................................................................................. 91
15.2 Estimating the covered population size and profile ................................................................ 95
15.3 Membership Options ............................................................................................................ 103
15.4 Actuarial costing of benefit packages ................................................................................... 106
Data received ....................................................................................................................................... 107
“Hospital” benefit package ................................................................................................................... 108
“Hospital + Day to Day” benefit package ............................................................................................. 111
Benefit package and membership base combinations: Risk Matrices ................................................ 116
Limitations and considerations:............................................................................................................ 123
16.
Conclusions and Recommendations ............................................................................................. 127
16.1 The enabling legal framework for the NMBF ......................................................................... 127
16.2 Health insurance models ....................................................................................................... 127
16.3 International experience with SHI .......................................................................................... 128
16.4 Collection methods for the NMBF .......................................................................................... 128
16.5 Legislative considerations: NMBF Target population ............................................................ 129
16.6 Benefit package recommendations ....................................................................................... 130
16.7 A phased implementation approach ...................................................................................... 131
Bibliography .............................................................................................................................................. 133
Annexure A: Population groups ................................................................................................................ 134
Annexure B: PSEMAS subsidy ................................................................................................................. 138
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Executive Summary
The Social Security Act, No. 34 of 1994, paved the way for the establishment of a National Medical
Benefit Fund (NMBF) to provide for the payment of medical benefits to employees.
Actuarial and Analytical Solutions (A&AS) at Deloitte have been appointed by the Social Security
Commission of Namibia to assist with the design and development of the National Medical Benefit Fund
of Namibia.
This report is a comprehensive consolidation of strategic research, health care expertise and actuarial
analysis conducted in the following four broad areas that define the scope of work concerned:

Policy Framework:
An analysis of the enabling legal framework for the NMBF; a basic review of other social security
provisions in Namibia; a literature review on international health insurance practice and experience;
as well as potential policy objectives for the NMBF.

Namibian Medical Insurance Market Status
The current healthcare environment of Namibia is analyzed in order to understand the role that the
NMBF would play in this environment; its interaction with the current healthcare provisions; the
possible membership of the fund and the macro-economic and general implications of the fund.

NMBF Design and Actuarial Review
This area requires comprehensive research and analysis on the possible design and structure of the
NMBF, including funding options and the form of the benefits to be provided. This section also
required the determination and recommendation of a reasonable and appropriate contribution
structure and benefit package for the NMBF.

Administration and Stakeholder Engagement
The possible administration models for the NMBF and the identification and assessment of the
various stakeholders that will be impacted by the NMBF.
The results of this comprehensive undertaking of research and analysis are provided in this report, the
main findings of which are presented below.
Report Findings

The enabling legal framework for the NMBF is enshrined in the Social Security Act of 1994.
The Social Security Act 34 of 1994 provides for the establishment, constitution, powers, duties and
functions of the Social Security Commission. The Act paves the way for the establishment of a
National Medical Benefit Fund (NMBF) which is to provide for the payment of medical benefits to
employees.
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Section 20 (1) of the existing Social Security Act firmly defines the envisaged target population for the
NMBF as follows:
•
The NMBF requires registration of every employee of every employer
•
“Except if he or she is a member of any other medical aid fund or scheme approved by
the Minister on recommendation of the Commission”
The Act - with the exception of Parts VI (National Medical Benefit Fund) and VII (National Pension
Fund) - came into force on 15 January 1995. The NMBF is yet to be implemented and hence, the
consideration of its design and funding options is presented in this report.

Research into health care funding models revealed that there are four main models namely the:
1. National Health Insurance (NHI) model,
2. Bismarck Social Health Insurance (SHI) model,
3. Beveridge model, and
4. Out-of-Pocket model.
The NMBF is intended to ensure that all employed persons are members of a medical fund. Based on
the literature review of international experience the objectives of the NMBF are consistent with the
Bismarck Social Health Insurance (SHI) model where all employed persons form part of a prepaid
health arrangement. . It is therefore distinct from more universal health systems such as National
Health Insurance which is extended to the unemployed population, and in which all have access to
healthcare facilities and services irrespective of ability to pay.

A detailed literature review of international experience was performed, illustrating the path to
achieving universal coverage, as well as important lessons that have been learnt from such
experience.
SHI was found to be one of the main funding models used for healthcare financing. Many SHI
initiatives have taken place in Africa, Asia, and Latin America. A total of twenty seven countries have
introduced the overriding principle of universal coverage via SHI (Hsiao & Shaw, 2006).
The following factors were found to contribute positively to an enabling environment for SHI:
•
•
•
•
•
•
•
•

Large formal sector employment
High wages and salaries
Low poverty rate
Small family and/or household size
Efficiently functioning provider networks
Strong human resource capabilities
Strong administrative support
Government capacity to regulate
(Hsiao & Shaw, 2006)
Possible collection methods for NMBF contributions were identified.
The contributions could be funded via income tax. The Namibian tax system has undergone
continuous reform since independence which has brought about numerous improvements. The tax
system is perceived to be equitable and transparent, and after the introduction of the value-added tax
in November 2000, tax collection has significantly improved. Countries who have implemented
Social/National Health insurance typically have a considerably higher total tax rate. If Namibia is to
fund the NMBF through taxes it may need to increase the tax rate to accommodate this. However this
will have many other implications that will need to be considered such as the effect on GDP and
economic growth. Alternatively the government may need to redistribute the current budget in which
tax is currently being utilized.
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A further consideration for the NMBF is how contributions will be collected via individuals and/or
employers. If government fails to collect contributions successfully, they will not be able to cover the
claim costs and expenses needed to support the fund. It is recommended that the NMBF, should they
chose to use contributions collected from employers/individuals in order to fund the scheme, use a
similar method as the one used in South Africa, whereby all employed individuals must have medical
cover, and contributions are collected via employers or direct debit orders. The collection of
contributions from the self-employed, however, will be more challenging due to the variability of the
income, the inability to verify the accuracy of the income stipulated, as well as the difficulty in locating
the self-employed.

Medical aid funds in Namibia are required to comply with the Medical Aid Funds Act, No 23 of 1995
and the regulations of 11 February 1997, and are governed/ regulated by NAMFISA. Health
Insurance is classified as short term insurance in Namibia and therefore falls under the Short-term
Insurance Act, No 4 of 1998, but is also governed/regulated by NAMFISA
The NMBF will act as a medical aid fund rather than provide health insurance and will therefore need
to comply with similar provisions to those stipulated in the Medical Aid Funds Act. It will be exempt
from the Medical Schemes Act (Act 72 of 1967), except in so far as the Minister determines otherwise
(as laid out in the Social Security Act).

An overview of the current healthcare environment in Namibia revealed that the Namibian
government is the main provider of healthcare services in Namibia, with the private sector and
mission facilities playing supporting roles.
The medical aid fund population is dominated by the Public Service Employees Medical Aid Scheme
(PSEMAS). This is a state run scheme, exempt from the Medical Aid Funds Act, with approximately
80 000 principal members and is open to civil servants only. PSEMAS accounts for over 50% of the
medical scheme principal member population, with the other schemes consisting of above 60 000
principal members.

The total number of beneficiaries covered by medical schemes, including PSEMAS, was
approximately 320 000 people during 2010. Given that the total population in 2010 was estimated by
the US census bureau to be approximately 2 million, this implies that approximately 1.68 million
uncovered Namibians are forced to make use of public health facilities where an out-of-pocket
method of payment is required.

The possible policy objectives of the NMBF include:
 Accessibility (Increasing the proportion of the population that reaches appropriate health
services.)
 Financial accessibility
 Geographical accessibility
 Universal access to health care
 Universal coverage
 Equity in health care
 Equity in health financing
 Equity in resource allocation
 Quality in health care
 Responsiveness in health care
 Sustainability
 Protect the nation’s health
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
Key design requirements that should be considered for the design of the NMBF were identified as:
 Maximizing the overall percentage of population covered by SHI
 Maximizing the overall percentage of population covered by SHI, by target group
 Setting the ratio of prepaid contributions to total costs (i.e. the overall prepayment ratio) of the
SHI benefit package at an acceptable rate
 Setting the prepayment ratio by target group, at acceptable levels
 Minimizing the percentage of households with catastrophic spending
 Minimizing fragmentation of the NMBF pool
 Making membership compulsory
 If the NMBF is going to be priced on solidarity principles, then legislation is required which
also imposes such cross-subsidies from rich to poor on all existing open and closed funds to
limit anti-selection on the NMBF.
 Ensuring the effective collection of finances
 The benefits package should adhere to certain broad principles
 Monitoring mechanisms associated with the benefits package should be put in place
 Minimizing risks, legal contracts between the NMBF and its providers need to be welldefined.
 Ensuring that the mix of reimbursement methods promotes optimal resource allocation
 Minimizing the percentage of total expenditure on administration expenses
 Ensuring that an effective governance structure is put in place

The technical requirements for the administration of the fund include:
 Correspondence management services
 Membership management services
 Claims management services
 Financial management services

The following administration models exist which could be used by the NMBF:
 Agency Model (Outsourcing the administrative function)
 Self-Administration
 A combination of the above
 A “phased-in” approach (Moving from an outsourced position until eventually successful selfadministration is possible)
However, the Social Security Act of 1994 contains two stipulations which may prohibit, or restrict,
the extent to which outsourcing of the administration system is permissible:

“15. (1) Every person engaged in carrying out any provision of this Act shall preserve and aid
in preserving secrecy in relation to all matters that may come to his or her knowledge in the
exercise of the powers or the performance of the duties and functions conferred or imposed
upon him or her in terms of any provision of this Act, and shall not communicate any such
matter to any other person or permit any other person to have access to any documents in
his or her possession or custody, except in so far as any such communication (a) is made in the ordinary course of the exercise of his or her powers or the performance
of his or her duties under this Act or any other law, or is required by an order of a
competent court;
(b) is effected with the prior permission in writing of the person concerned.”

“16. (1) The Commission shall, in accordance with sound business principles, administer
every fund referred to in paragraph (a) of subsection (1) of section 9.”
It is recommended that legal advice is obtained before embarking on an outsourcing strategy which
may be in contravention of the above stipulation. Furthermore, clarity on the scope for any such
outsourcing activity permissible under the act should be obtained.
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
The following parties were identified as direct stakeholders in the NMBF with due consideration:
 Social security commission
 Ministry of Health and Social Services
 NAMFISA
 PSEMAS
 Ministry of Labour
 Employers
 Taxpayers

In the absence of previous empirical studies regarding the uncovered population, Deloitte estimated
the uncovered tax paying population (who would be principal members on a medical fund) to be
approximately 115 938. This estimated population exhibits a moderately young age profile.
Additionally, upon analysis of the medical scheme industry data including an appropriate adjustment
to reflect 2012 numbers, the medical scheme industry comprises of 149 696 principal members.

The results of the actuarial costings undertaken showed the expected costs per family per month for
three different benefit packages as at the beginning of 2012: a Hospital benefit package at N$
1196.68; a Hospital + Day-to-Day benefit package at N$ 2535.78 and the PSEMAS package at N$
998.46. These costs were appropriately adjusted to reflect the expected costs under implementation
of a number of different possible NMBF target populations.
Conclusions and recommendations
This report analyzed various benefit packages and membership base combinations, however the optimal
combinations are highly dependent on the interpretation of the Social Security Act and the financing
constraints of the NMBF. This report therefore considered a variety of outcomes and commented on their
relative merits and possible restrictions:

Benefit package: Affordability
The “Adjusted PSEMAS” benefit package was found to be the superior option based on cost alone
and is therefore the most applicable to the uncovered population which we assume to be on average
poorer than the covered population.

Benefit package: Public vs. Private
The choice of sector will determine the funnelling of funds to health care facilities and this choice
must be considered at a strategic level in terms of how the NMBF will improve both health
infrastructure and access to healthcare for the target population while achieving goals on the NMBF.

Target population
According to the Social Security Act the target population is defined as all employed persons “Except
if he or she is a member of any other medical aid fund or scheme approved by the Minister on
recommendation of the Commission”. (SSA, Section 20 (1))
This report considered various interpretations of whether or not PSEMAS can be considered a
medical fund and therefore whether it will form part of the NMBF.
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Scenario: PSEMAS is classified as a medical fund
The resultant target population (the uncovered taxpayers) was found to be the least sustainable
group from a design perspective, however the easiest to implement given the lack of any reform
required.
Scenario: PSEMAS is not classified as a medical fund
This target population extends from the uncovered to include PSEMAS lives. Based on a risk analysis
it was found that this group would be a superior option to the above (i.e. Uncovered population) due
to a larger risk pool and the opportunity to reform PSEMAS into a more financially sustainable
structure. However there is likely to be resistance from both employee’s and unions if the benefit and
subsidization arrangements are reduced to become more financially sustainable.
Scenario: Legislation is revised and medical scheme members are no longer excluded
This target population was found to be the best option purely from a design perspective as it
represents the largest risk pool (the entire taxpaying population), has extensive scope for risk and
income cross-subsidisation, eliminates buy-down risk (cross sector) which serve to reduce the
financing requirement and contribution rates.
However the need to reform both the medical fund industry and PSEMAS as well as a need to revise
the legislation may make this option practically unviable.

A phased implementation approach
Implementing the NMBF at its full membership base level from the outset faces many practical
problems and leaves little room for error in terms of administration systems, pricing correctly,
collecting contributions and taxes and ensuring optimal service delivery of benefits. It is therefore
recommended that a phased approached be adopted by gradually adding various population subgroups until the target population is reached and the legislation’s objectives are met.
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1. Introduction
Background
The Social Security Act, No. 34 of 1994, paved the way for the establishment of a National Medical
Benefit Fund (NMBF) to provide for the payment of medical benefits to employees.
Actuarial and Analytical Solutions (AAS) at Deloitte have been appointed by the Social Security
Commission of Namibia to assist with the design and development of the National Medical Benefit Fund
of Namibia.
Scope of work
This report is a comprehensive consolidation of strategic research, health care expertise and actuarial
analysis conducted in the following four broad areas that define the scope of work concerned:

Policy Framework:
This section of the deliverable involves an analysis of the enabling legal framework for the NMBF; a
basic review of other social security provisions in Namibia; a literature review on international health
insurance practice and experience; as well as potential policy objectives for the NMBF.

Namibian Medical Insurance Market Status
This section explores the current healthcare environment of Namibia to understand the role that the
NMBF would play in this environment; its interaction with the current healthcare provisions; the
possible membership of the fund and the macro-economic and general implications of the fund.

NMBF Design and Actuarial Review
This section consists of comprehensive research and analysis on the possible design and structure of
the NMBF, including funding options and the form of the benefits to be provided. This section also
required the determination and recommendation of a reasonable and appropriate contribution
structure and benefit package for the NMBF.

Administration and Stakeholder Engagement
This section looks at possible administration models for the NMBF and the identification and
assessment of the various stakeholders that will be impacted by the NMBF.
The results of this comprehensive undertaking of research and analysis are provided in this report, the
sections of which are outlined below.
Report Structure
Section 2 of the report explores the enabling legal framework for the NMBF and other social security
provisions in Namibia. This is followed by an overview of the four main models of health care funding in
Section 3.
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Section 4 provides a detailed literature review of international experience, the path to achieving universal
coverage, as well as important lessons that have been learnt from such experience.
Possible collection methods for NMBF contributions are then explored in Section 5.
The demarcation between the NMBF and health insurance is provided in Section 6 followed by an
overview of the current healthcare environment in Namibia in Section 7 that includes both public and
private sector provisions, as well as the medical scheme environment.
The possible policy objectives of the NMBF are defined in Section 8.
Section 9 provides a situational analysis for SHI in Namibia by assessing certain criteria that would
support the development of SHI. This is followed by key design features that should be considered for
the design of the NMBF in Section 10 as well as macro-economic impacts of the NMBF in Section 11.
The technical requirements and options for the administration of the fund, investment considerations and
stakeholder considerations are then discussed in Section 12, 13 and 14 respectively.
Finally, Section 15 details the methodology applied and results obtained from the actuarial costings
performed which includes the proposed benefit package, the determination of the target population for the
NMBF as well as the assumptions used and limitations faced in conducting these analyses.
The Namibian healthcare environment is defined by unique characteristics that need appropriate attention
for the implementation of Social Health Insurance and for overall health care reform. This report provides
the Social Security Commission with insights and tools to effectively implement these reforms by drawing
from international experience and actuarial expertise.
Limitations
This report has been prepared for the exclusive use of the Social Security Commission of Namibia. This
report should be considered in its entirety, as parts taken out of context may be misleading. Any third
parties reading this report may not have the background information necessary for a full understanding of
the report.
The actuarial costings performed for the determination of contribution rates for the NMBF were restricted
by the limited data available. This data was neither audited nor verified other than performing standard
checks on the data. These limitations are discussed in the report and should be taken into consideration
when examining the results thereof. The accuracy of the calculations is therefore impacted by these
limitations.
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2. Legal Framework for the NMBF
The purpose of this section of the report is to explore and analyse the enabling legal framework for the
NMBF. The Social Security Act (which pertains to the achievement of SHI), and the Constitution (which
would be the starting point for paving the way for NHI), will be investigated.
2.1 Social Security Act
The Social Security Act 34 of 1994 provides for the establishment, constitution, powers, duties and
functions of the Social Security Commission. The Act paves the way for the establishment of four social
security funds namely:




Maternity Leave, Sick Leave and Death Benefit Fund: to provide for the payment of maternity leave
benefits to female employee members, sick leave benefits to all employee members, and death
benefits to dependants of all employees, subject to the provisions of the fund.
Development Fund: to provide for the funding of training schemes for disadvantaged persons,
employment schemes for unemployed persons, bursaries, and other forms of financial aid.
National Pension Fund: to provide for the payment of pension benefits to retired employees, subject
to the rules of the fund.
National Medical Benefit Fund (NMBF): to provide for the payment of medical benefits to employees.
The Act - with the exception of Parts VI (National Medical Benefit Fund) and VII (National Pension Fund) came into force on 15 January 1995. The Social Security Commission (SSC) is currently administering
the first two of the funds listed above. The NMBF is yet to be implemented and hence, the consideration
of its design and funding options is presented in this report. It is important to understand the key features
of the Act in order to properly frame the design of the NMBF, and to understand how the establishment of
the NMBF will impact the other three funds.
The key general provisions






of the Social Security Act with respect to the NMBF are:
The Act applies to every employer, including the State, and every employee
The assets and liabilities of every fund shall be valued at such times as may be considered necessary
by the Commission, but at least once every three years by an actuary appointed by the Minister of
Labour and Human Resources Development;
Every employer and employee must be registered with the Commission, in the prescribed manner
and within the prescribed period
A self-employed person who does not employ any other person may, in the prescribed manner,
voluntarily register with the Commission
Every employee registered with the Commission shall be a member of:
o the Maternity Leave, Sick Leave and Death Benefit Fund
o the National Medical Benefit Fund, except if he or she is a member of any other medical fund or
scheme approved by the Minister on recommendation of the Commission
o the National Pension Fund, except if he or she is a member of any other pension fund or scheme
approved by the Minister on recommendation of the Commission
Different contributions may be prescribed in respect of different categories of employers or
employees
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



No claim for any benefit payable under this Act shall be considered by the Commission unless:
o The person to whom such claim relates has been a member of the fund concerned for a
continuous period of at least six months before the date on which such claim arose
o All contributions payable in respect of his or her membership of such fund have been paid in full
Authorized personnel are given the power to inquire and investigate the NMBF through auditing
enterprise accounting and registration systems, and enterprise facilities
No benefits payable, or any right to such benefits, shall be capable of being assigned, transferred,
ceded, pledged or hypothecated, or be liable to attachment or any form of execution under any
judgement or order of any court of law
The Commission may at any time, but only after the person concerned has been notified and granted
an opportunity to be heard, review any benefits granted and payable to any person if:
o Upon the request of the Commission, he or she refuses or fails without sufficient cause to submit
himself or herself to a medical examination
o In the case of a person receiving maternity leave, sick leave or medical benefits, such person has
become:
 Addicted to Intoxicating liquor or any dependence-producing substance or uses such liquor
or substance excessively
 Mentally or physically disabled to such extent that he or she is unable to care for himself or
herself or the child concerned
o In the case of a person receiving sick leave or medical benefits, he or she refuses or fails without
sufficient cause to submit himself or herself to medical or surgical treatment when considered
necessary by the Commission; and in the opinion of the Commission, such refusal or failure is
prolonging or aggravating the condition as a result of which the benefits have been granted to
such person
o Such benefits, if payable by way of instalments, have due to altered circumstances become
either insufficient or excessive to meet the circumstances of the case
o Such benefits, due to mistake or misrepresentation, have been incorrectly granted or granted in a
wrong amount
We will now discuss the specifics of each fund as prescribed by the Social Security Act.
Maternity Leave, Sick Leave and Death Benefit Fund
The Fund is mandated, subject to the provisions of the Act, to provide the following benefits to members
of the Fund:



maternity leave benefits to every female employee
sick leave benefits to every employee
death benefits to the dependants of every employee
Maternity benefits are payable in respect of both the four week period prior to the expected confinement
date and the eight week period after the actual confinement date. The Act stipulates further conditions
should the actual confinement date differ to the expected confinement date.
Sick leave benefits shall be payable in respect of a member who was incapable for at least 30
consecutive days. These benefits are prescribed based on the number of days during which the member
was absent from work through incapacity which exceed the number of days sick leave provided for in
section 40 of the Labour Act. Sick leave benefits shall not be payable in respect of a period of sick leave
which exceeds two consecutive years.
The following items may be allowed for when determining the amount of sick leave benefits payable to a
member:
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



Any disability pension referred to in section 2 of the National Pensions Act, 1992 (Act 10 of 1992)
Any compensation referred to in section 38 or 39 of the Employees' Compensation Act, 1941
Any compensation from a fund or organization contemplated in paragraph (a) of subsection (4) of
section 40 of the Labour Act
Any compensation or remuneration (i.e. basic wage, salary, or commission earned by the member)
from his or her employer
If the dependant entitled to a death benefit is a minor, then the death benefits will be paid to his or her
guardian or to any other person who is considered by the Commission to be a fit and proper person to
administer such benefits on behalf of the dependant. If a member retires or becomes permanently
disabled, then the full value of the death benefits which would have been payable had the member died
on the date of his or her retirement shall be paid to him or her and no further benefits shall be payable. If
a member dies without leaving any dependants, then the death benefits shall be paid into his or her
deceased estate.
Development Fund
It is important to note that a portion of the prescribed contributions payable to the NMBF fund may be paid
into the Development Fund, in accordance with Section 37 of the Social Security Act:
(3) There shall be paid into the Fund –
(a) such portion of the prescribed contributions payable to any other fund as may be determined
by the Commission with the concurrence of the Minister
Therefore, this provision may increase the cost of contributions to the NMBF.
The Development Fund provides benefits in respect of:


The conducting of training schemes and employment schemes approved by the President for the
benefit of socio-economically disadvantaged persons who are unemployed;
The granting of bursaries, loans, and other forms of financial aid to students enrolled at any technical
or academic institution of higher education.
National Pension Fund
The National Pension Fund has not currently been implemented.
The Pension Funds Act (Act 24 of 1956), shall, except in so far as the Minister determines otherwise by
notice in the Gazette, not apply to the Fund.
The Fund pays pension benefits in respect of retirement, permanent disability and death.
National Medical Benefit Fund
The National Medical Benefit Fund has not currently been implemented.
The National Medical Benefit Fund will aim to provide medical benefits to every employee who is a
member of the fund and who has complied with the terms of membership. These terms state that
13 | P a g e
members should belong to the fund for at least 6 months and that contributions to the fund should be upto-date. Only under these conditions will members be eligible for receipt of any benefits from the NMBF
when claims are incurred.
Critically, Section 20 (1) of the existing Social Security Act firmly defines the envisaged target population
for the NMBF as follows:


The NMBF requires registration of every employee of every employer
“Except if he or she is a member of any other medical aid fund or scheme approved by the Minister
on recommendation of the Commission”
The establishment of the Fund dictates that the Fund shall be a juristic person. Furthermore, the following
items will be paid into the Fund:





The prescribed contributions payable to the Fund
The moneys appropriated by Parliament for the purposes of the Fund
Any interest or dividend earned
Any fines paid by virtue of penalties imposed under this Act in respect of an offence involving the
Fund
Any other moneys which may accrue from any other source
The Medical Schemes Act (Act 72 of 1967), shall, except in so far as the Minister determines otherwise
by notice in the Gazette, not apply to the Fund.
The medical benefits payable in respect of medical expenses incurred by a member, shall be as
prescribed. Given that the Fund has not yet been established, this provision allows for the definition of a
specified benefits package.
Regulations
The Act allows for the establishment of further regulations in relation to:






Entering into agreements, handling of funds, and keeping of books by the Commission. This is a
useful provision for the NMBF since alternative provider reimbursement methods may need to be
agreed, and governance rules surrounding the management of the fund may need to be set up.
Regular monitoring of claims and membership experience is made possible by the above provision.
Except as otherwise provided by this Act, any fees, contributions or benefits payable under the Act.
This is a useful provision for the NMBF as the benefits package, which still needs to be defined, will
drive costs, which will in turn drive contributions. The setting of benefits and hence contributions is
made possible by the above provision.
The form of the registrars and certificates to be kept or which may be issued in terms of the Act. This
provision allows the NMBF to contract with providers for the formation of pre-specified provider
networks.
The procedure to be followed in the submission of claims and the requirements with which claims
should comply. This provision allows the NMBF to set rules to minimise claims processing delays,
and set benefit conditions and rules to minimise risk and potential fraud.
The manner in which the Commission may execute or perform any power, duty or function in terms of
the Act. This provision is open ended and the Fund could potentially create a regulation relating to
any area as deemed fit, for example, providers, members, existing insurers, etc.
The management and control of any fund established by the Act. This provision allows for the
introduction of inter alia, a regular analysis and reporting requirement, and a new governance
structure.
14 | P a g e

All other matters in general which are by the Act required or permitted to be prescribed or which are
necessary or expedient to be prescribed in order to achieve the purposes of the Act.
Once again, this is an open ended provision. Essentially, this provision paves the way for any NMBF
design feature that is deemed necessary and appropriate to achieve the aims of the Act. For
example, the establishment of procedures to collect contributions that are essential to help ensure the
sustainability and solvency of NMBF, can potentially become law by virtue of this provision.
Furthermore, these procedures can be set up in a manner which appropriately acknowledges the
exchange of sensitive data.
Any existing or future regulation may prescribe a fine not exceeding N$2 000, or imprisonment for a
period not exceeding six months, as a penalty for the contravention of such regulation.
Overall Assessment
The Social Security Act provides the platform for the development and implementation of the NMBF in
line with Namibia’s health and social security policy objectives. It is therefore important that this Act
contains all the required supporting legislations and does not overlook any material requirement of the
Fund.
If SHI is to work effectively, it is necessary to equip the SHI scheme with certain legal instruments to:





implement compulsory membership - allowed for in theory since “every employer must register every
employee”
limit fraud - partially allowed for in theory through the use of checks on the operations of enterprises &
the specification of penalties (fine or imprisonment)
enforce the collection of contributions - allowed for in theory through the definition of penalties
audit enterprise accounting and registration systems & to have access to facilities – allowed for in
theory through a combination of inquiry, authorised personnel, and investigation provisions
negotiate and enforce provider payments and to accredit providers - allowed for in theory through the
Regulation section of the Act, which allows for the entering into any necessary agreements e.g. with
providers, and the formation of certificates e.g. for accreditation of providers
(Normand & Weber, 2009)
The points below highlight potential gaps in the Social Security Act legislation that may constitute a risk to
the successful implementation of the NMBF:


The Fund’s exemption from income tax is clearly stipulated in the Act. However, SHI contributions
should also be exempt from taxes because the NMBF is a social fund.
The Act allows for dispute resolution through the labour courts, following an appeal made by a
member regarding determinations made by the social security appeals board, as established by
section 15(1)(a) of the Labour Act 1992, but not through a cheaper arbitration process:
o The Labour Act has since been updated and the latest Act, the Labour act 2007 (Act 6 of 1992),
makes provision for arbitration or dispute resolution. The Social security act should be updated to
allow for the new Labour act and take advantage of the arbitration process enshrined therein.
Accelerating disputes to the Labour court, without first attempting less time consuming and less
costly channels of dispute resolution, such as via the ombudsman and an arbitrator, would be an
unnecessary drag on resources and administrative efficiency within the SSC as well as for the
SSC fund members.
o Experience with both SHI and tax collection shows that if SHI related matters have to go to court
for every fraud detected, this may hamper its effective enforcement, increase the costs
associated with SHI and cause delays.
15 | P a g e
o


Medical benefits are heterogeneous in nature, subject to complex medical claims definitions, and
are incurred frequently (in contrast to death benefits as per the other Funds under the
Commission’s administration)
Legislation in Namibia does not require medical schemes to operate on the basis of solidarity
principles, resulting in many schemes making use of age-rated contributions. Thus, if the NMBF
contributions incorporate a cross-subsidy from rich to poor, but not all private open medical funds do
so, then the NMBF may be significantly selected against.
The potential long-term objective of extending the SHI system to a NHI system:
o International experience, as analysed in section 3 of this report, recommends an SHI strategy
that is linked to a NHI strategy, assuming that NHI is on the agenda (Hsiao & Shaw, 2006).
2.2 Constitution
Based on past Health Insurance workshops conducted in Namibia, and the subsequent establishment of
the Health Insurance Funding and Technical Advisory Committee (HIFTAC), NHI is on the agenda in
Namibia. However, it is worth noting that the Constitution of Namibia only allows for an indirect provision
for NHI as opposed to a direct one. Therefore, NHI cannot be viewed as a Constitutional imperative in
Namibia, as it is found to be in some countries.
In Namibia, Article 95 on The Promotion of the Welfare of the People, paves the way indirectly for the
implementation of NHI. Article 95 states that the State shall actively promote and maintain the welfare of
the people by adopting, inter alia, policies aimed at the following:
(a) enactment of legislation to ensure that the unemployed, the incapacitated, the indigent and the
disadvantaged….accorded such social benefit amenities as are just and affordable with due regard to
the resources of the State; and
(b) consistent planning to….improve public health.
We will illustrate the contrast to a direct implementation as is the case in South Africa. Section 27 of the
Constitution on Health Care, Food and Social Security paves the way directly for NHI. Section 27 states
that everyone has the right to have access to:
(a) health care services, including reproductive healthcare;
(b) sufficient food and water; and
(c) social security, including, if they are unable to support themselves and their dependants, through
appropriate social assistance.
16 | P a g e
3. Health Insurance Models and
Funding Models
The fundamental objective of health systems is to improve the health of the population and to provide
financial protection against the unexpected costs of ill-health. Central to achieving these goals is the
concept of risk pooling, where the risk of having to pay for health care is spread across the entire pool of
members instead of being borne solely on the individual. Therefore, the larger the degree of risk pooling
in a health financing system, the smaller the financial consequences of individual health risks, and the
easier it is to increase access to health care and achieve universal coverage.
The purpose of this section of the report is to outline the features of the four main models of healthcare
system financing:
5.
6.
7.
8.
the National Health Insurance (NHI) model,
the Bismarck Social Health Insurance (SHI) model,
the Beveridge model, and
the Out-of-Pocket model.
3.1 National Health Insurance (NHI) Model
The NHI model uses an insurance system as opposed to a budget system. This implies that the pool of
state insurance funds, as opposed to the household’s personal income, becomes the budget for
individuals to service their healthcare needs. A single state NHI fund acts as a single funder and single
purchaser of medical benefits, with only those citizens/employers earning above a certain income or
means threshold, required to pay contributions into the NHI Fund. However, the entire population is
entitled to benefits from the Fund. The NHI Fund is non-profit and may contract with both public and
private sector health providers i.e. it is a multiple delivery system.
3.2 Bismarck Social Health Insurance (SHI) Model
The Bismarck SHI model is named after the Prussian Chancellor, Otto von Bismarck, who invented the
welfare state. The SHI model also utilizes an insurance system, with the insurers called "sickness funds”.
A Bismarck SHI scheme can either be made up of multiple risk pools/funds, or a single risk pool/fund. The
SHI scheme can be funded by a single entity (for example the Government) or by multiple entities. It may
also consist of a single-purchaser or multiple- purchasers of health care services, where the purchaser of
health care services contracts with health care providers to provide health care services to the scheme
members. Funds are usually financed jointly by employers and employees through payroll deductions.
Typically, an SHI scheme contracts with both public and private providers i.e. a multiple delivery system.
The sickness funds are non-profit.
ii
It is important to outline certain distinct characteristics of SHI :
1. Membership under the “contributory regime” is compulsory
2. Government may fund poor enrolees under the “subsidised regime” (should the government wish
to extend SHI to achieve NHI).
3. Enrolees are eligible for benefits once a contribution is paid (whether this contribution is
subsidised or not).
4. Legislation sets out the contribution and benefit rules
17 | P a g e
Given that the Social Security Act of 1994 specifies that the NMBF will cover every employee of every
employer, except if he or she is a member of a private medical fund or scheme, the NMBF is essentially
envisaged to be a medical fund which, together with the ten existing open and closed medical aid funds in
Namibia, will achieve SHI.
Namibia is considering an NHI system. Whether NHI follows from a financially stable SHI or whether NHI
is achieved directly, it is important to draw the key distinction between NHI and SHI. NHI covers the entire
population, thereby achieving “universal coverage”, whilst the Bismarck SHI model only covers those in
the formal sector who contribute to the SHI Scheme.
3.3 Beveridge Model
The Beveridge model is named after William Beveridge, a social reformer who designed Britain's National
Health System (NHS). In this system, health services are free at the point of treatment and health care is
provided and financed by the government through tax payments (in a similar manner to the police force or
the public library). The government is the sole payer i.e. single funder model. Many, but not all, hospitals
and clinics are owned by the government. Some doctors are government employees, but there are also
private doctors who collect their fees from the government. Government directly reimburses providers i.e.
single purchaser. The State fund contracts with a network of public and private providers i.e. a multiple
delivery system.
3.4 Out-of-Pocket (OOP) Model
Only the developed and industrialised countries (perhaps 40 of the world's 200 countries) have well
established national health care systems. Most nations are too poor and suffer from unsophisticated
organisational structures which limit their ability to provide mass medical care. They are thus forced to
adopt an out-of-pocket model where the individual bears the full cost of any health care.
The basic result in such countries is that the rich get medical care and the poor stay sick or die. Access to
care under the Out-of-Pocket model is only available if the individual:


Can pay the bill out-of-pocket at the time of treatment, or
Is sick enough to be admitted to the emergency ward at the public hospital
Therefore, this model can force individuals and families into poverty due to the costs of ill-health and can
thus jeopardise economic growth and the overall health of the population.
18 | P a g e
The following graphic indicates which models a number of countries have opted to implement:
19 | P a g e
4. International literature and country
experience
The purpose of this section of the report is to outline the country case studies and summarise the lessons
learned by each of the above models. The lessons learned will be summarised at a high-level.
References will be included for further reference.
4.1 The Advantages and Disadvantages of NHI
Country experiences show that NHI has the following advantages:








Potential to be cheaper and much simpler administratively than for-profit private insurance since there
is no need for marketing and no profit objective and hence no financial motive to manage/assess
claims
The single payer tends to have considerable market/bargaining power to negotiate for lower prices
Cost control through benefit limits or waiting lists
Increases ease of access to health services
Increases equity
Universal coverage ultimately achieved
Single-payer system allows more effective cost containment (unified fees, lower administration)
If the unemployment rate is low and there is a functioning existing health system, then NHI can be
phased in potentially without using more resources (increases in claims cost can be offset by savings
due to economies of scale and risk pooling)
Country experiences show that NHI has the following disadvantages (du Toit, 2009):




Requires substantial organisational skill and HR are required to manage and administer NHI
Resources might be channelled to services that deliver non-optimal health returns
Decreases funding for public health, since significant NHI funding channelled to comprehensive
coverage for acute care and short-term care
The NHI Fund and not individual disposable income becomes the budget constraint, which may make
it difficult for supply to keep up with patient demand for more and more health benefits, thus resulting
in high medical inflation
4.2 The Advantages and Disadvantages of SHI (Bismarck model)
Country experiences show that SHI has the following advantages:





Comprehensive and uniform benefits package possible, although challenging
Universal cover is possible in the long-term, although challenging
Funding and provision of services functions are separated
Increased competition between providers contains cost
Competition between private providers drives quality of services provided.
20 | P a g e
Country experiences show that SHI has the following disadvantages (du Toit, 2009):








Contributions are community-rated (i.e. contributions do not depend on risk, but on ability to pay),
which results in significant increases in contributions for young and/or healthy employees relative to
what the contributions would have been for them in a risk rated environment)
Enforcing compulsory contributions under a contributory regime is challenging
The self-employed may not enrol or they may understate their income
Significant administration expenses
Significant regulatory control is required
The SHI Scheme and not individual disposable income becomes the budget constraint, which may
make it difficult for supply to keep up with the increasing patient demand for health benefits, thus
resulting in high medical inflation
If there are multiple funds and community rating is in place, then a risk equalisation fund (REF) is
1
required, however a REF is difficult to implement with poor information systems (Netherlands) .
Continual depletion/degradation of benefits under subsidised regimes (Colombia)
Fee-for-service reimbursement is expensive such that SHI fund starts to short-pay providers, who t
hen charge out-of-pocket payments (Ghana)
4.3 The Advantages and Disadvantages of the Beveridge Model
Country experiences show that the Beveridge model has the following advantages:





Reasonable potential for cost-control bargaining power over the long-term: these systems tend to
have low costs per capita, because the government, as the sole payer, controls what doctors can do
and what they can charge
Universal coverage
Low administration expenses
Simple for members of public to use
A public budget system is administratively simpler than a NHI or SHI insurance system
Country experiences show that the Beveridge model has the following disadvantages (du Toit, 2009):



Deficits in government finances may develop over time if healthcare costs increase at a faster rate
than tax revenue
Quality problems may become prevalent because of the government deficits
Substantial co-payments may develop due to deficits
1
Risk equalisation refers to the notion of having an equitable and efficient private medical scheme market. The
purpose of risk equalisation is to prevent medical schemes from competing on a risk-selection basis, whereby
members are charged contributions commensurate with the level of risk they represent as determined by risk factors
(e.g. age and health status) and instead promote competition on the basis of cost efficiency and quality of healthcare
services provided. (SADoH, 2002)
The concept of a Risk Equalisation Fund is readily explained within the context of a health insurance (medical)
scheme environment in which open enrolment and community rating is practised. Open enrolment refers to the fact
that enrolment in a particular scheme is not restricted and community rating refers to the fact that prospective
members of a scheme must be accepted at the standard contribution rates i.e. a prospective member may not be
charged a higher contribution based on his/her age, health status, or any other risk factor. (Mcleod, 2008)
As a result of such an environment, members will be charged different contributions by different medical schemes for
an equivalent “benefit package”.
A Risk Equalisation Fund (REF) could be established and operated by a regulatory body in a health insurance/medical
scheme market where open enrolment and community rating is employed in order to achieve risk equalisation. The
essential idea is that mandatory contributions are made by medical schemes to the REF and subsidies are paid back
to those medical schemes that are determined to have poor experience as a result of the risk profile of its members
being worse than average. This would in effect create greater fairness in the level of contributions paid by members.
21 | P a g e



Significant waiting lists for e.g. surgical procedures, in-hospital, specialists
Restricted provider choice
Private health insurance typically used to obtain “higher level of care” by the rich e.g. bypass waiting
lists, luxury accommodation, increased doctor choice, access to local hospital, increased standards.
However, this results in inequitable access e.g. for specialist and in-hospital treatment
4.4 Achieving Universal Coverage
Universal coverage is defined by the World Health Organization as: “access to key promotive,
preventative, curative and rehabilitative health interventions for all at an affordable cost” (WHO, 2005).
The literature recognises four options for achieving the ultimate objective of universal coverage (WHO,
2004):
1. The Beveridge Model, which achieves universal coverage immediately
2. The Bismarck Model, where SHI can be viewed as a building block for NHI. This model follows a
phased implementation approach towards achieving universal coverage in the long-term.
3. National Health Insurance, which achieves universal coverage immediately. NHI can be viewed as a
mix of the above two options. Under mixed health financing systems, the subsidised population group
is partially covered via general tax revenue, and a clearly specified contributory population group is
covered by SHI.
4. A system of private health insurance that is subject to government regulatory powers, especially
ensuring a pre-defined benefit package of care.
The Social Security Act paves the way for the NMBF, which essentially aims to insure the currently
uninsured in the formal sector. Once the NMBF is implemented, it is envisaged that, a mix of private
medical funds and a single State fund (the NMBF), will cover all members employed in the formal sector
and their dependants (thereby achieving SHI). If SHI will be achieved via the NMBF, then Namibia will
presumably be looking to achieve NHI via SHI. Pro-active planning is essential, as any long-term NHI
strategy must be linked to the short- to medium-term SHI strategy.
Due to the existing NMBF Social Security Act legislation and debates on NHI in Namibia, it is important to
outline a few points pertaining to the NHI-via-SHI strategy below.
SHI is a one of the main funding models used for healthcare financing. Many SHI initiatives have taken
place in Africa, Asia, and Latin America. A total of twenty seven countries have introduced the overriding
principle of universal coverage via SHI (Hsiao & Shaw, 2006). Due to the difficulty of moving to universal
coverage overnight, a process or phased approach is needed:
1. Start with occupational/employee groups
2. Expand coverage, where the government plays a role in subsidising the rest of the population
Advantages of this two-step approach:


More financial stability (once the contributory regime is solvent and performing well, the subsidised
regime can then be established)
More buy-in from contributors i.e. more acceptable to people who pay SHI contributions in Step 1.
The above two-step approach is particularly important given the small size of the Namibian taxpaying
population. However, Dr Zokufa (CEO of the BHF in SA) noted that South Africa did not choose to follow
the above approach as they perceived that the transition from SHI to NHI would generate excessive
22 | P a g e
resistance i.e. those lives registered under the contributory SHI regime would be reluctant to roll-out their
fund to incorporate a subsidised regime.
However, this argument against the two-step approach could be countered in several ways:
1. Decide the subsidized regime in advance, while designing the contributory regime
2. Secure donor funding in advance of introducing the subsidized regime: This is unlikely to be possible
in Namibia given the expected decline of donor funds. Hence, secure government funding in advance
of introducing the subsidized regime.
It is also important to note that the transition from SHI to NHI is a lengthy process. The figure below
illustrates the transition period from SHI to NHI by country (WHO, 2004)
:
Time to universal coverage
Republic of Korea
26
Japan
36
Country
Costa Rica
48
Luxembourg
72
Austria
79
Belgium
118
Germany
127
0
20
40
60
80
Years to universal coverage
100
120
140
However, it is important to also note that the factors at play for these countries, in the distant and recent
past, differed to the factors at play in today’s more technologically sophisticated world. This report
focuses on providing recommendations on the successful design and implementation of the NMBF only.
Considerations for a transition to NHI are not covered in detail. For further reading on the factors to
consider when transitioning from SHI to NHI, please refer to “Reaching universal coverage via social
health insurance: key design features in the transition period” by the WHO.
4.5 Implementation of SHI: Lessons Learnt
As this report focuses on providing recommendations on the successful design and implementation of the
NMBF, and thus achieving SHI, we provide a summary of the key findings from a systematic review of
SHI (in particular) country experiences from 5 developing countries (Hsiao & Shaw, 2006). These
countries were/are developing nations and therefore, their circumstances were/are similar to those of
Namibia to a certain extent.
23 | P a g e
Year
Source
Kenya
Ghana
Philippines
Colombia
Thailand
Namibia
Population
(millions)
Per capita
GDP (US $)
Population
below poverty
line (%)
2010
World Bank
40.5
24.4
93.3
46.3
69.1
2.3
2010
World Bank
775
1283
2140
6225
4608
5330
2003 - 2009
UNdata
45.9 (2005)
28.5 (2006)
26.5 (2009)
45.5 (2009)
8.1 (2009)
38 (2003)
% of
Private Health OOP health
population Unemployment
Expenditure expenditure (%
living in urban
rate (%)
(% of THE)
of THE)
areas
2010
2008 - 2010
2010
2010
UNICEF
NationMaster
WHO
WHO
22
40.0 (2008)
55.7
42.7
51
11.0 (2000)
40.5
26.9
49
7.3 (2010)
64.7
54.1
75
11.8 (2010)
27.3
19.5
34
1.2 (2010)
25.0
14.0
38
51.2 (2008)
41.6
7.4
Total
dependency
ratio
2010
WHO
82.2
73.6
64.1
52.3
41.7
66.9
However, the table above highlights some distinct characteristics of Namibia that one should bear in mind
when drawing from the experience of these 5 countries. In particular, the Namibian population is much
smaller in number and the unemployment rate is significantly higher than that in the other countries. This
will result in greater financing challenges for Namibia. On the other hand, the low out-of-pocket (OOP)
expenditure is favourable for the achievement of SHI.
Even though the lessons learned relate mainly to SHI, the lessons learned can very well be extended to
the design and implementation of any State health insurance fund (including the NHI and Beveridge
models).
(Hsiao & Shaw, 2006) synthesize the overall lessons learned and policy implications from the above 5
countries, which have been chosen because:
1. Their circumstances are similar to Namibia’s, and
2. They are at various stages of SHI implementation (see diagram below for the various stages and
which country provides the case study for each stage)
Thailand
Colombia
Philippines
Ghana
Kenya
Initiating SHI
Extending
coverage
beyond the
formal sector
SHI with
managed
competition to
improve health
care delivery
Achieving
universal
coverage with
SHI
Designing SHI
Hsiao and Shaw make the point that SHI is a complex instrument of reform. Done well, SHI can yield
positive outcomes over time. Done properly, SHI can be expected to improve a country’s risk protection
and health status outcomes. Done hastily, SHI can be backward, disruptive, and possibly hazardous.
Against this cautionary background, the main overall lessons learned are synthesised across the five
case studies and are key unwavering principles that must be adhered to when designing and
implementing a fund, such as the NMBF, which will achieve SHI.
24 | P a g e
These lessons learned are summarised in terms of the following four dimensions (Hsiao & Shaw, 2006):
1.
2.
3.
4.
Factors contributing positively to an enabling environment for SHI
Positive changes that can be attributed to SHI
Major problems that challenge implementation
Implications for policy makers
Factors Contributing Positively to an Enabling Environment for SHI
Large formal sector employment
• Ease of administering mandated payroll tax on employers and/or employees
• Ease of locating employers and collecting premiums
High wages and salaries
• Reduced economic burden of payroll tax
• Opportunity to finance broader benefit entitlements
Low poverty rate
• Reduced need to subsidise membership of poor households
Small family and/or household size
• Reduced need for worker contributions to cover large number of dependants
Efficiently functioning provider networks
• Improved access by members to provider
• Greater choice of providers
• Possibility of quality-based competition among providers
Strong human resource capacities
• Available skills to manage SHI and monitor and evaluate quality
Strong administrative support
• Banking, accounting, actuarial, and legal support available
Government capacity to regulate
• Greater capacity to regulate for quality and manage grievance procedures
Source: Social Health Insurance for Developing Nations, Hsiao & Shaw
Several structural features of the economy, as illustrated in the diagram above, tend to contribute
positively to the enabling environment for SHI.
A successful launch of SHI requires three major pre-conditions:
25 | P a g e
1. Incentive for people to pay premiums
People must be motivated to accept and pay for SHI, even in compulsory systems. People are willing to
prepay for health care services only if they currently have to pay for their health services. If adequate
public sector services of good quality are provided for free or nearly free, why would people who use
these services want to enrol and pay for SHI? People will not want to pay for SHI unless user fees are
high, if patients have to purchase drugs and supplies, or if public services are so poor that many patients
pay out-of-pocket for private providers.
A comparison of the Ghanaian and Tanzanian experiences can be instructive. Ghana shifted to the “cashand-carry” user fee system in 1999, and patients had to pay fairly high user fees. Consequently, voluntary
prepayment plans such as the community-based mutual health organisations (MHOs) flourished, growing
from 4 MHO funds in 1999 to 157 by 2002. In 2003, Ghana was able to pass legislation to establish SHI
nationwide, relying on the MHOs as a building block.
By contrast, Tanzania does not have high user fees. Since 1996, Tanzania has tried to attract and enrol
its population into its district-based insurance, the community health funds. The government subsidises
50% of the premium, regardless of income level, yet the enrolment rate remains low, ranging from 5% to
20% of the eligible population, and those who enrol tend to be the elderly and the sick.
2. Certifications of qualified providers
Developing nations have tended to pay little attention to the safety and quality of health services rendered
in the private sector, other than establishing minimum standards such as licensing requirements.
Following initial licensing, the actual safety and quality of health services remain largely unmonitored and
unregulated. In rural areas, drug peddlers and indigenous doctors have free reign, because regulations
are not enforced. Moreover, governments rarely require private facilities to be transparent in relation to
their financial operations or to adopt modern financial and medical record systems. Under such
conditions, the quality of private sector health services is highly variable, and detecting fraud and price
gouging when SHI pays for claims is difficult.
Publicly provided health services are also problematic. Governments manage public facilities by means of
bureaucratic rules that tend not to encompass modern accounting, financial, and clinical information
systems. The average clinical quality of public facilities might be better than that of private facilities, but it
is nevertheless highly variable. These deficiencies have to be remedied before or concurrently with SHI to
gain sustained public support, perform its role of assuring a reasonable quality of health care, and sustain
its operations financially.
The SHI administration should prudently purchase health care for its insured. A prudent purchaser has to
ensure that services and drugs meet certain standards. Equally important, SHI has to be able to control
fraudulent claims and supplier-induced demand for unnecessary services, as well as “inside” dealings
between doctors, pharmacies, and testing laboratories. Conditions in the market for health services often
requires SHI to set safety, quality, financial, and audit standards beyond what currently exists so that SHI
can be a responsible and prudent purchaser. Under such circumstances, SHI has to develop and
implement new standards and enforcement mechanisms to assure the safety and clinical quality of health
care, as well as standard medical records and accounting systems, and adequate inspection and auditing
of providers. Establishing standards and a system for enforcing them must be high priorities before SHI
can be implemented.
26 | P a g e
3. Rapid economic growth
Rapid economic growth is an important consideration in sustaining an SHI program and in expanding it to
achieve universal coverage. Health care costs rise rapidly due to inflation, rising expectations, and
expensive new drugs and technology. Unless wage rates are also rising rapidly, premiums would have to
be increased frequently. Meanwhile, governments may need rising revenues to subsidise the growth in
premiums for the poor and to expand coverage.
Moreover, rapid economic growth has positive effects on SHI enrolment in that it (a) can lift people out of
poverty, meaning that more people can afford to pay their premiums; (b) can bring more workers into the
formal sector, which increases the number of people in the contributory regime; (c) can raise the
government’s general revenues, meaning that the government can subsidise more of the poor; and (d)
tends to increase the government’s administrative capacity to collect taxes and insurance premiums.
Rapid economic growth will therefore enable a nation to move toward universal coverage.
Positive Changes Attributable to SHI
SHI experiences from developing countries indicate that SHI can be credited with at least 13 positive
changes. Effective SHI:
1. Facilitates national debate and consensus on the financing of health care and allocation of resources,
involving more stakeholders such as industrial groups, cooperatives and religious groups
2. Mobilises more revenue for health
3. Constitutes a formal mechanism for pooling revenues and spreading risks across population groups,
from rich to poor, the sick and the healthy, and across the life cycle
4. Forces more careful and rational planning to equate SHI revenues with SHI expenditures
5. Responds to clients’ preferences and complaints through grievance procedures if benefit entitlements
have not been honoured
6. Separates public finance from public provision, whereby the SHI fund manages the financing and
contracts out to public and private providers to deliver services
7. Inspires more realistic consideration of equity, arising from the debate on subsidising and expanding
coverage for the poor and the indigent that accompanies SHI
8. Encourages more efficient purchasing of health services using different forms of provider
remuneration (e.g. capitation agreements) in the quest to achieve value for money
9. Results in a clarification and redefinition of the roles of ministries of health
10. Succeeds in expanding membership rather than simply stalling or levelling off
11. Reduces catastrophic financial loss that is faced at times of serious illness or injury, and thus the
vicious cycle of indebtedness, debt servicing, and reduced household expenditure on necessities
12. Expanding access to quality services by the insured
13. Free up scarce public revenues (from general taxation) for more effective targeting to the poor
Major Challenges Inherent in Implementation
The experiences of the five countries also indicate that, at various stages of development, SHI can expect
to encounter at least 9 major implementation challenges along the following themes:
1. Enforcing the collection of contributions
27 | P a g e
Mandatory SHI needs to be enforced. Passing a law and creating an organisation to collect premiums
is relatively easy, but actually collecting those premiums is another matter. Collection will be easiest
for civil servants using regular payroll lists and monthly deductions. Collection from large formal
sector employers and employees will also be relatively easy. Collection will be much harder among
smaller enterprises in the formal sector, with evasion by both employers and employees being a
major problem. In the Philippines, for example, the Office of the Actuary estimates that for small
employers in the formal sector, only 30% of those who should be contributing actually do. In
Colombia, estimates indicate that only 65% of potential contributors are actually paying, with evasion
decreasing revenues by up to 35%.
2. Contributing members may not afford contributions in respect of dependants
The poorer the country, the higher the dependency ratio, largely because of high levels of fertility and
large family size. If dependents are excluded from SHI benefits, as was initially the case in Costa
Rica’s and Thailand’s SHI systems, then revenue from workers’ contributions only pays for the
workers’ health care costs. To cover workers’ dependents, the contributions must be more than
doubled (although the independence of some administration costs on the number of lives covered
reduces the overall contribution to some extent). A favourable financial condition for including
dependants is that the premium rate for a child is typically only about one-quarter of that for an adult.
In the Philippines, approximately 25% of benefit payments go to beneficiaries less than 20 years of
age, 50% to those aged 20 to 60, and 25% to those older than 60. Thailand eventually extended its
coverage to dependants, but only once SHI accumulated a hefty surplus.
3. Actuarial costing of the benefits package requires technical skills and data, and is essential to
determine the financial sustainability and survival of SHI
Actuarial costing of the benefits package is essential, with such techniques increasingly being
applied. Actuarial methods require such information as household utilisation data broken down by
age, sex, employment, and income. Furthermore, utilisation and unit costs will have to be projected to
reflect moral hazard, induced demand, and price increases associated with the introduction of SHI.
For example, health services of higher quality than in the past, without financial barriers to their use,
are likely to lead to a large increase in primary care consultations. The contribution can only be
determined when accurate actuarial costings have been completed. Is a contribution of x% of payroll,
split evenly between employer and employee, enough? Is y% enough or is a higher percentage called
for? What level is politically acceptable and collectible? If the required contributions are too high, as
usually happens, what has to be cut back in the benefits package? In order to take all these
considerations into account, the benefits package is determined by means of an iterative cycle:
designing the benefits package, estimating its costs, undertaking political consultation, then adjusting
the benefits package and estimating its costs, and so on. This process requires technical skills and
data. In countries with a per capita annual income of US$2,000 or less, these problems will be a
major challenge; in countries with a per capita annual income of US$500 or less, they will be
monumental. In all countries, sound actuarial analysis combined with a political process will be
essential. Many districts in Ghana encountered difficulty in implementing SHI because the premium
was too low.
4. Enrolment of those in the informal sector and the self-employed, since mandatory enrolment is not
easily enforceable
Enrolment of those in the informal sector and the self-employed will always be a major challenge,
because mandatory enrolment is not easily enforceable. If their enrolment is voluntary, antiselection—meaning the poor and the sick with the highest medical bills will be the most likely to join—
will be a major threat to the financial sustainability of SHI. In addition, the administrative costs to
enrol, monitor, and collect contributions from this population can also be high. In the Philippines, two28 | P a g e
thirds of voluntary enrolees did not pay their premiums on a regular basis, motivating the SHI fund to
give religious and cooperative organisations group discounts as a way of enrolling their entire
membership, which helped somewhat, but did not solve the problem. In Thailand, coverage and
collection problems were such that the government decided to use general revenues to pay for all
informal sector and self-employed workers. The more confidence workers have in government and
SHI, the more recourse government and SHI have to effectively punish those who evade.
5. Defining, certifying, and subsidising the poor
All stages of SHI face major problems in relation to defining, certifying, and subsidising the poor. As
implied by the Ghana and Kenya case studies, the poorer the country, the worse the problem,
because the number of poor people will be large and the capacity to monitor and evaluate them will
be limited. Moreover, actually getting public subsidies to the poor and the indigent will be a major
hurdle, requiring proper cross-subsidisation and pooling of risks between rich and poor regions if SHI
contributions are held at the regional or district level.
6. Supply will have to be built up progressively if clients in semi-urban and rural areas are to have
access to adequate health care
Moreover, improving performance through contracting (on the supply side) and through choice of
providers (on the demand side) will be compromised without sufficient providers to allow some form
of competition.
7. Provider payment mechanisms that aim to shift the financial risk of provision to the provider, will have
to be continuously monitored and evaluated
As Thailand’s experience shows, capitation without special provisions for the indigent or for
expensive cases, can lead to cream skimming and risk selection as providers have an incentive to
keep their costs to a minimum.
8. Administrative efficiency improvements e.g. associated with the consolidation of existing social
insurance and other risk-pooling schemes
Improvement of the administrative efficiency and effectiveness of SHI requires attention on several
fronts. How should a country consolidate existing social insurance and other risk-pooling schemes? In
Colombia and Ghana, for example, several different insurance schemes already existed prior to the
introduction of a universal SHI, resulting in fragmented risk pools, inefficiencies, and large transaction
costs. In Ghana, SHI faces the challenge of integrating various schemes that vary in terms of
membership, benefits, premiums, and types of providers. In Colombia, the administrative costs of
health plans were so variable, ranging from 4 to 60% of the value of the premium, that the
government issued a decree that required plans to have a minimum of 200,000 enrolees. This led to
a wave of mergers among plans serving the subsidised population, with a reduction in their numbers
from 239 in 1999 to 43 by 2004, with 45% being private, 42% being community based, 6% being
public, and the remainder being health plans for indigent people. Moreover, administrative budgets
have to be realistically determined and adhered to. In Kenya, these are set at 5% of SHI revenues,
but are as high as 12% in the Philippines. Within those budgets, SHI administrations have to be more
effective in discharging their responsibilities because they have little recourse to soft budgets and
government bailouts should cost overruns occur. This places a premium on establishing efficient
administrative operations and recruiting good managers.
9. Leakage of SHI funds because of corruption will be a perpetual threat
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In Kenya, compulsory SHI for hospital services suffered greatly from poor management and
corruption, with only 22% of the fund actually used to pay for benefits and a large portion of the
accumulated reserve lost through corruption. As a result, Kenya’s plans to launch a new national SHI
system include rules to constrain the board’s behaviour, including a 5% limit on administrative costs,
a 3% limit on reserves, and a requirement for board members to abstain from voting on investments
or contracts if they have any financial links to them. Fraudulent claims will hound SHI, as in the
Philippines, where the Office of the Actuary estimates that somewhere between 10 to 20% of claims
are fraudulent.
Policy Implications
The 15 policy implications are cautionary statements, intended to minimise misconceptions and mistakes
surrounding SHI:
1. SHI is complicated: effective and efficient implementation takes many years
SHI is a sophisticated financing method and effective implementation requires reorganising the
Ministry of Health and establishing a new SHI agency. The ministry of health has to be transformed
from being a funder, manager, and operator of public health services to being a policy maker, a
regulator, and an overseer. The new SHI agency has to have a sound organisational structure,
effective leadership and management, capable and dedicated professional staff, and sophisticated
management information and information technology systems. For example, the SHI agency has to
recruit or contract capable doctors, actuaries, accountants, financial managers, information
technology specialists, policy analysts, and planners and its executives and managers have to be
educated in the nature and functions of SHI. In managing health services, the SHI agency needs to
select and contract health care providers and monitor their services, which requires hospitals to
develop modern accounting, financial, and medical record-keeping systems. Most low-income
countries simply do not have the required human resources and knowledge and these will have to be
developed over time.
2. It takes decades for SHI to achieve universality
Passing a law to introduce the principle of universal coverage through SHI is only the first step. In
relatively rich countries, the number of years between the first law related to health insurance and the
final law that effectively implemented universal coverage through SHI ranged from 70 to 100 or more
years in several Western European countries, to 30 to 50 years for Costa Rica, Japan, and Korea.
Moreover, coverage tended to grow slowly, usually taking decades to approach universality.
The most severe constraints to achieving universality in low- and middle- income countries are tax
revenues and the portion of workers employed in the formal sector, which depends on a country’s
stage of economic development and employment structure. Poor countries not only have small tax
bases worsened by large informal sectors. Enrolling civil servants and employees of large firms is
easy, but enrolling the self-employed and informal sector workers is much more difficult. The
challenge for enrolling the poor is funding them.
Economic growth can have four positive effects on SHI enrolment:


it lifts people out of poverty, meaning that more people can afford to pay;
it brings more workers into the formal sector, which increases the number of people in the
contributory regime;
30 | P a g e


it raises general revenues for the government, meaning that more of the poor can be subsidised;
it tends to increase the government’s administrative capacity to collect taxes and insurance
premiums.
Thailand took more than 25 years to reach universality, at which point their annual per capita income
had reached US$2,400. Thus expanding SHI coverage and attaining universality depends on a
nation’s rate of economic development.
3. Initially, having the same benefits package for all groups may not be possible
All countries would like to offer a comprehensive benefits package to all citizens. Unfortunately lowand middle-income countries may not be able to afford such a package. Formal sector employees
demand comprehensive benefits and may be able to pay for it. However, a difficult trade-off has to be
made for the poor and near-poor. The choice involves covering fewer poor and near-poor with a
comprehensive package or covering more of them with a less comprehensive package. For example,
Colombia had to limit the benefits package of the poor to make it only half as expensive as that of
formal sector employees so that it could be affordable. Colombia then expanded its coverage to the
near-poor with an overall benefits package less comprehensive than that offered when it was
restricted to just the poor population.
4. The benefits package must be designed and costed
Costing out the benefits package is a major technical and political hurdle in implementing SHI.
Usually, politicians like to promise the most and pay the least. A sound SHI program requires
adequate and sustainable financing. The initial “wishful” benefits package has to be costed to
ascertain its affordability and acceptability by the funders. In practice, it requires several rounds of
designing a benefits package, estimating its actuarial costs, modifying the benefits package, and then
re-estimating its actuarial cost to reach a balance between “wishes” and economic reality. Kenya did
not conduct such a process, which resulted in the president’s refusal to sign the SHI bill into law.
Ghana, as at 2004, had yet to cost its benefits package. The Philippines had, after 10 years of SHI,
not undertaken actuarial studies of the real costs of providing benefit packages. Absence of this kind
of information disempowers managers.
5. User fees must be in place to motivate people to join
People have to have incentives to pay SHI premiums. This applies especially to self-employed
workers, who would not be motivated to join SHI if government services were available at little or no
cost. This is a significant issue in countries with high levels of poverty and strong political pressures to
eliminate user chargers at public facilities. In other words, people will be motivated to pay for SHI if
user fees are relatively high, if patients have to purchase drugs and supplies, or if public services are
so poor that many patients pay out-of-pocket for private providers and are susceptible to catastrophic
financial loss at times of serious illness or injury.
6. SHI must create adequate incentives for workers to enrol
The mainstay of SHI membership will be workers in the formal sector who can be identified as
employees of organisations and are mandated to pay monthly premiums. However, even when
contributions are mandatory, anti-selection can be a critical problem, with evasion most likely among
smaller employers. To overcome this, SHI has to create incentives for workers to enrol by requiring
employers to pay a share of the SHI premium. Thus Colombia, Ghana, Kenya, the Philippines, and
Thailand all designed their SHI so that employers pay at least half of the premium. This parallels the
31 | P a g e
experience of SHI in many countries that are more developed than these five, where the contribution
rate is also split between employers and employees, for example, 4.5% of payroll each in Bulgaria
and 6.1% each in Romania.
7. Large general revenues are needed to cover the poor
All low- and middle-income countries have large poor populations who are unable to pay the
premium, and nations use different criteria to establish the poverty level. The indigent population
usually accounts for 40 to 50% of the population of low-income nations. Even in the United States,
12% of the population falls below the poverty line. The government has to have the budget to
subsidise the poor, and to do this, it could reallocate funds from other programs to health and/or raise
new tax revenues. For example, Ghana imposed a new 2.5% value added tax to help finance the
subsidised regime, but whether the funds will be sufficient to pay for all the poor as Ghana’s SHI
coverage expands, is not clear. The Philippines used revenues from a national sweepstakes lottery to
help finance premiums for the poor.
8. Stakeholders must be convinced of the actuarial soundness of SHI
SHI is required to maintain its own solvency, meaning expenditures “out” must not exceed revenue
“in,” and thus must be transparent and accountable. Solvency cannot be adequately assessed
without actuarial calculations that consider near and longer-term characteristics of the workforce and
the level of workers’ earnings. These, in turn, will depend upon many economic and demographic
factors, including future birth rates, death rates, labour force participation rates, economic
development rates, and wage increases. In the United States, for example, actuarial calculations
must show predicted revenues and expenditures for 25 years into the future for Medicare, a program
financed primarily by a payroll tax that covers 38 million elderly and disabled Americans. The
absence of actuarial studies will leave SHI policies and implementation plans vulnerable to intense
public scrutiny and criticism in relation to solvency.
9. Supply-side subsidies must be reduced
In most low-income countries, the government subsidises public health facilities with a large annual
budget. Under SHI, public health facilities will receive their revenues from SHI payments. The supplyside subsidy should be reduced in synchronization with the implementation of SHI, with the savings
used to expand the subsidy for the poor or the like. Otherwise, the public health facilities will be
overpaid, a poor use of scarce resources. Colombia had planned to reduce this supply-side subsidy
as SHI expanded, but it has been unable to do so, because of the political power of public health
workers’ unions. As a result, the planned expansion of SHI to cover the near-poor has been retarded
and public health facilities used the additional revenues from SHI payments to increase staff
compensation and to undertake new capital projects.
10. The SHI Agency should be insulated from political interference
To represent the interests of the insured and prevent corruption, SHI needs to be independent from
the government. The new independent agency must be transparent in relation to its finances, which
requires independent audits. Many countries establish their SHI agency under the ministry of health
without adequate representation by the insured and by premium payers. Typically, the ministry of
health is dominated by medical professionals who tend to protect supply-side interests, as was the
case in Colombia and the Philippines. Under such governance, much of the new revenue went to
increasing the salaries and profits of providers.
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11. The SHI Agency should be a prudent purchaser of medical services and goods
For the ministry of health to manage SHI is difficult, because doing so requires a transformation of its
corporate culture from that of a funder and operator of public services to that of an active, prudent
purchaser of services for the insured. The contrasting experience of the Philippines and Thailand
provides a good example. The SHI agency in the Philippines has acted like a traditional, passive,
private insurance company, that is, as just a financial intermediary. It enrols members, collects
premiums, and pays claims. By contrast, the national health security office (NHSO) in Thailand
selectively contracts with provider networks and pays them a capitation rate, a payment system
designed to discourage overuse. As a result, Thailand has not had the same problems the Philippines
has of new funds being used to benefit suppliers instead of the insured.
12. Qualified providers must be certified before or concurrently with implementation of SHI
As a purchaser of services, SHI will need to contract with public, NGO, and private-for-profit
providers. SHI members will expect these providers to provide more or less uniform quality of
services and have more or less uniform capacity to deliver them. To a large degree, public providers
will be trying to conform to established, published, provider guidelines, with the onus on public
providers to live up to those guidelines if contracted by SHI. At the same time, the quality of private
sector health services is highly variable, and detecting fraud and price gouging is difficult when SHI
pays claims. These kinds of deficiencies have to be remedied before or concurrently with the
implementation of SHI if it is to gain enduring public support, perform its role of assuring reasonable
quality, and sustain its operations financially.
13. A single fund is preferable to multiple funds.
Three main arguments support the establishment of a single insurance fund instead of many funds.
Firstly, low-income countries lack the human resources, experience, and information technology
systems required to start one fund properly, so having multiple funds would further dilute the human
resource pool. Secondly, having multiple funds would increase administrative costs at both the
insurer and provider levels, meaning that fewer of the scarce resources would be spent for health
services. Thirdly, a system with multiple funds develops political and bureaucratic barriers to
universal SHI with equal access.
Thailand’s major hurdle to equalising access is the merger of its various funds. Colombia, Ghana,
Kenya, and the Philippines learned from the struggles of more advanced economies such as
Germany, Korea, and Taiwan (China) that had multiple SHI funds, and established a single SHI fund.
Nonetheless, several economists argue that multiple funds would give people a choice and that
competition among funds would promote greater efficiency.
14. Donors could play a valuable role in supporting the implementation of SHI
Donors are keen to fund international or national public subsidies to improve the health of the poor.
Their traditional approach has been to channel donor assistance to publicly financed and provided
health goods and services, on the presumption that these funds will benefit the poor. However, as
studies of public funding typically show, the richest households are the ones that benefit the most by
“capturing” the public subsidy through having public hospitals built in urban areas where the rich can
easily access them. In addition to multilateral and bilateral donors, international NGOs channel large
infusions of funds to supply-side provision of public health goods and services, such as much needed
vaccinations supported by the Global Alliance for Vaccines and Immunisations, which directly affect
33 | P a g e
health status outcomes. Donor support of SHI is needed to complement traditional development
assistance, because SHI shifts the emphasis from improving health status alone to improving both
health status and financial risk protection. Avenues of support include the following:



Writing off debt owed to the donor countries (“debt forgiveness”) in developing countries that are
undertaking SHI as a way to subsidise membership by the poor as Ghana planned to do;
providing direct grants to SHI that are earmarked for enrolling the poor and the indigent and/or
expanding special benefit entitlements to targeted groups, as the Philippines did with directly
observed treatment short-courses (DOTS) and maternity benefits;
increasing technical assistance to manage and operate SHI in the form of resident, seconded
staff who have experience in planning, budgeting, undertaking actuarial analysis, contracting, and
monitoring performance.
15. SHI should be linked to a National Health Insurance policy
Finally, an important role of government is to formulate a policy that clearly links the initiation of SHI
with other risk-pooling mechanisms and other dimensions of health systems development:
Firstly, SHI should not be seen merely as a way of mobilising and earmarking more revenue for
health and for providing formal sector workers with better health services. It should be seen as a
building block in national efforts to provide universal risk pooling and coverage and, where possible, it
should be used to connect and integrate risk-pooling initiatives by other groups in society. The clearer
the government’s intentions are in this area, the better different stakeholders will be able to assess
the current and future benefits of SHI and the more solidarity can be facilitated in the process.
Secondly, it is important to recognise and clarify that legislation in support of SHI, as well as laws to
implement it, will have nationwide implications for all sources of revenue mobilised for health. Key
issues requiring clarity are the extent to which the government will continue to mobilise financing for
health from general revenues and other taxes and how it plans to target these revenues more
effectively to provide public health goods and services and subsidise the poor. In other words, as SHI
evolves, how will it co-exist with core government funding in a way that maximises financial risk
protection and assures access to quality care nationwide?
Thirdly, the potential or intended role of SHI as an instrument of health sector reform should be
specified. SHI can be a powerful instrument for reforming the health care delivery system to improve
the efficiency and quality of health care by being an active and prudent purchaser of health goods
and services. SHI can also be an instrument for helping to horizontally integrate the many vertical
externally funded programs typically found in low- and middle-income countries.
4.6 Country experience within the informal sector
In Africa, Community Health Insurance (CHI) Schemes are a common mechanism used to provide health
care to low-income earners living in rural areas. It was independently estimated that there were 626 CHI
schemes in West Africa alone. (Soors W, 2010)
Community Health Insurance Schemes share five characteristics, namely:
1) The schemes are established by communities, of which the individuals share common
characteristics such as geographical area, ethnicity, religion, etc.
2) Solidarity principles are applied as opposed to mutuality i.e. contributions to the scheme are not
determined based on a member’s risk factors
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3) Members are involved in decision making and management of the scheme
4) The schemes are non-profit
5) Membership to the scheme is voluntary
(Soors W, 2010)
In West African countries the establishment and management of CHI schemes has been undertaken by
the respective governments which have also instituted enabling legal frameworks. Varying levels of
success have been achieved by different countries of which Senegal, Mali, Ghana, Guinea, Burkina Faso,
Benin, Togo, Cameroon and Niger are included. Progress has been slow and the success of the entire
concept as a means of providing health care to low-income earners who live in areas with limited access
to such services has been heavily criticised. (Soors W, 2010)
In Central and East Africa, both government and health care providers tend to play leading roles in the
establishment and management of CHI schemes. The United Republic of Tanzania, Kenya, Uganda, and
Rwanda are some of the countries who also have attempted to provide health care to the informal sector
through CHI schemes. Most of these schemes are young and small though, also with varying levels of
successful implementation. (Soors W, 2010)
Exploring the possible establishment of CHI schemes as a means of providing health care to the informal
sector in Namibia would require extensive research and investigation into the nature and size of it and the
most appropriate structure for the CHI schemes.
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5. Collection Methods
The NMBF has various options available when it comes to funding the claims and expenses the scheme
will incur on an on-going basis. Various countries worldwide take different approaches to funding
social/national health insurance schemes. Funding systems are generally a mix of three sources of funds
(private, employer-employee contributions, and national/sub-national taxes). These funds are usually notfor-profit institutions run solely for the benefit of its members.
In countries such as Canada, payment is made by government directly from tax revenue. In the UK, an
additional contribution is collected for all workers, paid by employees and employers based on the level of
salary paid. In both of these cases the collection is administered by government. The NMBF may
consider a combination of these methods by offering a health care subsidy on contributions paid by
employers and employees.
In choosing a preferred funding method, the NMBF needs to consider the affordability and the viability of
funding through national taxes, as well as the ease of collecting contributions through employers/
employees.
5.1 Tax collection system in Namibia
One of the options of funding for the NMBF is via income tax. Individuals are taxed on a progressive
marginal scale over a series of income brackets with the highest marginal rate being 35%.
The Namibian tax system has undergone continuous reform since independence which has brought
about numerous improvements. The tax system is perceived to be equitable and transparent, and after
the introduction of the value-added tax in November 2000, tax collection has significantly improved.
Currently there are tax allowances where individuals may deduct for contributions to approved pension
funds, provident funds and retirement annuity funds, however no deductions are granted to individuals for
medical expenses (employers liable for such expenses may deduct them, subject to certain limits). In
addition, both employers and employees are required to make social security contributions at a rate of
0.9% of the employee’s basic salary income up to a maximum of NAD 54 per month. A similar structure
may be considered when determining the funding method for medical costs.
The success of funding the NMBF through income tax will largely be dependent on the tax collection
method and how successful Namibia has been at collecting income tax in the past.
Namibia has a self-assessment tax system for both income tax and value-added tax, and therefore places
the obligation squarely on the taxpayer to submit tax returns by the due date or face the consequence of
a penalty for late submission of the tax return. In some cases these penalties are severe.
Salaried individuals must file their returns by the end of June. Tax on employment income is withheld by
the employer under the pay-as-you earn system and remitted on a monthly basis to the Receiver of
Revenue. Individuals who derive income from business or farming activities must register as provisional
36 | P a g e
taxpayers. Therefore it is unlikely that tax from employed individuals will not be collected, which is
promising for the NMBF if income tax is the funding method of choice.
The following table shows how Namibia ranks worldwide with regard to ease of paying taxes. We
compare Namibia’s ranking to other countries where Social Health Insurance/National Health Insurance
has been implemented.
Country
World Ranking
Ease of paying taxes
Tax payments
Time to Comply
Total Tax Rate
Namibia
99
123
149
4
UK
16
15
23
76
Germany
88
53
84
128
Taiwan
87
56
108
100
South Africa
24
24
75
43
Kenya
162
133
153
135
Ghana
78
109
90
53
Philippines
124
149
70
118
Colombia
118
71
80
171
Thailand
91
83
106
78
* www.pwc.com/payingtaxes

The amount of taxes and mandatory contributions payable by businesses after accounting for allowable deductions and
exemptions as a share of commercial profits.(as defined by The World Bank)
Namibia is ranked relatively low in respect of ease of paying taxes compared to the UK and South Africa.
However, it is evident that although Namibia needs to improve their collection methods, it is not far behind
compared to most other countries in the above table. The big difference is evident in the total tax rate.
th
Namibia is ranked as the 4 lowest total tax rate in the world. Countries who have implemented
Social/National Health insurance typically have a considerably higher total tax rate. If Namibia is to fund
the NMBF through taxes it may need to increase the tax rate to accommodate this. However this will have
many other implications that will need to be considered such as the effect on GDP and economic growth.
Alternatively the government may need to redistribute the current budget in which tax is currently being
utilised.
5.2 Current collection methods by medical aid schemes
A further consideration for the NMBF is how contributions will be collected via individuals and/or
employers. If government fails to collect contributions successfully, they will not be able to cover the claim
costs and expenses needed to support the fund. The collection method will be vital to the success of the
NMBF.
Currently in the Namibian market, medical schemes collect contributions on a monthly basis in advance,
and any subscriptions in arrears will result in suspended benefits and accrue interest at the prime interest
rate. Contributions for individuals who are part of their employer’s group medical aid are normally paid
through the employer, with the contribution deducted from a member’s salary and paid into a revenue
fund. Therefore medical schemes generally do not have problems collecting contributions from these
individuals. Individuals who are not on an employer’s group medical scheme generally set up a debit
order to pay for their contributions on a monthly basis; however this is not always the case in Namibia,
with only 62% (FinScope, 2011) of the adult population having a bank account.
37 | P a g e
Individuals are not required by law to join a medical aid when employed, and therefore the decision to join
is normally a financial one. Medical schemes in Namibia experience the problem that members often
default on their payments during months of hardship in order to bring temporary relief to the household
budget. When times improve, members continue to pay their contributions, however the contributions in
arrears are often not made up. The NMBF will need to devise a strategy in order to overcome this
situation and ensure that contributions are collected timeously in full.
In South Africa, employed individuals may be required to join a medical aid as a condition of employment.
An employed individual will either need to join the specific medical aid their employer supports, whereby
contributions are automatically deducted from the member’s salary. Alternatively an individual would need
to prove they are a member of a medical aid and will then have contributions automatically debited from
their account via a debit order. Unemployed/self-employed individuals are also able to join a medical aid
and will also have contributions automatically debited from their account.
It is recommended that the NMBF, should they chose to use contributions collected from
employers/individuals in order to fund the scheme, use a similar method as the one used in South Africa,
whereby all employed individuals must have medical cover, and contributions are collected via employers
or direct debit orders. The collection of contributions from the self-employed, however, will be more
challenging due to the variability of the income, the inability to verify the accuracy of the income
stipulated, as well as the difficulty in locating the self-employed.
38 | P a g e
6. Demarcation between Health
Insurance and the NMBF
6.1 Health insurance vs. medical aid
Health insurance and medical aid differ significantly, but are essentially both insurance products used to
cover expenses relating to healthcare.
Health insurance works like a typical insurance product, where cover is paid for, and a defined claim
amount is paid out if a specified incident occurs. Health Insurance payment amounts are also typically
defined prior to the benefit event occurring and do not indemnify the policyholder from the actual medical
expenses incurred.
Medical aid is not incident based, and claim payments are made on an indemnity basis subject to certain
benefits rules. Medical services and products are paid for on an ongoing basis.
6.2 Demarcation in Namibia
In Namibia, medical aid funds are the largest provider of healthcare coverage, with insurance companies
playing only a minor role. In general, insurance companies will provide healthcare benefits that bridge the
gap between actual medical costs and the benefits provided by a medical aid fund. In certain instances,
health insurance products will provide cover for AIDS-related illnesses.
Medical aid funds in Namibia are required to comply with the Medical Aid Funds Act, No 23 of 1995 and
the regulations of 11 February 1997, and are governed/regulated by NAMFISA. The Act defines a fund
as follows:
" any business carried on under a scheme established with the object of providing financial or other
assistance to members of the fund and their dependants in defraying expenditure incurred by them in
connection with the rendering of any medical service, but does not include any such scheme which has
been established in terms of an insurance policy”
Medical aid funds in Namibia are not allowed to offer long and short term insurance products according to
the NAMFISA Circular No PI/MA/2003 of December 2003.
Health Insurance is classified as short term insurance in Namibia and therefore falls under the Short-term
Insurance Act, No 4 of 1998, but is also governed/regulated by NAMFISA. Medical aid funds and health
insurers will therefore have different administrative, regulatory, reporting and capital requirements.
39 | P a g e
6.3 What does this mean for NMBF?
The NMBF will act as a medical aid fund rather than provide health insurance and will therefore need to
comply with similar provisions to those stipulated in the Medical Aid Funds Act. It will be exempt from the
Medical Schemes Act (Act 72 of 1967), except in so far as the Minister determines otherwise (as laid out
in the Social Security Act).
The NMBF should fall under the regulatory ambit of NAMFISA, as this body regulates all non-banking
institutions in Namibia. NAMFISA is an independent regulatory body, whereas if the SSC were to set up
its own regulatory function this would result in the SSC regulating itself and thereby foregoing the core
regulatory requirement of independence.
Regulation pertaining to the NMBF in particular will need to be defined at a high level, however the rules
governing the day-to-day running of the scheme will need to be detailed and approved on an annual basis
in order to ensure they remain appropriate within an ever changing environment.
40 | P a g e
7. Overview of the Healthcare
Environment in Namibia
7.1 Overview
Namibia has one of the largest income inequalities in the world, with 10% of the highest income
households accounting for over 90% of total household income. This poses a serious health care
challenge as a vast majority of the population is unable to afford medical scheme contributions (NPC,
2005).
This uneven distribution of wealth also results in a small taxpayer base and hence less tax revenue per
capita that the government can spend towards the improvement of public health care services for the
population.
A direct result of lower funding in the public sector is that health professionals are naturally attracted to
the private sector, further exacerbating the dis-equilibriums between the rich and the poor. In 2008 it was
estimated that there were 8.8 health workers per 1000 population in the private sector, compared to 2.0 in
the public sector (the WHO benchmark is 2.5) (MoHSS, 2008). The table below further illustrates the
shortage of health care professionals and facilities in Namibia.
Health workforce 2000 - 2010
Number
774
3.7
Benchmark
density (per
10 000
1
population)
22.4
5 750
27.8
44.5
Dentistry personnel
90
0.4
6.5
Pharmaceutical personnel
376
1.8
3.7
198
1
4.7
Physicians
Nursing and midwifery personnel
Environment and public health workers
Density
(per 10 000
population)
Infrastructure
Hospital beds (2000 – 2009)
-
2.7
36
Radiotherapy units (2010)
-
0.005
.014
Note: The benchmark is taken to be the average for upper middle income countries as Namibia is
classified as an upper middle income country
Source: World Health Statistics 2011, World Health Organization
41 | P a g e
7.2 Public Sector
The Namibian government is the main provider of healthcare services in Namibia, with the private sector
and mission facilities playing supporting roles.
The public healthcare sector is managed at two principle levels:
1. The Ministry of Health and Social Services (MoHSS) head office in Windhoek, and
2. The regional level.
The MOHSS is responsible for formulating policy, strategic planning, setting legislation & regulation, and
co-ordinating functions. The regional level is split into 13 directorates that oversee the implementation of
healthcare policies and the provision of health services within the 34 health districts that exist.
There are 30 public district hospitals, 44 health centres and 265 clinics that deliver public healthcare
provisions. In addition, the district hospitals are supported by three intermediate hospitals as well as one
national referral hospital. (MOHSS, 2008)
Given the vast geographical size of Namibia relative to its population, health care outreach is critical in
order to provide healthcare services. The public healthcare system addresses this problem by providing
mobile clinic services at 1 150 outreach points throughout the country.
Various mission facilities also play a significant role in the health care industry, although these missions
are completely subsidised by the government and are therefore included in the public sector facility
numbers quoted above.
7.3 Private Sector
The private hospital sector is largely restricted to urban areas and provides health care through 13
medium sized hospitals, 75 primary healthcare clinics, 8 health care centres, 557 medical practitioners
and 75 pharmacies. (WHO, Namibia Health Resource Tracking: 2007/08 & 2008/09, 2010)
The medical fund industry is regulated by the Medical Aid Funds Act of 1995. This Act also allowed for
the formation of the Namibian Association of Medical Aid Funds (NAMAF) as the representative body for
the healthcare funding industry tasked to “control, promote, encourage and co-ordinate the establishment,
development and functioning of funds in Namibia.”
Ministry of Health and Social Services
13 regional directorates
34 health districts
30 public district
hospitals
44 health
centres
265 clinics
3 intermediate
hospitals
National referral
hospital
1 150 mobile
clinics
The Namibia Financial Institutions Supervisory Authority (NAMFISA) is a public body responsible for the
regulation and supervision of non-banking financial institutions in Namibia, including pension and
retirement funds, long-term insurers, short-term insurers and medical aid schemes.
42 | P a g e
There are four administrators operating in the Namibian medical scheme environment, providing
administration services to nine medical aid funds as illustrated below:
Administrator
Methealth Namibia
Administrators
Medscheme
Prosperity Health
Paramount
Medical Aid Fund
Scheme Type
Closed
Bankmed
Namibia Health Plan
Open
Closed
Open
NAPOTEL Medical Aid Fund
Closed
Namdeb Medical Aid Scheme
Roads Contractor Company (RCC) Medical
Aid Fund
Renaissance Health Medical Aid
Closed
Namibia Medical Care
PSEMAS
Nammed Medical Aid Fund
Closed
Open
Open
Private health insurance products are used mostly as top-up cover to the cover provided by medical aid
funds. These products fall under the Short-term Insurance Act of 1998.
The medical aid fund population is dominated by the Public Service Employees Medical Aid Scheme
(PSEMAS). This is a state run scheme, exempt from the Medical Aid Funds Act, with approximately
80 000 principal members and is open to civil servants only. PSEMAS accounts for over 50% of the
medical scheme principal member population, with the other schemes consisting of above 60 000
principal members.
The total number of beneficiaries covered by medical schemes, including PSEMAS, was approximately
320 000 people during 2010. Given that the total population in 2010 was estimated by the US census
bureau to be approximately 2 million, this implies that approximately 1.68 million uncovered Namibians
are forced to make use of public health facilities where an out-of-pocket method of payment is required.
Therefore, the health coverage of the population in 2010 is illustrated below.
Namibian population
PSEMAS
8%
Other
medical
funds
7%
Uncovered
population
85%
43 | P a g e
The 2011/12 budget allocated N$ 3.3 billion to the MoHSS, however PSEMAS alone allocated N$ 1.1
billion in its budget for members over the 2011/12 period. (Haufiku, 2011)
PSEMAS is heavily subsidised by the Ministry of Finance as the contributions charged are minimal and
insufficient to cover the comprehensive set of benefits that are provided. Given steeply rising healthcare
costs, the sustainability of PSEMAS is likely to come under increased pressure going forward which in
turn reduces funding available to other institutions serving a greater portion of the population, such as the
MoHSS.
The introduction of the NMBF could be used as a tool to partially correct the inequalities which currently
characterise the Namibian health care environment. It is aimed at providing greater financial protection to
the Namibian population against the uncertain costs of ill-health. Further detail on the policy objectives of
the NMBF and its influence on the Namibian environment are provided in the sections to follow.
44 | P a g e
8. Policy objectives of the NMBF
The NMBF aims to be an active step towards improving and/or achieving the following Namibian health
system goals and objectives (IMSA, 2009a):
1. Accessibility
Formally, accessibility is defined as the proportion of the population that reaches appropriate health
services. Access includes the ability of a sick person to gain entry to the system in order to establish
a diagnosis and plan therapy. It then also includes the ability to move between differing levels of the
system i.e. from primary care to specialist or even highly specialised care. It should be noted that
accessibility as defined above is with regards to the prospective members of the NMBF.
2. Financial Accessibility
Financial accessibility measures the extent to which people are able to pay for care.
3. Geographical Accessibility
Geographical accessibility measures the extent to which services are available and accessible to the
population. It is, of course, linked to the distribution of infrastructure in a given region, but also to the
actual offering of these services at these facilities. Geographical accessibility will vary according to
local means of transportation, as well as the local topography.
4. Universal access to healthcare
Universal access to healthcare refers to all people having an equal opportunity to gain entry to a
quality accredited health facility for diagnosis and therapy, regardless of their socio-economic class
and ability to pay, ethnicity, or physical disability. Accessibility includes not being obstructed by issues
of transportation and affordability.
5. Universal coverage
Universal coverage is defined by the World Health Organization as: “access to key promotive,
preventative, curative and rehabilitative health interventions for all at an affordable cost” (WHO,
2005).
6. Equity in healthcare
Equity in healthcare is about fairness and justice in the distribution of costs, benefits, and
opportunities in the health sector. Equity is therefore an ethical and subjective concept.
Consequently, there are varied views on what equity in the health sector means. Nevertheless, the
dominant perspective on equity is that “everyone should have equal opportunities to maximise their
health status (irrespective of socio-economic, demographic, and geographic characteristics of
different individuals/groups within the population). Accordingly, the incidence of health care financing
should be distributed according to ability to pay, and benefits should be distributed according to need.
This view (referred to as the egalitarian perspective) has been the guiding principles for many health
systems in recent years and is the basis for the definitions below.
7. Equity in health financing
Also termed “fair financing”. This is the case where wealthier groups contribute a greater proportion of
their income to the overall financing of the healthcare than poorer groups. Equity in health care
financing also advocates for the protection for the poor from catastrophic health expenditure.
45 | P a g e
8. Equity in resource allocation
Resources for healthcare (clinics, human resources, hospitals, budgets) should be distributed in such
a way that gives greater preference to those that have a greater need for healthcare (most vulnerable
– poorer, and/or those with greater disease burden).
9. Quality in healthcare
The degree to which health services for individuals and populations increase the likelihood of desired
health outcomes and are consistent with current professional knowledge. Quality is a perceptual,
conditional, and subjective attribute relating to a product or service. Quality in healthcare includes the
delivery of safe care that is consistent with current medical knowledge and customer-specific values
and expectations.
10. Responsiveness in healthcare
The WHO has defined several dimensions of responsiveness. These are: autonomy; information;
confidentiality; dignity; prompt attention; quality of basic care; access to social support network; and
choice of providers. Responsiveness reflects the individual’s actual experience with a health system.
The fundamental goals of a health care system therefore can be expected to improve health
outcomes and respond to the legitimate expectations of the population.
11. Sustainability
Sustainability of the health sector refers to the ability of the health system (based on its organization,
financing mechanism, structure, etc) to adequately generate resources for the provision of good
quality health care today and in the future. Implicit in this is the ability of the health system to change
with the changing needs of the population that is served.
12. Protect the nation’s health
Ultimately, the government aims to safeguard a healthy and productive workforce.
This in turn promotes productivity and a growing Gross Domestic Product. A healthy body is more
likely to support an enthusiastic work ethic. So, in this sense, the State healthcare policy should pay
for itself.
Note of course that there are certain prerequisites which are required for a health system to achieve its
goals. These include:
 Ensuring that there are adequate financial resources; trained staff; appropriate facilities, equipment;
and pharmaceuticals.
 The appropriate allocation and utilisation of resources
 Regulatory framework ensuring stakeholder participation, and relationship management
 Infrastructure for continuous monitoring and evaluation and clinical governance
The NMBF will aim to mobilise further financial resources for health. A dedicated medical fund regulator in
Namibia will also be recommended, who will thereby help ensure stakeholder participation and
relationship management. The regulator will also be mandated with continuous monitoring and clinical
governance.
46 | P a g e
9. Situational Analysis for SHI
If the NMBF is to be implemented, then SHI must first and foremost be desirable and feasible. The
purpose of this section of the report is to illustrate some of the most pertinent situational issues, in order
to set the context of the investigation for the NMBF and hence SHI.
The points set out in this discussion are not meant to be exhaustive, but rather intend to inform
predictions of why and how implementation difficulties may arise. The situational issues discussed below
will be assessed against the NMBF framework discussed in the previous section of the report.
It is important to emphasise first and foremost that this is an opportunity to design and implement a
solution to ensure the overall sustainability of the health financing system, in the face of an unsustainable
PSEMAS and declining projection of donor funding for healthcare (HIV/AIDS programmes in particular).
There is no question that PSEMAS in its present form is unsustainable. At the moment, there is no
relationship between contributions and costs. Members pay a flat contribution fee of N$60 per member
per month (pmpm) versus comparatively massive average claims cost of N$764 pmpm. The Minister of
Finance (MoF) funds the above deficit between claims and contributions generated by PSEMAS, and
hence ultimately assumes this risk. The MOF funds an equivalent of about 92% of total claims cost. This
is unsustainable because PSEMAS is the largest medical scheme provider in Namibia, and it effectively
shares MoF financing with the Ministry of Health and Social Services (MoHSS).
The following figure shows the increase in total claims cost for PSEMAS from 2007 to 2010:
Total Claim Cost to Service Providers by Year
Total claims cost (N$)
1000000,000
804736,808
874842,241
800000,000
657038,272
600000,000
558134,109
400000,000
200000,000
2007
2008
2009
2010
Calendar Year
Thus, one recommendation is to either repeal or replace the enabling legislation of PSEMAS so that a
more sustainable solution is provided. We understand that significant sticking points will lie ahead as
PSEMAS is a “condition of service” for government employees and forms part of their benefit package
47 | P a g e
expectations, but we believe that the revision of PSEMAS is critical for the attainment of Namibia’s overall
health financing solution.
Absorption of PSEMAS membership into the NMBF will have a number of advantages and
disadvantages.
Advantages:






The successful implementation of the NMBF would enable the reformation of PSEMAS which is
unsustainable in its current form.
Currently the MoHSS and PSEMAS are not aligned in their health sustainability objectives. By
absorbing PSEMAS membership into NMBF and aligning the objectives with that of the MoHSS, the
MoF funding can be shared between the entities in a more transparent and consistent manner.
PSEMAS’s data set and membership are comprehensive and may be used to inform the expected
membership and claims profile of the population under the NMBF.
PSEMAS’s overall shared in-house and out-sourced administration system works well, and this can
be leveraged off
The NMBF risk pool will be larger with more contributors, and thus the contributory regime will be
more financially stable
Help align and give impetus to the many debates that are ensuing in the health sector at the moment
e.g.:
o Equitable resource allocation requirement for a “minimum service package”
o Potentially offsetting the expected downward trajectory of donor funding
Disadvantages:



PSEMAS is a “condition of service” which forms part of government employee benefit package
expectations. The removal or downgrading of this benefit will be a major sticking point with the unions
who will look to preserve the current benefits enjoyed by government employees.
Government approval is required
Legislation must be updated
The results of our actuarial scenario-based costing exercise will help inform the merits of absorbing
PSEMAS members into the NMBF, or at least revising the existing PSEMAS arrangement.
Rather than a re-statement of the many debates ensuing in the Namibian health environment, we hope
that the NMBF (and hence SHI, leading to a potential NHI) discussion will bring all these debates under
one umbrella and thus generate focus.
If SHI is neither desirable nor feasible according to the criteria below, then it is important to rather ask
how any deficiencies can be countered, rather than completely disregard the imperative for a sustainable
health financing solution for Namibia.
Before embarking on SHI, it is worth asking five pertinent questions as suggested by the academic
literature (Normand & Weber, 2009):





What is the current level of employee taxation i.e. personal income tax i.e. payroll deduction, and is it
advisable to impose further charges?
What is the current level of unemployment, and the income distribution of those employed?
Is the formal sector large relative to the informal sector, and will it be possible and economical to
collect SHI contributions from the informal sector?
Should the emphasis of the SHI benefits package be on curative care versus basic preventative care
and health promotion?
Is the economy i.e. GDP expected to grow?
48 | P a g e
If the answers to these questions may be “no”, then it is absolutely imperative that one or more of the
following is carried out:
1. Sound actuarial costings are performed based on a range of SHI scenarios
2. The impact of shifting the taxation burden to another base, e.g. an employer taxation on company
profits in the private sector, is tested
3. A phased implementation approach is considered e.g. SHI can have a part to play initially for some
groups of the population, as a first step towards a more comprehensive system
4. Alternative health system financing models are considered
Of course, the above counter-actions are important even if SHI is neither desirable nor feasible. But the
point is that they become even more crucial if SHI is expected to face significant design and
implementation challenges.
9.1 Payroll Deduction i.e. Employee Taxation
According to the Ministry of Finance (MoF) only 131 247out of 2.2 million (6.0%) pay personal income tax,
which is a small payroll tax base. The MoF feels that taxation room exists only on employers in the private
sector. However, this base may already face other tax increases e.g.:


for the new Education Act, the taxation system proposed is that 2% of company profit must be paid
over
Other Acts such as the Child Protection Bill are sound in principle but require costing investigations
Thus, it can probably be answered that it is not advisable to impose further charges at this stage, at least
without due consideration. Rather, a better approach might be to adopt fiscal discipline and move away
from a welfare state (to avoid sovereign bankruptcy like countries are experiencing in the EU, and to
attract foreign investment in Namibia). However, one may counter this argument and state that PSEMAS
is in itself unsustainable, thus making the existing health financing system in Namibia at present
unsustainable (because PSEMAS is a large spender of MoF health expenditure).
The key point is that the results of the scenario-based costing investigation will inform this debate.
9.2 Unemployment
About half of Namibia's labour force are unemployed – the broad unemployment rate was estimated at
51.2% in 2008 i.e. unemployed persons who are not actively looking for work are included (Ministry of
Labour and Social Welfare, 2010). The unemployment rates are higher in the younger age groups and
consistently fall in the older age groups. Unemployment in Namibia is of a long-term nature (72.2% of the
unemployed have been without a job for 2 years or more). The unemployment rate is higher in rural areas
(64.9%) than in urban areas (36.4%)
Thus, it can probably be answered that the current level of unemployment is not conducive to SHI, at this
stage, at least without due consideration.
However, one may counter-argue that “job creation” and “healthcare” are inter-connected, and these two
issues should not be considered in isolation. Rather, academic studies have shown that ensuring the
49 | P a g e
health of the population can contribute positively to productivity, GDP growth, and hence job creation.
Therefore, the NMBF and employment might be considered simultaneously.
9.3 Labour market structure
SHI is typically funded by a percentage deduction from income. However, the income of the informal
sector and self-employed is difficult to assess because:



Income tends to be variable
It is genuinely difficult to know when a cost has been incurred by the individual or business
There are strong incentives for people to understate income
SHI therefore works best in the context of a relatively large formal sector. It is more expensive and more
difficult to operate SHI under the conditions of a large informal and self-employed sector.
We therefore need to assess the labour market structure in Namibia (Ministry of Labour and Social
Welfare, 2010). Namibia has a population of approximately 2.2 million. There is a significant formalinformal split of that population:



About 60% of the population operate in informal sector employment, in particular in subsistence
agriculture
Agriculture and fishing employees make up 29.9% of total employment
Agriculture, primarily livestock, is a substantial contributor to the economy, but is particularly prone to
fluctuations due to weather extremes, suffering from both drought and flood
So, it can probably be answered that the formal sector is not large relative to the informal sector, and it
may be difficult and expensive to collect SHI contributions from the informal sector.
However, because of mining, tourism, and large commercial farms, the formal sector of the economy is
proportionately larger than in many African countries. The formal sector in 2008 included about 250 000
employees, which includes 60 000 government employees.
9.4 Burning health priorities and need: curative care or basic preventative care
and health promotion?
It is important to investigate the burning health needs of the Namibian population by investigating the
most recently available morbidity and mortality data procured by the MoHSS, to inform the NMBF benefits
that can match the need. The MoHSS provides us with the following mortality and morbidity data for
2010, as extracted from their Health Information System:
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Rank
Main causes of morbidity
Number
Percentage
1
Other respiratory disease
472,734
22.9
2
Musculo-skeletal system disorder
287,959
13.9
3
Skin Diseases
205,393
9.9
4
Common cold
199,084
9.6
5
Trauma
180,007
8.6
6
Diarrhoea without blood
176,608
8.5
7
Nose and throat diseases
175,743
8.5
8
Other Syndrome
171,486
8.3
9
Other Gastro Intestinal diseases
122,570
5.9
10
Contraception, gynaecology, pregnancy and obstetric
80,907
3.9
2,072,491
100
Number
Percentage
Grand total
Rank
Main causes of mortality
1
HIV/AIDS
1,811
20.4
2
Diarrhoea, gastroenteritis, presumed infectious
1,578
17.8
3
Pneumonia
1,483
16.7
4
Pulmonary tuberculosis
1,453
16.4
5
Heart failure including CCF
587
6.6
6
Anaemia
549
6.2
7
Malnutrition
410
4.6
8
Hypertension, essential primary
345
3.9
9
Other respiratory system diseases, pneumoconiosis, lung
abscess, etc.
336
3.8
10
Stroke, intracranial haemorrhage, cerebral infarction, CVA
319
3.6
8,871
100
Grand total
We have two main reservations of the above data, which warrants further substantiation from other
sources that inform the chronic disease profile of Namibia:


The morbidity and mortality statistics are not explicitly “linked” or they don’t “talk to each other”. It
might be informative to obtain data which demonstrates a closer more explicit link between morbidity
and mortality in Namibia.
Some may argue that it is not strictly true that someone can die from HIV/AIDS. Rather, they may
argue that individuals die from other opportunistic infections and co-morbidities. Therefore, it may be
informative to obtain a further breakdown/split of the HIV/AIDS death by their key opportunistic
infections.
However, the above data suggests that Namibia’s key health needs are preventable. For example,
effective preventable measures (against largely preventable conditions such as HIV/AIDS, Diarrhoea and
Gastroenteritis, Malaria, Pulmonary tuberculosis, Pneumonia, Malnutrition, other respiratory diseases,
Heart Failure, and Stroke) can help reduce or avoid downstream (and hence more expensive) health
costs.
51 | P a g e
Thus, the health priorities of the nation suggest that a large part of the health needs of the population will
be met by the continued introduction of preventative care. However, the academic literature, informed by
past country experience, suggest that SHI works best for the coverage of curative care (versus
preventative care) in both primary and secondary care settings, because this offers a value proposition to
the SHI members i.e. people enjoy the benefits of being guaranteed access to treatment in the event of
illness (Normand & Weber, 2009).
The literature suggests that it is more difficult to fund basic preventative care and health promotion
through SHI insurance, than it is to fund curative care. The literature goes on to suggest that if the highest
priority is to expand primary health care (PHC) coverage among scattered rural populations, with an
emphasis on basic preventative care and health promotion, then it is unlikely that SHI will help to achieve
this. A mixture of government funding, with fees and co-payments by patients, and innovative forms of
community financing are likely to be more useful for the expansion of preventative care and health
promotion services.
However, in rebuttal of the above argument, if a residual part of the health needs of the population will be
met with the introduction of a NMBF benefits package that is based on curative primary and secondary
care (versus preventative care), then SHI will be useful. This is because such a benefits package can be
effective in reducing downstream, more expensive hospitalisation costs. In addition, a focus on
preventative care via SHI (i.e. the NMBF and the 10 private medical funds) will allow the State to focus its
attention and efforts on curative care.
9.5 Projected GDP growth
It was identified previously in the literature that an important enabler for SHI is economic growth. The
economy contracted by 0.8% in 2009 owing to a sharp drop in diamond production. The GDP forecasts
below, provided by the International Monetary Fund (IMF), are reasonable but not exceptional (Korea
took 26 years to achieve NHI, with a very high 10% annual economic growth). In addition, the forecasts
are estimated as of April 2011, before fears over a double dip recession owing to the Euro Zone crisis
became heated. Thus more recent forecasts might be desirable.
The table below illustrates the IMF’s GDP growth forecasts for Namibia (Ndjavera, 2011):
52 | P a g e
IMF GDP Percentage Change Forecasts
6
GDP Percentage Change
5
4
3
2
1
0
2010
2011
2012
2013
2014
2015
2016
Year
Thus, one could argue that the economy is expected to grow, but not to a sufficient extent to fully support
the introduction of the NMBF and hence SHI. However, once again, as stated above, health decisions
should not be made independently of job creation decisions. This is because the two issues are interconnected, as supported by findings from academic studies. Hence, health and job creation should be
viewed in a holistic manner.
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10. Design Considerations for the
NMBF
The literature provides for various recommendations on the design of SHI (Hsiao & Shaw, 2006). The
design factors are also informed by the lessons learned from the country experience of the
aforementioned 5 countries: Kenya, Ghana, Philippines, Colombia and Thailand.
SHI must be designed in a way that is not only sufficiently inclusive in terms of benefits, but so that it is
affordable and sustainable over time. Moreover, it must be implemented in ways that do not exceed the
capacity of health systems and that can be regulated to assure quality. The design of SHI essentially
involves maximising social benefits under financial and political constraints. For example, policy makers
have to trade-off between the goal of covering as many poor as possible with the goal of offering them a
comprehensive benefits package. Meanwhile, the cost of the benefits package is also determined by how
the SHI contracts for and pays providers.
Policymakers have to decide on at least seven interconnected groups of major questions in order to
pursue the goals of SHI:
1. Size of
contributory
regime?
7. Healthcare
delivery
improvements?
2. Coverage of
poor?
SHI
Interconnected
Decisions
6. SHI
governance
and
administrative
structure
5. Fiscal
capacity and
projected
timetable for
universal
coverage?
3. Coverage of
self-employed
and informal
sector ?
4. Benefits
package
definition and
cost?
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The following describes the seven major groups of questions, as suggested by Hsiao and Shaw:
1. How many people can be enrolled under the contributory regime, who should these people be, and
how can premiums be collected from them? The SHI premiums the insured pay are the new source of
financing that provides additional funds for health while pooling their risks.
2. How should “poor” be defined, what portion of the poor should be subsidised, how should the subsidy
be targeted, how much will this cost, and how will it be financed? Answers to these questions
determine the government budget required for funding SHI for the poor, what portion of the poor will
gain equal financial access to health care, and to what extent health gains will be produced.
3. How can non-poor self-employed and informal sector workers be enrolled and how can premiums be
collected from them? Decisions on these issues influence whether a nation will be able to achieve
universal SHI and pool health risks widely and also have the potential to reduce fraudulent claims,
because people who are not covered often “borrow” membership cards of those covered so that they
can obtain health services.
4. What is the benefits package for each group and how much will it cost? These decisions determine
the premium rates for the contributory regime population, the government budget needed to fund the
poor, and people’s access to health care and insurance protection.
5. What is the nation’s fiscal capacity to fund the poor and near-poor to achieve universal coverage, and
what is the projected timetable for this? Such planning disciplines decision makers in the adoption of
a long-term strategy for SHI and considers the steps that have to be taken to achieve universality.
6. How should SHI be governed? Should the SHI agency be a public agency, a quasi-public agency, or
a private non-profit entity? What is the best and most viable administrative structure for SHI?
Decisions on these matters influence the efficiency and effectiveness of SHI operations.
7. How can SHI improve health care delivery? How should providers be contracted and paid? Decisions
pertaining to these issues influence the efficiency, cost, and quality of health care, and in turn the
population’s health, the premium rates, and the government’s budget for subsidising the poor.
If SHI design and implementation is to be successful, then SHI must adhere to the following design
principles:
1. Maximise the overall percentage of population covered by SHI
The success of an SHI system depends largely on:


The ability to enrol and collect premiums from the contributing population, and
The government’s ability to subsidise premiums for the poor
The law should define who is eligible to enrol and pay a premium and who will be subsidised. Higher
coverage percentages obtained through time are associated with better performance, all else being
equal.
SHI for developing countries usually divides the population into three groups:
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Group
Target population
Enrolment and premium collection
Compulsory
enrolment
and payment
(contributory
regime)
Large employers in the formal
sector e.g. banks and
manufacturing corporations
Relatively easy.
Voluntary
enrolment
and payment
(contributory
regime)
a. Employees of small employers
b. Informal sector workers e.g.
housekeepers, waitrons
c. Non-poor self-employed e.g.
farmers, fishermen, hunters,
shopkeepers, and day labourers
Evasion is a challenge.
Fully or
partially
subsidised
(subsidised
regime)
Poor and possibly non-poor
Gradually phase in the poor (in the hope that economy will
grow and fewer people will need to be subsidised)
Feasible if 10 or more employees at employer (international
experience).
Either:
• Identify the poor with a means test
• Subsidise groups where the majority of members are
easily identifiable as being poor e.g. farmers in certain poor
regions, residents of poor districts, elderly, orphans,
children, disabled.
Corruption is a challenge e.g. local officials award subsidies
to relatives, friends, or political supporters
2. Maximise the percentage of the population covered by SHI, by target group
Factors relating to the structure of the economy will impact the level of population coverage. For
example, it is typically administratively easier to collect contributions from employees in industry,
mining, or services sector than from the self-employed. Hence economies with a larger industry,
mining, or services sector are likely to have a higher percentage of the population covered by SHI
from the outset. Thus, the NMBF implementers may choose to maximise the percentage of the
population covered by target group (versus overall).
The following benchmark classification, based on typical groups for SHI membership, may be used:
1 = civil servants (including teachers, police, and military personnel)
2 = employees of private and public enterprises
3 = self-employed professionals
4 = casual and migrant workers, agricultural workers and other self-employed
5 = retired civil servants and employees
6= selected groups of the non-working population (e.g. students, disabled, unemployed)
Dependants are included in the various categories. Certain population groups are administratively
easier to cover than other groups. Therefore, some extensions or expansions in respect of SHI
coverage are easier than others. For example, it may be relatively easy to extend health insurance
coverage to previously uninsured dependants. For example, at the time of the introduction of SHI in
Colombia in 1993, only 20.6% of the total population was affiliated to social security. Four years later,
53% of the population was enrolled. A significant part of the increased coverage was explained by the
enrolment of family members of formal sector workers who were already previously insured.
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3. Set the ratio of prepaid contributions to total costs i.e. the overall prepayment ratio, of the SHI
benefit package, at an acceptable rate
Prepayment is typically always preferred to out-of-pocket (OOP) payments because prepayment:

Is more likely to include the poor:
OOP spending restricts access to only those who can afford it, and is likely to exclude the poorest
members of society. In contrast, prepayment improves financial accessibility to health care and it
offers better protection against the uncertain financial consequences of health care.

Improves financial accessibility to the SHI benefit package:
The level of prepayment affects how accessible the SHI benefit package will be to the population.
The higher the level of prepayment, the greater the SHI benefit package’s accessibility. In
particular, co-payments may be so high that access to a number of health services is limited. In
essence, the prepayment ratio is important as a measure of financial accessibility.

Is a requirement for risk pooling
Prepayment is also preferable to OOP payments as it is a requirement for pooling of risks
amongst people. Under SHI schemes, prepayment is combined with risk pooling.
Thus, a higher prepayment ratio (i.e. the ratio of prepaid contributions to the claims cost of health
services under the SHI benefit package) suggests a better performing SHI scheme.
However, there are three main caveats:

The SHI benefits package must still remain adequate
A very high prepayment ratio may imply that the benefit package is very restricted. This is
because the state may need to limit the benefit package to allow for financing constraints
resulting from subsidising a larger prepayment amount.
This is undesirable because many families may still be left to bear significant health care costs
OOP, or they simply cannot afford to gain access to certain health services. Therefore, a high
ratio of prepaid contributions to the total cost of the SHI benefit package indicates a wellperforming SHI scheme only if the SHI benefit package offered is simultaneously comprehensive.
A comprehensive package is generally comprised of outpatient care (primary care, selected
specialist services, essential drugs) and inpatient care (including essential drugs and ancillary
services, such as laboratory tests).

Counter moral hazard with the use of co-payments
Moral hazard suggests that individuals may have an ‘excess’ demand for health care at the point
of consumption. This is because the price of healthcare for these individuals has been
subsidised. However, it can be argued that moral hazard is not that pronounced in health, as one
should expect people to prefer being healthy to demanding care. Nevertheless, moral hazard
remains an important consideration as once sick, people may want to obtain as much care as
possible. Introducing some level of co-payments can counter moral hazard behaviour to some
extent.
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
Patients may bypass primary care levels and access the health system at inefficient secondary or
tertiary levels of care. This can be countered through a gatekeeper mechanism.
When there are no financial barriers to demand health care at the various levels of the health
care system, families may want to bypass the primary care level and instead enter the health
system at a more specialised secondary or tertiary care level. Such practice is inefficient and is
likely to contribute to increasing health care costs unnecessarily. Policymakers may assign a
gatekeeper role to certain providers, such as GPs, whereby access to higher levels of the health
care system is given only in case of need, and upon referral from the GP gatekeepers.
For the first two reasons above, a 100% maximisation of the prepayment ratio is not necessarily
the best policy. For example, in most European SHI systems, co-payments for health services up
to 30% are quite common. Higher co-payments are even possible in the case of certain
categories of pharmaceuticals.
There is no “one size fits all” prepayment ratio. The need to take account of moral hazard may
differ between countries, resulting in different levels of co-payments, and hence different
prepayment ratios. Furthermore, the prepayment ratio will depend on a country’s income level.
Lower income SHI countries may decide to introduce lower levels of co-payments for certain
health services, given that these are unaffordable by the population.
International SHI experience is useful in making a recommendation. However, international
prepayment ratio data that specifically relate to the SHI benefit package is not explicitly available.
As a proxy for the prepayment ratio, data from SHI countries on the ratio of general government
expenditure to total health expenditure can be used. The average of these ‘prepayment’ ratios in
27 countries is 71.1%, with 16 countries having a ratio from 70% to 91.9%. The latter range is
deemed a sensible guideline for developing countries, in terms of financial protection against
health care costs (WHO). The literature therefore recommends the following range for the
prepayment ratio in developing countries: 70% to 91.9%.
4. Set the prepayment ratio by target group, at acceptable levels
Policymakers may choose to vary the prepayment ratio by target group due to:



Different levels of insurance membership between these groups
Risk pool fragmentation resulting in different levels of financial risk protection
The existence of alternative prepayment mechanisms (such as community based health
insurance schemes) that are used more by certain target groups
It is however important to aim for similar prepayment ratios for all target groups in order to maintain
fairness.
5. Minimise the percentage of households with catastrophic spending
Catastrophic spending is defined as 40% or more of a household's effective income, net of
subsistence (food) expenditure. Better-performing SHI schemes minimise the percentage of
households with catastrophic spending. This is desired as it ensures that prepaid contributions and/or
co-payments are affordable to all.
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The prepayment ratio remains important as a measure of financial accessibility. However, minimising
the percentage of households with catastrophic spending guarantees the affordability of health care
payments, and hence gives a more fundamental measure of the success of a SHI scheme.
6. Minimise fragmentation of the NMBF pool
Fragmentation is the existence of too many small risk pools. A fragmented risk pool will:


Receive a lower overall amount of contributions
Possess limited risk pooling ability
If the NMBF offers many benefit options, then this may result in a more limited risk pool per option,
and hence the SHI benefit package per option will need to be limited to reduce claim volatility, which
places more restrictions on access to health care benefits. In addition this introduces opportunities for
anti-selection whereby individuals can select their benefits based on healthcare need.
Therefore, it is recommended to rather aim to minimise the level of fragmentation under the NMBF.
The NMBF’s target population equals all employees in the formal sector (including self-employed)
including those lives who are already insured, and as such is a sufficiently large risk pool in its
entirety. Care should be taken when considering options which could excessively fragment this risk
pool.
A SHI scheme can be made up of either:


multiple risk pools/funds, or
a single risk pool/fund
Given that the NMBF together with the 10 open and closed private medical funds in Namibia will
achieve SHI, it is worthwhile considering the advantages and disadvantages of a single fund versus
multiple funds.
The main argument in favour of multiple risk pools:

Competition between funds may result in greater efficiency (under risk adjusted risk equalisation
but not without post risk sharing risk equalisation)
However, single fund systems remain the most attractive to policy makers because:





Minimising the level of fragmentation maximises risk pooling
Less money is spent on administration
Funds are centrally allocated
Even though branch offices in different regions or provinces may not contain costs, financial
incentives can encourage efficient administration and contracting with providers
Even though regulation (such as open enrolment) is required to limit cream-skimming in a single
fund system with branch offices, equivalent regulation would be required under a multiple fund
system
7. Make membership compulsory
Several problems will arise if membership is voluntary.
59 | P a g e
SHI contributions are not risk-based but are instead based on ability to pay. Hence, there will be a
significant anti-selection risk IF membership is voluntary.
If membership is voluntary, then:
•
•
Higher risk lives and poorer lives are likely to want to join the SHI scheme
Lower risk lives and richer lives are not likely to want to join the SHI scheme e.g. in DRC, the
wealthiest population group was under-represented in the scheme’s membership
Thus, the result is an on average unhealthier risk pool and higher contributions would be required by
those who contribute.
If this high risk profile is not anticipated and priced for when contributions were set, then financial
strain on the NMBF is likely to follow.
The fund’s administrators must then intervene to ensure the financial security of the fund, by:
•
•
Revising or restricting the SHI benefit package, or
Increasing the SHI contributions paid
However, neither of these interventions are solutions to the initial anti-selection problem, but are
instead reactive measures that are likely to accentuate the initial problem.
The above two interventions are not solutions because there is a risk that any subsequent
lapsation/withdrawal is selective. Normal lapsation differs to selective lapsation. Under selective
lapsation, the healthier lives lapse or fail to renew their SHI contract instead of paying the increased
SHI contribution or accepting the restricted SHI benefit package, while those in poorer health agree to
continue or renew their SHI contract. The NMBF must be wary of the better risks choosing to leave,
which will cause the overall morbidity experience and hence claims experience for the NMBF as a
whole to deteriorate. The fund’s administrators may therefore in the future need to once again
increase contributions by a greater than anticipated margin, which would exacerbate the initial
problem, as a second bout of lapsation may once again be selective (“vicious circle” or “death spiral”
scenario). Selective lapsation can therefore have a destabilising effect on the health profile of the risk
pool.
The key take-home message from the above discussion is that membership of the SHI funds
(whether the NMBF or one of the 10 open and closed schemes) should be compulsory as opposed to
voluntary.
8. If the NMBF is going to be priced on solidarity principles, then legislation is required which
also imposes such cross-subsidies from rich to poor on all existing open and closed funds to
limit anti-selection on the NMBF.
It is always possible in setting the prices to be charged to socially-engineer the table to provide relief
for vulnerable groups. In medical schemes, elderly pensioners or lower income workers typically
favour restricted schemes. This is because an income-rated contribution table provides relief for lower
income earners and often pensioner members fall in these lower income groups. It is not usually
feasible to do so in open schemes because of the potential anti-selection if only some open schemes
follow this route. This is where Government needs to play a role in regulating acceptable crosssubsidies that all open schemes must implement (IMSA, 2009b).
60 | P a g e
9. Ensure the effective collection of finances
The chosen sources of funding drive the equity or fairness of the SHI scheme. Equity is also driven by
the way SHI contributions are distributed between families with different incomes.
The main funding source for SHI schemes are contributions from:
Employees
Self-employed
Typically salary-related and paid in part by the
employer
Typically flat-rated (much easier to administer)
or income-rated (arguably fairer)
Those with a higher income will accordingly pay higher contributions. Thus, income-rated
contributions are fairer than flat-rated contributions. On the reverse, flat-rated contributions,
particularly in countries where it is very hard to properly estimate income for the self-employed, can
be time saving and easier to administer. A trade-off between efficiency and equity thus exists. Under
an income-rated design, contributions are more equitable but at the expense of higher administrative
costs.
A compromise would be to have a series, or bands, of flat-rates as an alternative to either a pure
income-rated or flat-rated design. This accounts to some extent for individual’s ability to pay, without
making administration too expensive and time consuming.
Society as a whole may limit the overall degree of equity. When all contributions are pooled and the
benefit package is universal, differences in contributions between groups may be excessive and
unacceptable to certain individuals. If a significant percentage of the population is reluctant to accept
an important implicit redistribution of wealth, then public buy-in and the sustainability of the SHI
scheme will be threatened.
One way for a SHI scheme to place a limit on the financial solidarity underlying a society is to cap the
absolute amount of the salary which is used to calculate contributions. Differences in contribution
levels by salary band are therefore reduced.
Salary-rated contributions are a relatively sustainable source of revenue, since the contributions
increase along with the employees’ income. Salary-rated contributions are subject to fewer yearly
budgetary negotiations than general taxation funding. However, salary-rated contribution funding is
not completely stable. Under a salary-rated contribution structure, the SHI scheme will collect less
revenue in recessions if the workforce shrinks. The revenue amount generated will still depend on the
prevailing economic condition, and so the revenue stream is still subject to some volatility.
For SHI, the unit of subscription or registration for the above contributions is typically either at the:


Family level, or
Individual level
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Family level
Individual level
Advantages:
• Increases coverage (due to administrative
ease)
• Reduces anti-selection (since unhealthy
individuals are less likely to register
themselves if they have to also register their
entire family)
Disadvantage:
• Likely to incur the highest administrative
cost e.g. a health insurance card needs to
be delivered to each individual
Nonetheless, individual registration may be a
better option if fraudulent use of the SHI system
can be avoided.
However, an important disadvantage is:
• Potential fraud, whereby non-contributors
claim to be members of a registered family
when they are not.
• To mitigate this fraud risk, a family and its
constituent dependants need to be clearly
defined.
However, policy makers often wish to cover more of the population than just those who have
contributed, such that payroll contributions alone do not produce adequate revenues for SHI
financing. Such population groups may include the unemployed, pensioners, students, and the poor,
however the inclusion of these broader groups leads to the creation of a National Health Insurance
system in which the entire population is eligible for benefits but only those who can afford to
contribute do so . Hence in most SHI systems, payroll contributions are supplemented by other
revenue-generating mechanisms. Government subsidies through general taxation are typically the
primary supplementary funding source.
Contributions may typically be supplemented by the other alternative funding sources to ensure
equity and sufficient resource generation:




Government subsidies and general taxation
Earmarked consumption taxes. Earmarked consumption taxes on harmful tobacco and alcohol
products and activities can help cover the health care costs incurred from such products and
activities. Such taxes can also help alter consumer behaviour.
External aid e.g. donors. External aid may be useful in funding specific once-off projects.
However external funding is, by nature, only a short-term solution.
Co-payments are not a revenue source for the NMBF. Co-payments are used to directly and
indirectly control costs. The level of SHI expenditure is directly impacted by the co-payment level.
Insured expenditure is lower, the higher the level of the co-payments, all else equal. Claims cost
is also indirectly affected through the influence of co-payments on consumer incentives, as in the
case of moral hazard above. However, co-payments are not typically a revenue generator for the
SHI scheme. Instead, the health care providers typically directly receive the co-payment
revenues.
Advantages and disadvantages of government subsidies through general taxation:
Advantages


May be used to subsidise the cost of care for the unemployed, pensioners, students, and the poor
in the non-contributory subsidised regime, thereby securing affordability of health care to a
greater number of lives.
To the extent that vulnerable groups contribute less given their lower ability to pay, government
subsidies also improve equity.
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Disadvantages



Typically more volatile due to yearly budgetary negotiations, although salary-rated contributions
will decrease in a recession.
Reduces the independence of the SHI fund from the government budget.
May create friction between contributing employees and the subsidised self-employed. For
example, in the Republic of Korea in early 1989, SHI membership became compulsory for the
urban self-employed. Heated debates on how feasible it was for the government to subsidise the
self-employed, ensued between stakeholders. Friction arose, as employees did not like the
possible subsidisation of the self-employed. SHI financing for the different population groups
therefore became a political issue. Ultimately, a compromise was reached, and government
subsidies were implemented to a limited extent only. In 1995, government subsidies amounted to
35% of the urban self-employed health insurance fund.
Assessing the fiscal requirements for funding SHI, and the potential to achieve universal coverage is
absolutely essential.
The major technical issue pertaining to the viability and sustainability of SHI relates to its costs and
whether sufficient funding can be provided for it. While the goal may be to establish SHI to achieve
universal & equitable access to reasonable health care, the tax funds required to finance it could be
prohibitively high. Planning a sustainable SHI requires several rounds of analysis, each of which
requires a careful specification of those eligible to be covered, a detailed delineation of the actual
benefits package and an actuarial analysis of its costs, as well as an assessment of how the costs will
be financed. This process is when noble visions, however worthy, face a reality check.
The Kenya case illustrates the fiscal challenge facing the government. The legislation intends to
provide universal SHI. Employees in the formal sector will pay a percentage of their wages to cover
the full cost of their premiums and others will pay a flat-rate premium. The government planned to
impose an 11% value added tax to fully subsidise the poor, who account for around 30% of Kenyans.
Even though the president proposed legislation to establish SHI and parliament passed it, the
president delayed signing the legislation into law because he was uncertain that the contribution rate
will be sufficient to fund SHI in the long term.
Ghana established an SHI program in 2003 and issued regulations clarifying the intent of the law in
2004. Ghana’s strategy differs from that of Kenya. Ghana plans to enrol 20% of the total population in
three years and 50% of its citizens in 15 years. These seemed to be realistic goals, but whether the
Ghanaian community-based insurance scheme can overcome the difficulties of enrolling the poor,
non-poor farmers, and informal sector workers to achieve the 50% goal remains to be seen.
The Philippines passed a law and established a universal SHI program in 1995, intending to achieve
universality by 2005, but 40% of the population still remains uncovered. Most of these are the nearpoor, the non-poor self-employed, and workers in the informal sector. The government stated that its
goal was to achieve universality by 2010.
Colombia implemented SHI in l993 with the intent of achieving universality within a few years by
compromising the benefits package for the poor, who account for 40% of the population. This entailed
giving the poor half the benefits that employed workers received. Nevertheless, 11 years later, only
67% of the population was enrolled. The near-poor and informal sector workers have largely
remained uncovered by SHI.
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Thailand has just achieved universal coverage. The successful candidate for prime minister in 2001
put universal SHI at the top of his election promises. Once elected, the prime minister allocated
sufficient government funds to pay the premium for all the poor, the near-poor, and the non-poor
informal sector workers. Nonetheless, their benefits package is less than those employed in the
formal sector, which leaves Thailand with a multi-tiered system.
Realistically, developing nations may achieve universal coverage in two or three decades if their
economies grow rapidly. SHI can first cover civil servants, formal sector employees, and the poor who
are being fully subsidised, then move step-by-step to include other groups until universal coverage
has been achieved.
Worldwide experience indicates that SHI can be effectively implemented in developing countries for
formal sector workers plus those who are largely subsidised by the government budget, such as the
poor and the near-poor. Enrolling and collecting premiums from non-poor workers in the informal
sector and farmers are the major hurdles for universal coverage. It seems that universal coverage
can only be attempted with a chance of success when a nation’s economy has grown to
approximately US$3,000 per capita per year (as exemplified by Costa Rica and Thailand).
10. The benefits package should adhere to certain broad principles
A key policy decision in designing SHI involves what services the benefits package covers.
The pooled SHI contributions are used to purchase a specified benefit package to which all insured
lives are entitled. The specified benefit package must be clearly defined in a contract between the
SHI scheme and the healthcare providers at the respective levels of the health system.
Costs are directly related to the comprehensiveness of the benefits package. This issue immediately
raises the question of what is affordable for different population groups, for example, self-employed
workers may not be able to afford the same benefits package that can be financed by employer and
employee contributions. The issue often becomes a choice between:
1. comprehensive benefits with fewer people covered, versus
2. less extensive benefits with more people covered
When a country adopts SHI, its government is often unwilling or unable to allocate enough tax funds
to finance the same benefits package for the poor as for others. As a result, the poor and the selfemployed often get a much smaller benefits package than those who are employed in the formal
sector. As the five country cases illustrate, all five nations except the Philippines have different
benefits packages for different groups, with the poor getting much less. In the Philippines, SHI for the
poor became a key presidential election strategy to solicit votes from the poor, so full benefits were
extended to them. Indeed, the poor are the only group with outpatient benefits.
In designing an affordable benefits package, the question arises as to what services should be
included. In determining the actual components of the benefit package, the following principles should
be followed.
The benefit package’s specification should aim to:
3. Be as comprehensive as possible, given the budget constraints of the SHI scheme.
4. Ensure members receive the health benefits that they need.
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5. There should be no under-provision or over-provision of health care, as this is not in the interest
of the patient and the SHI scheme respectively. Therefore, regular monitoring of under- and overprovision is a necessary task of the SHI administration.
6. Account for society’s preferences regarding efficiency and equity, so that resources are used
optimally.
7. Policy makers need to decide the relative importance of different efficiency and equity criteria.
Clarity on the criteria used is of benefit to all stakeholders who have an interest in the SHI
system.
A health financing discussion paper (WHO, 2004) proposed the following efficiency and equity
criteria:
 Cost-effectiveness
 Significant positive impact on an individual’s health or severe health conditions
 Equality in health over a lifetime
 Poverty reduction
 Horizontal equity, defined as “equal treatment for equal need”
 Collective versus individual responsibility
It is very important that efficiency-equity trade-offs are recognised and well understood. For
example, very expensive treatments may be part of the benefit package, provided that insurance
against the costs of such treatments benefits the vulnerable population and thus contributes to
poverty reduction.
The relative weighting given to each criterion should broadly reflect the society’s particular
preferences. In other words, policy makers may prefer less efficiency in exchange for a greater
degree of equity.
11. Put monitoring mechanisms associated with the benefits package in place
The following monitoring systems are needed to help ensure that the benefit package is fully received
by all the insured lives that are entitled to it:

Full information on claimant rights
Claimant rights information should be easily available so that members are more likely to access the
full range of health services in the SHI benefit package.

A patient appeals mechanism
This mechanism allows members to complain through the appropriate channels when they feel that
they have received inadequate care.

A peer review committee to counter under-provision
Information on claimant rights and a patient appeals mechanism do not guarantee that patients obtain
the correct treatment when they become ill. Patients still need to rely on the health care provider to
recommend the appropriate type of treatment, given that the provider is better informed to make such
a recommendation. There is an asymmetry of information between the health care provider (the
“agent”) and the patient (the “principal”), and the provider makes decisions on behalf of the patient.
This is an example of an “agency relationship”.
65 | P a g e
In circumstances where the provider has a limited budget and the intervention required is expensive,
the agency relationship can lead to the provider under-providing i.e. not providing interventions
included in a benefit package to a patient even when the interventions are necessary.
A peer review committee can review whether providers have given adequate care, often through
analysis of cases brought up through a patient appeals mechanism.

A claims review process to counter over-provision
Over-provision is also possible, particularly when the provider is reimbursed by the SHI fund on a feefor-service basis. This arises once again due to asymmetric information, yet this time between the
insurance fund (the principal) and the health care provider (again the agent).
A claims review process, where qualified health personnel employed by the SHI scheme
independently review insurance claims, will help ensure that claims made by health care providers
are justified.
12. To minimise risks, legal contracts between the NMBF and its providers need to be welldefined.
The nature of the contract between the provider and the SHI fund also needs to be carefully
designed. The precise terms and conditions in the contract are important, especially because the
ultimate decision on whether a patient should receive a particular treatment or not lies with the
provider.
The potential contestability of the contract is also important. A contract which is regularly contestable
is preferable to a long-term fixed contract. This is because contestable contracts would put pressure
on the providers to provide good quality care.
13. Ensure that the mix of reimbursement methods promotes optimal resource allocation
The purpose of this section is to describe the features and merits of the main reimbursement or
payment methods so that an optimal mix of these methods can be chosen.
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Capitation
Fee-forservice
Per diem
Salaries
Diagnosis
Related
Groups
(DRGs)
Budgets
The choice of reimbursement method is a fundamental driver of the provider’s behaviour and can
significantly impact both the cost and quality of care provided. Care should be taken to ensure that
appropriate incentives are in place that will align the interests of the provider and the scheme.
Reimbursement mechanisms utilised can affect the performance of SHI schemes, particularly in
relation to potential over- and under- provision of services by providers. The choice of reimbursement
method is therefore crucial in guaranteeing optimal resource allocation.
It is impossible to unanimously state which provider reimbursement mechanisms are better or worse
than others, as each have their relative advantages and disadvantages. Appropriate remedial
strategies should be used to ensure that each type of reimbursement method gives the optimal
impact on cost containment and quality of care. For each reimbursement method, a brief description
and design remedies to ensure better performance are presented.
The success of any reimbursement system should be measured by both:


The system’s accuracy and lack of bias
The extent to which the reimbursement system incentivises provider behaviour in line with social
objectives
13.1 Fee-for-service
Description:
Fee-for-service is a reimbursement method whereby providers are paid for each service provided to a
patient. This method encourages providers to provide health services and is perceived to thus be
advantageous in terms of service quality. However, this incentive effect is also the method’s main
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source of criticism. Fee-for-service is often criticised for encouraging an overproduction of health
services (i.e. supplier-induced demand) because providers are paid for each service given. For the
same reason, there is a tendency to reduce the time spent by activity and/or delegate to less qualified
health professionals, so the provider can maximise their income. In addition, administrative costs
associated with billing costs, reimbursing fees, and monitoring/adjusting fee schedules, are likely to
be high.
Design remedies:
The following strategic interventions can counter over-production:



Combining fee-for-service with budgets
Adjusting fees after a specified level of services is exceeded
Using co-payments for patients
Monitoring, such as peer reviews, can also help counter inappropriate delegation and insufficient time
spent per activity.
Competition between providers can counter the negative quality aspects as a poor quality of service
will lead to patients choosing other providers. However, this is limited by the patients’ ability to
differentiate between a good and poor quality of service.
Such methods have been used in countries such as Japan, Germany, Belgium and Canada.
13.2 Capitation
Description:
Under a capitation agreement, providers receive a fixed fee per person for services delivered over a
specified period. Capitation can be used for both ambulatory and inpatient care. Capitation is easy to
administer. However, this is not necessarily the case if the payment is adjusted to reflect the expected
morbidity of the population. As providers are not reimbursed according to the quantity of services
given to the patient, there is no incentive to over-service. However, capitation encourages underproduction as providers will want to contain costs to improve their profits. Furthermore, referrals and
transfers of cases to higher levels of care, which may not be subject to capitated reimbursement,
limits this method’s ability to control total claims cost.
Design remedies:
The following strategic interventions can counter under-provision:



Monitor utilisation and occupancy rates
Capitate groups of individual providers together, reducing the incentive for any single provider to
under-produce
Encourage competition between providers, which will motivate providers to provide good quality
service
For referrals and transfers, monitoring is less essential if capitation payments are paid, not just to one
level, but to many levels in an integrated referral system. Use of an integrated referral system is a key
design remedy.
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According to Mr Karl Whey of Paramount, it is currently the case in Namibia that only one private
medical fund (Nammed, administered by Paramount), has entered into a hospital capitation fee
arrangement with a provider group (Medi-Clinic). Since 2008, Nammed entered into a hospital
capitation agreement with Medi-Clinic as its Preferred Service Provider. On a monthly basis, the fund
looks at the total membership profile. Then, the fund allocates all the lives into age bands e.g. 0-19,
19-39 etc. Thereafter, the fund allocates a risk premium for hospital benefits to each beneficiary. The
total risk premium is then calculated and paid to Medi-clinic. During the month, if certain members go
to non-Medi-Clinic facilities, then Medi-Clinic pays the non-Medi-Clinic service provider according to
the normal NAMAF structure, and subtracts the payment amount from the Medi-Clinic prospective
capitation fee payment. During the month, Medi-Clinic submits a summarised monthly account. The
fund does not pay these claims because of the capitation agreement. The capitation contract’s
duration is the same as the financial year of the fund. It can be expected that this arrangement
reduces the volatility of claims payments from the medical scheme.
13.3 Daily (per diem) payment
Description:
Daily payment of hospital services is simple and cheap to administer. However, if unregulated, then
costs may be difficult to control. This is because there is an incentive to extend the length of stay of
patients, and to increase the number of admissions or re-admissions. If there is a lack of competition
or monitoring, then poor quality services can result. This is because hospitals have an incentive to
reduce input costs.
Design remedies:
In order to provide incentives to shorten the average length of stay, the daily payment can be
progressively reduced as the length of stay increases. This is the case in Japan, where basic
hospitalisation fees have been progressively reduced, with the per diem rate after ninety days being
less than half of the first fourteen days.
Competition between providers and monitoring are the main methods for achieving good quality
services.
13.4 Diagnosis Related Groups (DRGs)
Description:
Under DRGs, hospitals are prospectively paid an inclusive flat sum for a patient’s treatment according
to the patient’s diagnostic group. DRGs were developed to classify hospital cases into a number of
groups. An example of a DRG is “Renal Failure”.
This method encourages cost containment because providers are incentivised to be efficient.
However, the potential of DRGs to contain costs is limited because providers are incentivised to:



Increase the number of admissions (if diagnosis is broadly defined)
Diagnose more severe and thus more profitable cases for the provider
Transfer the more complicated cases needlessly towards other providers
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Design remedies:
To avoid unnecessary admissions, DRGs need to be clearly defined. This however depends on the
availability of well coded data. Monitoring will ensure patients are diagnosed correctly and that
complicated cases are not needlessly transferred.
13.5 Budgets
Description:
Budgets, which are often based on historical costs, can be set for providers.
If strictly fixed, budgets help control costs. This is because the provider’s reimbursement does not
depend on the quantity of health services given to the patient.
However, their ability to control total costs is limited if the budget is inadequate and results in others
having to provide the necessary care.
Furthermore, if budgets are not strictly set, then there may be little incentive for providers to control
costs.
Transfer or referral of cases, under-production, and waiting lists are also likely.
Design remedies:
Budgets must be strict. They should not only be based on historical costs, but also primarily on the
population’s size and profile and expected morbidity.
Regular monitoring is needed to counter under-production and inappropriate referral or transfer of
cases. However, monitoring is less essential if budgets are applied to not just to one level, but to
many levels, in an integrated referral system. A single budget for an integrated referral system is a
key design remedy.
13.6 Salaries
Description:
Salaries are administratively simple. However, salaries only cover the costs of human resources, and
no other provider costs, such as medication and medical equipment. Over-provision is unlikely but
under-provision is likely, given that health professionals will be less motivated to earn their salary. In
the extreme, providers may decide to additionally or alternatively contract with the private sector.
Design remedies:
In order to ensure quality, salaries should be linked to performance. Regular monitoring is needed to
counter under-production.
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Conclusion
Each reimbursement method has advantages and disadvantages. An important consideration is
whether the reimbursement method encourages over- or under-provision of services. Therefore, a
mix of reimbursement methods is likely to be desirable. For example, policy makers could adjust a
basic salary with capitation weighting. This could be combined with fee-for-service reimbursement for
particular services, such as immunisations, where high production is clearly preferred.
A well-performing SHI system must ensure that providers face appropriate incentives so that optimal
resource allocation is achieved. In summary:
Reimbursement
method
Fee-for-service
Likely level of
provision
Over-provision
Capitation
Daily payment
DRGs
Budgets
Under-provision
Over-provision
Over-provision
Under-provision
Salaries
Under-provision
Key design remedies
Combine with budgets
Adjust fees when specified quantity is exceeded
Integrated referral system
Decrease daily payment as length of stay increases
Clearly defined diagnostic groups
Strict budgets that are not based on historical cost
allocations
Integrated referral system
Link salaries to performance
14. Minimise the percentage of total expenditure on administration expenses
Administration expenses arise from the following functions: planning, management, regulation, fund
collection, and claims management.
In addition, a certain amount of funds should be kept as reserves. These reserves should be sufficient
to cover all expected future liabilities, and to act as a cushion against unexpected claim costs.
However, the reserves should not be excessively high to ensure that the greatest number of benefits
can be paid for.
Lower administration expenses do not necessarily translate into a better-performing SHI scheme.
This is because additional factors, such as information on claimant rights, claims reviews, a patient
appeals mechanism, and a peer review committee are also important for ensuring optimal resource
use. However, these monitoring tools come at the expense of increased administrative expenses.
The fund administrators must set a target percentage of funds for administration expenses as a
benchmark that can be monitored. There is no “one size fits all” percentage. However, the table
below provides a recommendation based on the international SHI experience in 20 selected OECD
countries.
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Phase of SHI development
Objective
Before maturity
Administration expenses are expected to
decrease as SHI is extended (economies of
scale and technological advancements).
Aim for a minimum of 0.1% reduction per
annum.
Mature SHI
Aim for a maximum percentage of 6-7%
Based on international experience data, the average share of administration expenses in health
expenditure was 4.2% for a selection of mature SHI systems, with a range from 2% (Japan) to 6.6%
(Switzerland). However, it is important to emphasise that some of these expenses may have been
under-estimated. The percentage associated with the selected SHI systems demonstrated a
decreasing trend over time. Average claims processing expenses decreased over time due to
economies of scale and technological advancements. For example, in the Republic of Korea,
administration expenses in health expenditure were 11.9% in 1990, but by 1999 had fallen to 6.4%.
Furthermore, in a preliminary analysis of 20 OECD countries over the same period, the share of
administration expenses reduced on average by 0.1% per annum.
Therefore, a maximum percentage of 6-7% is only recommended once a country is already at the
later phases of SHI development. Before maturity, administration expenses are expected to decrease
as SHI is extended, and this performance must be regularly monitored over time. A minimum of 0.1%
reduction per annum, based on the international experience in the selected OECD countries, could be
the objective.
Performance with respect to the above objectives must be regularly monitored over time.
It is important to consider other ways to reduce administration costs, and/or to promote administrative
efficiency. For example, the NMBF may choose to exclude particular low-severity high-frequency
interventions from the SHI benefit package, which will lead to reduced transaction and hence
administration expenses. If such interventions meet the efficiency and equity criteria used to define
the SHI benefit package, then policy makers may choose to omit these interventions only if the
interventions are easily affordable, and so can be paid for OOP even by the poorer families.
The following table provides a high level summary of the countries with national health systems, the
type of national health system and the levels of non-healthcare expenditure. This table is not
exhaustive and in some instances, no information is available (Colombo & Tapay, 2004).
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Country
Australia
Canada
System
Non-health care costs
Public health
expenditure (% total
health expenditure)2
Single-payer
National health insurance
Medicare in Australia 3.7% of
contributions in the year 2001-02.
67.0% (2005)
Single-payer
Medicare of 0.6% of total public health
expenditure (1999)
Private insurers (13.2% OECD,
2004a)
70.2% (2005)
2.2% of total public health expenditure
(1999)
83.7% (2005)
Social insurance models
Denmark
Single payer
National health insurance
France
Single-payer
Social health insurance models
Germany
Multiple-payer
Social health insurance models
Ghana
79.9% (2005)
Private insurers (14% OECD, 2004a)
77.0% (2005)
Multiple payer
Proposed national health insurance
Kenya
Multiple payer
National health insurance
Mexico
A budget of 8% of the total
expenditures of the National Social
Health Insurance Fund (NSHIF) in
2003
Multiple payer
National health insurance
Netherlands
Multiple payer
Combine universal coverage with private
insurance and regulated market
competition
5% of premiums
Private insurers (10.4% OECD,
2004a)
South Korea
Single payer
National Health insurance
3.96% of total health expenditure in
2003
53.7% (2005)
Single payer
2.4% of total public health expenditure
(1999)
70.6% (2005)
Spain
National Health insurance
Sweden
Single payer
81.7% (2005)
National Health Service
Switzerland
Taiwan
UK
USA
Multiple payer
Combine universal coverage with private
insurance and regulated market
competition
5.3% of total public health expenditure
(2001)
Single payer
National Health insurance
1.6% to 3% of total contributions
Single payer
National Health Service
Multiple payer
Liberal model – private insurance and
public funded programmes, Medicaid and
Medicare
2
59.6% (2005)
86.9% (2005)
Insurance overheads of 11.7% of
premiums. Medicare of 3.6% and
Medicaid 6.8% of premiums
(Woolhandler et al., 2003).
45.1% (2005)
OECD Health Statistics Database
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15. Ensure an effective governance structure is put in place
Governance can be defined as “the structure and processes of the control mechanisms used to hold
the SHI agency accountable to beneficiaries and funders (that is, the government and employers) of
the scheme”
The following critical choices have to be made in relation to SHI governance:
 Ownership of the SHI agency e.g. public, quasi-public, or private non-profit. Ownership drives an
organisation’s motives and purpose. Public organisations are controlled by the government and
closely tied to politics and are thus subject to political influence, while private non-profit
organisations are more independent and insulated from political interference.
 Organisational structure, with emphasis on the composition, election, and accountability of board.
The organisation can be analysed using principal-agent theory. Beneficiaries and premium
payers act as the principals who select and contract the board of directors as their agent to
represent and pursue the principals’ interests. In turn, the board contracts with the chief executive
officer (CEO) as the agent to pursue the goals set by the board. Hence the composition and
election of board members and the determination of how they are accountable to beneficiaries
and premium payers become the paramount concern in relation to organisational design.
 Management structure, which must be given discretion in financial and personnel decisions. The
management team must be given discretion in financial and personnel decisions so that it has the
power to use financial and human resources to achieve the goals of the SHI agency. For
example, if employees of the SHI agency are civil servants, then civil service rules on hiring,
promotion, and firing would tie the management team’s hands.
 Government supervision, with emphasis on society’s interests, original objectives, and funding.
The state has to regulate and monitor the operations and performance of the SHI agency for two
reasons: first, to assure that SHI serves society’s interests and the original purposes for which it
was established and second, to supervise the SHI agency as the government is usually a
principal funder of SHI.
When a nation decides to establish an SHI agency as a public or quasi-public organisation, it has at
least three choices as to which ministry should be responsible for SHI.
One of two existing ministries may be responsible for SHI, and each structure has potential problems,
inter alia:
Ministry
Ministry of Health


Ministry of Labour and
Social Security

Challenge
Medical Professionals on board are more concerned about the welfare
of the supply side than of the demand side
The additional revenues generated by the SHI often largely benefit
providers
Insurance viewed simply as a payment mechanism, rather than as a
prudent, organised purchaser for the insured
Alternatively, a new independent ministry – the SHI agency – can be established.
Most developing nations have placed their new SHI agency under the Ministry of Health, but with
other ministers also serving on the supervisory board. Each structure has potential problems. Several
studies of SHI agencies organised under the Ministry of Health found discouraging performance, as
the ministries were dominated by medical professionals who were more concerned about the welfare
of the supply side than of the demand side and the additional revenues generated by the SHI often
largely benefited the suppliers of medical services. For example, a study of Colombia (General
Comptroller of the Republic 2002) found that the salary of health staff increased by more than 40% in
real terms during the initial years of SHI. Similarly, a study of the Philippines (Gertler and Solon 2002)
found that 86% of the increased funding for health that became available due to SHI financing went to
providers as profits or higher salaries.
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The Ministry of Health and Social Services may not be able to manage SHI any better, however. SHI
managed by the Ministry of Labour tends to view insurance simply as a payment mechanism, rather
than as a prudent, organised purchaser for the insured. SHI usually focuses on the fund’s balance by
controlling what the SHI will pay and shifts the remaining liability to patients. Providers are not
prevented from “balance billing” and “extra billing” patients. These SHI systems tend to have low loss
ratios and accumulate large surpluses in the SHI fund. In other words, the premiums are not
necessarily used for the benefit of the insured.
When the Ministry of Health manages SHI, the ministry has to undergo a major transformation
because SHI changes the Ministry’s role from a financier and operator of public sector services to one
that sets policies and regulates all providers. Generally, Ministries of Health have focused on
financing and managing public facilities and their staff, while paying less attention to patients’ wellbeing. Some ministries of health tend to protect the interests of public providers and take a laissezfaire attitude toward private sector providers. If a Ministry of Health starts at such a point, then it will
require a major change in its corporate culture for the Ministry to represent patients’ interests
effectively. Moreover, to become an effective purchaser requires the Ministry to reorganise its
functions and operations.
As explained earlier, when developing countries adopt SHI, they generally have to divide the
population into different eligible groups, each of which may have a different benefits package,
premium and subsidy rate, and enrolment procedures. Hence the question arises whether a nation
should have just one fund or separate funds and administrations for each group. This issue often
generates furious bureaucratic competition between the Ministry of Health and the Ministry of Labour
and Social Security over who controls the fund or funds.
In summary, according to the literature, satisfaction of the above key performance indicators and design
features will help ensure that SHI achieves its aims and is therefore successful.
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11. Macro-economic factors
impacting the NMBF
In order to consider how changes in the macro-environment will affect the implementation of the NMBF, it
is necessary to analyse how the:
 Size
 Socio-economic status
 Age structure, and
 Dependency structure
of the Namibian tax paying population will be affected by macro-economic factors.
11.1
Population Demographics
The population pyramid below illustrates the age and gender structure of the Namibian population using
population statistics as forecasted by the US Census Bureau.
Namibian population 2010
100+
95-99
90-94
85-89
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
-150000
-100000
-50000
Female Population
0
50000
100000
150000
Male Population
This population pyramid is characterised by the large proportion of young Namibians. There is significant
tapering in the population numbers in age bands above 29 years. The pyramid also narrows in age bands
below 10 years, which illustrates the decline in fertility rates experienced in the country. Further evidence
on the decline in fertility rates is provided in the Namibia Demographic and Health survey where it was
observed that fertility rates declined from 5.4 children per woman in the early 1990s to 3.6 children per
woman in 2005-07.
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This young population, combined with the low infant and middle aged to old population numbers has the
following direct consequences:
1. Young growing workforce
2. Low dependency ratio
3. Ageing Population
Young growing workforce
A large portion of the labour force is young and the labour force is likely to grow further with time as these
lives age and large cohorts in the younger age bands enter the workforce. As the NMBF will draw its
membership base from a subset of the workforce, the NMBF membership structure will assume
demographic characteristics similar to the labour force. It is therefore likely that the NMBF will have a
young and growing membership base.
In medical schemes, it is the young lives which naturally subsidise the older lives in the scheme as young
lives are typically healthier and have lower medical claim costs. Therefore, a young membership base will
benefit the NMBF in terms of having low average claim costs which will in turn lead to low contribution
rates.
A growing membership base will place pressure on the schemes administrative and management
systems going forward. A robust and scalable administrative system will be required to maintain the
schemes administrative integrity as the schemes membership base increases over time. In addition, a
growing membership will result in a larger risk pool which will in turn provide greater stabilisation of claims
experience over time.
Low dependency ratio
Namibia is currently enjoying a population structure which is characterised by a low dependency ratio.
This means that there is a low proportion of very young and very old lives (i.e. people who are not in the
labour force) relative to the population in the labour force.
This implies that the average number of dependants on the NMBF will be relatively low. It is important for
the NMBF to be aware of the dependency structure of the population when planning for the future and
making strategic decisions. In particular, the dependency structure will inform the structure and level of
the contributions.
The graph below illustrates the US Census Bureau’s projections for the Namibian dependency ratio,
where the dependency ratio is defined as the ratio of children aged 0-14 and persons aged 65 years and
older per 100 persons in the age group 15-64 years old. It can be seen that the dependency ratio is
expected to decline over time until it levels off at 40%.
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Overall dependancy ratio
100.00%
90.00%
80.00%
Percentage
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
0.00%
Year
Ageing Population
These population demographics are favourable for the NMBF in the short term. However, should the
fertility rate continue to decline, the population will experience an aging effect where an increasingly
larger proportion of the population is in the older age bands. This will place increased pressure on the
workforce to support the older population which usually experience higher average claim costs due to
deteriorating health. Therefore, greater subsidisation will be required between the young and the old to
support the increased claim costs.
In light of recent research confirming the effectiveness of Antiretroviral Treatment in combatting HIV/AIDS
and extending the lifetimes of HIV positive people, this aging effect will be further pronounced as the life
expectancy of young lives will be extended.
11.2
Economy
Economic policy
Employment is at the forefront of the political agenda in Namibia, as it is in most developing countries
around the world struggling to recover from the aftermath of the global financial crisis. The growth of a
nation’s economy along with a growth in its real GDP should result in the creation of more jobs and hence
an expansion of the employed portion of the labour force. This means that the membership base of the
NMBF should be closely linked to the general state of the economy and level of employment.
However, a growing economy does not necessarily translate into an increase in employment. This was
noted in the Namibian governments Fiscal Policy Framework for 2009/10 – 2011/12: “Gross Domestic
Product (GDP) has maintained an upward trend since 2000/1, but economic growth did not translate into
significant employment creation”. Reasons for this disconnect between economic growth and employment
is largely due to the inability of recent economic growth to absorb all the new entrants entering the market
(i.e. unemployment is outpacing economic growth)
Monetary policy
Namibia is part of the Common Monetary Area where the member countries’ currencies are pegged to
the South African rand (R1 = N$1). This is aimed to ensure that price stability is imported from South
Africa as an unpegged currency will be very sensitive to large foreign flows of capital into and out of the
relatively small Namibian economy.
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Therefore, In order to analyse the effect of Namibian monetary policy on the NMBF, one will have to
consider it in light of the South African monetary policy. This lack of independence limits the Namibian
central banks’ ability to achieve economic objectives, such as increasing employment, by utilizing
expansionary monetary techniques. However, the South African government has also placed increasing
employment on the front of its political agenda, so the countries’ economic objectives are currently
aligned.
Fiscal policy
Following successful fiscal consolidation over the past decade, the Namibian government has recorded
fiscal surpluses in 2006/7 and 2007/8. These surpluses have left space for the government to increase
expenditure earmarked for targeted sectors of the economy as laid out by the National Planning
Commission’s Targeted Intervention Program for Employment and Economic Growth (TIPEEG)
document.
This 3 year plan, commencing in 2011/12, is aimed at creating jobs for the unskilled youth population in
the short term by allocating more resources to labour intensive projects. The document estimates that as
many as 104,000 jobs will be created albeit temporary jobs. This surge in employment will directly impact
on the NMBF membership base should all go as planned, however the temporary nature of the
employment opportunities may mean that the membership base will deplete once the projects are
complete.
The NMBF administration systems will need to remain flexible in order to effectively handle possible
fluctuations in the membership base without compromising the integrity of the administration systems.
Fiscal policy may also require adjustment in order to fund the NMBF. This redistribution of the fiscus will
impact the current fiscal spending strategies as less money is available for distribution elsewhere.
11.3
Other influences
Tax
The NMBF may be funded from tax revenue. The level of tax collected will be directly related to the rate
of economic growth. A growing economy will be accompanied by a rise in tax revenue, however it may
also be accompanied with a growth in employment and hence a larger NMBF membership base.
In order to fund the NMBF, the tax rate itself may need to increase. A higher tax rate will also have
implications for economic growth, as the population will have less disposable income to spend and drive
the economy. This may therefore result in lower economic growth.
Healthcare inflation
The level of healthcare inflation will impact the cost of claims and hence, future changes in the
contribution rates. An inflation level that is higher than expected, will adversely affect the solvency
position of the scheme.
Furthermore, the majority of healthcare equipment is imported, making the cost of healthcare sensitive to
currency movements, in particular, the US dollar and the Euro. Should the Namibian dollar depreciate
relative to these two currencies, the cost of healthcare in Namibian dollars will increase. There is
therefore significant currency exposure for the NMBF which the Namibian government will be unable to
directly affect using monetary operations due its pegged exchange rate.
Scheme investments
The funding position of a medical scheme is determined by the difference between the scheme
investments and the schemes liabilities (including expenses). The larger the investment base relative to
the schemes liabilities, the healthier the funding position will be.
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In a fast growing economy, the scheme investments are expected to grow and improve the funding
position of the scheme. A growing economy will also bring about higher tax revenue which could result in
increased funding for the NMBF. On the other hand, a slow growing or recessionary economy is likely to
negatively impact the funding position as the investment returns may remain stagnant and tax revenues
may decrease.
These effects are particularly significant for the NMBF compared to other private medical schemes which
are not dependent on tax revenue as a funding mechanism.
11.4
Social trends and technology
The trend towards healthy living has been well documented in developed countries, with the adoption of
healthier eating habits as well as the development of more active lifestyles leading to less illness and
longer life expectancies.
These trends have been instituted into medical scheme structures by the inclusion of wellness packages
as part of the overall medical scheme package offered to members. A wellness package typically offers
members benefits such as reduced gym rates and other related deals which are meant to improve the
members’ health and hence reduce the probability of claim while keeping the scheme highly marketable.
A big concern of these packages is that they are expensive to implement, and the reduced claim benefits
are typically only recognised over a long period of time. However, given the social trend towards more
healthy lifestyles, the wellness packages act as powerful marketing tools which attract lives interested in
the benefits of a wellness package (and therefore are more likely to be, or become, healthier). The
argument is therefore that the wellness packages pay for themselves and more over the long term.
One of the risks identified above is that if the NMBF is implemented in an environment where private
schemes exist as direct competitors there will be a risk of anti-selection if more risky lives opt to join the
NMBF, due to factors such as a cheaper contribution rate compared to private schemes for a similar
package of benefits. By using a wellness program as part of the NMBF benefit package, this antiselection effect can be mitigated and possibly turned into a positive effect.
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12.
Administration of the NMBF
The process of administration consists of a number of functions. The following graphic illustrates the
functions at a high level with the corresponding flow of information.
12.1
Technical requirements
Correspondence management services
i.
Implementation and maintenance of an accurate receiving, routing, recording and distribution
system for all paper and electronic correspondence, including complaints, submitted to the NMBF
by beneficiaries, healthcare service providers and stakeholders sent from within and outside
Namibian borders.
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ii.
Ensure the availability of Call Centre services with representation of all the official languages
including the implementation of an efficient record keeping of all calls and correspondence by
capturing and maintaining all data and documentation.
iii. Establishing information and data management control processes including the maintenance of an
audit trail for correspondence management and records.
iv. Ensure that all NMBF communication with beneficiaries, healthcare service providers and
stakeholders is undertaken in simple and easily understandable language for the elimination of
ambiguity and misunderstanding.
v.
Provision for comprehensive off-site data storage, back-up and disaster recovery processes in
compliance with accepted industry norms and standards.
Membership management services
i.
Implementation and maintenance of an accurate receiving and processing system for all
applications for membership enrolment and alterations. Membership resignations will not be
applicable.
ii.
Contributions
a. Implementation and maintenance of a contribution management system that ensures
accurate billing and contribution collection according to the Scheme Rules.
b. Successful integration with the various payroll management systems of participating
employers.
c. Implementation of framework to actively manage debt and ensure the distribution of debt
letters and/or emails to debtors.
d. Correct suspension of member benefits when contributions and monies owed are not
paid within the period specified by the NMBF and/or the relevant legislation.
iii.
Implementation and maintenance of an information and data management system including the
establishment of control processes.
iv.
Implementation and maintenance of a communication management system to ensure that all
NMBF communication to beneficiaries and healthcare service providers regarding the processing
of membership and claims information is carried out accordingly as determined by the NMBF.
v.
Ensure the availability of complete and accurate historical membership and claims data to the
NMBF for the purpose of analysis as determined by the NMBF.
vi.
Provision for comprehensive off-site data storage, back-up and disaster recovery processes in
compliance with accepted industry norms and standards.
Claims management services
i.
Implementation and maintenance of an accurate receiving and processing, including real-time
processing, system for all claims submitted either electronically or by paper to the NMBF. The
system must facilitate accurate and consistent processing of claims against all benefit categories
and option rules; the validation thereof and the maintenance of comprehensive and accurate
patient records.
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ii.
The management of claim submission errors and claim processing errors through the verification
of services delivered, correct claiming behaviour and claims processing practices and the
maintenance of sound controls for the reprocessing of claims.
iii.
Ensure regular and ad-hoc claim service audits.
iv.
Provision for comprehensive off-site data storage, back-up and disaster recovery processes in
compliance with accepted industry norms and standards.
Financial management services
i.
Provision for a sound financial investment strategy for beneficiaries’ contributions in full
compliance with the relevant legislation and/or regulation.
ii.
Making suitable use of custodianship agreements for the assets of the NMBF.
iii.
All transactions and payments to and from the NMBF are to be handled in accordance with any
applicable tax legislation.
The technical requirements as presented above are not exhaustive and are meant to illustrate the core
functions of administration of a medical aid fund.
12.2
Model options
The administration of the NMBF could be carried out by implementing one of the following model options:




Agency Model (Outsourcing)
Self-Administration
A combination of the above
A “phased-in” approach
The option chosen would have to accommodate the technical requirements of the administrative functions
as set out above.
Outsourcing
Advantages of outsourcing the administration of the NMBF would include being able to leverage off the
technical and functional expertise and experience that the administrator would have in administering
medical aid funds. In doing so the SSC would obtain more certainty over the administrative expenses of
the NMBF, since fees would be negotiated in advance, and hence would experience a lower risk of
expense overruns. Though, an important consideration regarding this notion would be that fees charged
by the administrator may be high, especially at times of renegotiation. The loss of control of the daily
operations of the NMBF and the associated limitations to making desired changes to these operations
would be a disadvantage that could be managed and countered in establishing detailed Service Level
Agreements with the administrator to minimise this loss of control. An additional negative consideration
would be that there is a risk that the administrator would provide either no or poor data to the SSC
regarding the NMBF when requested. As a result of the above mentioned issues, it is worth noting that
the relationship with the administrator would have to be constantly managed to achieve the desired
outcomes.
If the SSC decides to outsource the administration of the funds, the SSC will need to look for an
administrator with the following key characteristics:
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




Good reputation
Fit and proper management
Financially sound
Sufficient past experience with the funds requiring administration
Appropriate infrastructure and systems to support the requirements of the funds and very
importantly, which have the capacity to undertake the scale of membership expected. It is likely
that no matter which administrator is chosen, their systems will need to be adapted to the
structure of the funds.
Self – Administration
The primary advantage of self-administering the fund would be having absolute control over the
operations of the NMBF and the associated costs. However, doing so requires extensive experience and
expertise in the administration of these types of funds and their respective complexities in order to
function effectively. Significant initial costs would be incurred in deciding to self–administer the NMBF
including: upgrading the current IT systems and infrastructure to the sophisticated systems that would be
required in order to carry out effective operations, recruiting and training new staff (including training
current staff), and possibly purchasing or building new office space in order to accommodate the new
staff. A social advantage to this notion though, would be the resulting job creation and development.
Combination of Self-administration and Outsourcing
Under this scenario, the SSC would decide which funds and functions to self-administer and which to
outsource to a third party. This decision would be based on all of the considerations outlined in the selfadministration and outsourcing sections, as well as the expected time to implementation of the NMBF
which will be the ultimate determinant of what is feasible within that timeframe.
For example, should the SSC improve its systems to the extent that the backlogs are removed and data
quality is improved prior to the introduction of the NMBF, then it may choose to self-administer these
funds. However if these problems persist the option to outsource administration will need to be seriously
considered.
Certain functions are likely to be outsourced regardless of the SSC, such as the investment management
of the NMBF’s assets. It may be advisable to appoint an investment consultant able to provide advice on
the suitable placement of assets with asset managers in accordance with relevant NAMFISA regulations.
It is important to consider this option in light of the current situation where there is a lack of integration
between the operational and financial systems. By outsourcing one function and keeping another related
function in-house, this integration problem could be further worsened and hence pushed further outside of
the SSC’s control. It is therefore important that the combination of functions selected to outsource are
chosen wisely to prevent a worsening of integration issues.
The SSC will also need to ensure that members are made aware of which functions are outsourced and
which are performed internally and the separation of functions needs to be reasonable to prevent any
confusion.
It is also crucial that there is clear communication between the fund and the outsourced administrator to
ensure that each party understands their duties. In addition, each party’s functions should be clearly
defined, e.g. with the use of detailed Service Level Agreements, to ensure the smooth operation of the
NMBF.
Outsource with the intention of phasing in Self-administration
This option would provide the SSC with sufficient time to build the appropriate systems and functions,
source the necessary skills and staffing requirements, and accumulate the start-up funds required to
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administer the fund. It presents a natural solution to the situation where the NMBF would be implemented
prior to the suitable improvement of the current SSC IT systems and processes.
During this period, the SSC would also be able to assess the strengths and weaknesses of the
administrative methods and systems adopted by the third party administrator, and use this knowledge to
improve on their own envisaged structures.
Although the SSC would have limited control of the administration of the funds and possibly pay high
administrative fees, this initial cost would be small in comparison to the amounts that will be saved once
self-administration is phased in.
The phasing-in process will however be quite complex and intricate as all the data would need to be
transferred from one system to another without disrupting the ability of the SSC to perform its functions.
Furthermore, beneficiaries and other key stakeholders would need to be informed of all developments in
the process.
Legal considerations
The Social Security Act of 1994 contains two stipulations which may prohibit, or restrict, the extent to
which outsourcing of the administration system is permissible:

“15. (1) Every person engaged in carrying out any provision of this Act shall preserve and aid in
preserving secrecy in relation to all matters that may come to his or her knowledge in the exercise
of the powers or the performance of the duties and functions conferred or imposed upon him or
her in terms of any provision of this Act, and shall not communicate any such matter to any other
person or permit any other person to have access to any documents in his or her possession or
custody, except in so far as any such communication (a) is made in the ordinary course of the exercise of his or her powers or the performance of his
or her duties under this Act or any other law, or is required by an order of a competent court;
(b) is effected with the prior permission in writing of the person concerned.”

“16. (1) The Commission shall, in accordance with sound business principles, administer every
fund referred to in paragraph (a) of subsection (1) of section 9.”
It is recommended that legal advice is obtained before embarking on an outsourcing strategy which may
be in contravention of the above stipulation. Furthermore, clarity on the scope for any such outsourcing
activity permissible under the act should be obtained.
Considerations to be made in deciding whether to outsource the administration of the NMBF:

As mentioned above the consequences of the possible legal restriction stipulated in the Social
Security Act of 1994 should first be explored as this could completely rule out the use of
outsourcing or a combination of outsourcing and self-administration along with the advantages of
using these approaches.

Subject to the above statement, the key characteristics of a suitable administrator to which the
administration could be outsourced (mentioned under “Outsourcing” above) should be
considered. In particular it should be investigated whether one administrator has the capacity to
solely administer the NMBF or, failing this, whether different functions of the administration
process should be outsourced to a number of different administrators.
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
An independent assessment of the time and cost that would be required in order to establish an
adequate in-house administrative function should be done and the results should be compared to
the expected cost of outsourcing the administration to a third party administrator.

A compromise of either a combination approach or outsourcing with the intention of phasing in
self-administration should be considered as this may be an appropriate and practical way to
successfully achieve the aim of the SSC to self–administer the NMBF,
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13.
Investment Strategy
The investment return assumption used in our financial model depends on the investment strategy
assumed for the NMBF. Given that the contribution rate each year will change, the NMBF can be seen to
contract with its members on an annually renewable basis. As such, the NMBF can be viewed as a
medical fund with short-term liabilities.
Normally, traditional private medical insurance (PMI) and its variations (such as the NMBF) are short-tail
businesses with little scope for significant investment return. The reserves will be relatively small and the
investment period is relatively short. The reserves are relatively small because it is hoped that, at least
approximately, the premium income from all the members should be sufficient to pay for the claims of the
unfortunate few, and to cover the company's expenses.
However, assets will still be required, so normally a mixture of cash and securities such as short-term
fixed-interest bonds would be suitable. Short-term assets are appropriate for most of these indemnity
short-term liabilities.
In addition, the NMBF may occasionally need to establish reserves where it is aware of future treatment
that could persist over some future years, as well to allow for large unexpected future claims. It then
becomes important to monitor the likely costs arising from the various treatments which are covered
under the NMBF. The amounts payable will be unknown at the time of setting these provisions, and any
current costs will escalate in line with medical inflation (often higher than price inflation) prior to final
settlement. Hence the assets recommended in these circumstances should be those that are expected to
provide a "real" return over the period until the case fully runs off the books.
Index-linked bonds may go some way to matching the liability in these cases, although claims costs may
inflate at a greater speed than the index (medical inflation is likely to be greater than price inflation). If this
is the case, then other asset classes that traditionally give higher long-term real returns may be more
suitable, such as equities and property. However, the volatility of such assets needs to be borne in mind.
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14.
Stakeholder considerations
The formation of the NMBF and the various forms which it could assume will have different effects on the
various stakeholders involved in the process. This section identifies the main stakeholders which will be
affected by the implementation of such a fund and attempts to crystallize the high-level significance of the
NMBF from their points of view.
Social Security Commission
The SSC is a direct stakeholder in the NMBF. The founding legislation of the SSC contains a requirement
to set up a National Medical Benefit Fund. The SSC faces the challenge of fulfilling the charge placed
upon it by the Social Security Act as well as developing an equitable solution taking account of all
stakeholder views. This need to find an equitable solution is enhanced by virtue of the fact that the
commissioners of the SSC are represented by individuals who in turn represent diverse interest groups
(for example both the MoHSS and Ministry of Labour have SSC representatives).
Ministry of Health and Social Services
The MoHSS receives its funding from the Ministry of Finance. Given the decrease in donor funding from
USAID to Namibia after being classified as middle-upper income country, as well as a decrease in future
donor funding due to poor international economic conditions, the Ministry of Finance funding is crucial.
The establishment of an NMBF will also likely be funded by the Ministry of Finance. The implications are
that the MoHSS could receive a smaller proportion of financing going forward as the NMBF is allocated its
share of funding.
The MoHSS will also want to ensure that Namibian healthcare outcomes, following the establishment of
the NMBF, do not face any threats due to funding issues going forward.
NAMFISA
The Namibia Financial Institutions Supervisory Authority (NAMFISA) is responsible for the regulation and
supervision of non-banking financial institutions in Namibia, including pension and retirement funds, longterm insurers, short-term insurers and medical aid schemes.
NAMFISA has expressed a willingness to regulate the NMBF, assuming that the NMBF is run like a
medical aid. NAMFISA will then also be faced with the role of educating the public regarding the NMBF.
It will also need to consider the legislation which will govern the NMBF. If the NMBF is to be exempt from
the Medical Schemes Act, as is currently the case for PSEMAS, then NAMFISA will need to consider
what laws are applicable to inform regulation of the NMBF. NAMFISA may need to table new legislation
or create regulations aimed at providing a legal structure within which the NMBF must operate.
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PSEMAS
PSEMAS is a key stakeholder in the formation of the NMBF for many reasons.
PSEMAS and the NMBF will share funding which is received from the Ministry of Finance.
The form the NMBF will take is particularly relevant to PSEMAS because it could be decided to merge the
two groups or keep them separate. A merging of the schemes will beg the question of whether or not the
benefit structure and contribution rates will remain unchanged. The current unsustainable nature of
PSEMAS could therefore worsen considerably with the addition of new lives from the NMBF.
Alternatively the introduction of the NMBF as a merged fund with PSEMAS could present an opportunity
to develop a more sustainable design structure which can also benefit further from a larger risk pool.
Ministry of Labour
The Ministry of Labour and labour unions will be concerned how the NMBF will impact the workforce. In
particular, the labour unions will be concerned about a potential decrease in benefits offered by PSEMAS
as a result of it potentially being merged with the NMBF.
Namibian government employees have an expectation of excellent medical benefits upon employment
due to the PSEMAS benefit package (“a condition of employment”). Labour unions will be opposed to a
reduction in these benefits as it negatively affects the labour union members, a large portion of who work
for the Namibian government.
However, to a certain extent, labour unions will be attracted to the idea of subsidized healthcare for their
members assuming that the NMBF contributions incorporate an element of contribution subsidization.
Employers
Employers will be faced with additional legislative as well as administrative requirements to ensure all
their employees are on a registered medical scheme. There may be other concerns for employers as far
as co-payments or higher tax charges may apply in order to fund the NMBF.
Taxpayers
The taxpayer stakeholders can effectively be broken down into two groups: those that are currently
already members of a medical aid fund (covered lives) and those that are uncovered.
The covered taxpayers will be influenced by the NMBF to the extent to which the NMBF is subsidized
based on deductions from all employees’ salaries (for example, a higher income tax or an explicit NMBF
deduction)
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Uncovered taxpayers will be directly affected as they are the target population. If membership of the
NMBF is made compulsory for uncovered taxpayers then this group will be affected in terms of being
forced to join the NMBF. This will be associated with the compulsory contribution rates payable to the
NMBF or higher income tax rates depending on the chosen financing method.
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15. Design of the NMBF
15.1
Overview: Defining a target population
The health care environment has changed substantially from that which was envisioned when the
legislation was originally created. There is an established private medical scheme sector which provides
coverage to a fair portion of the employed population including a large state fund (PSEMAS) that provides
comprehensive coverage to over a quarter of the estimated employed population. Medical scheme
enrolment is not mandatory and thus a significant portion of the employed population remains uncovered.
The NMBF aims to address this issue.
In specifying the target population for the NMBF, all the relevant stakeholders must be considered as well
as the overarching objective of the legislation which is to ensure that the entire employed population has
medical coverage in the first step towards achieving universal coverage.
The current medical scheme environment and distinct population groupings, identified in the illustration
below, form the building blocks for a variety of potential target populations for the NMBF. Furthermore,
the subgroups below were used as a basis for the costing exercise performed and informed the
demographic and claims profile expected under the NMBF.
Total Namibian
population
2 165 828
Total employed
population (including
self employed)
279 446
Covered population
(principal members)
149 696
PSEMAS (principal
members)
85 885
Total unemployed
population
1 886 381
Uncovered population
115 938
Other medical
schemes (principal
members)
63 811
*Please note that these estimated numbers are as at 2012.
*The total employed population does not divide equally between the sub-blocks due to uncovered population including all
beneficiaries, whereas the covered population will only include principal members.
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In terms of defining a population for the NMBF, the Social Security Act of 1994 states the following
regarding the membership of the NMBF:
“…every employer shall, in the prescribed manner and within the prescribed period, register (a) himself or herself with the Commission as an employer; and
(b) every employee employed by him or her, as an employee,”
Critically, Section 20 (1) of the existing Social Security Act firmly defines the envisaged target population
for the NMBF as follows:


The NMBF requires registration of every employee of every employer
“Except if he or she is a member of any other medical aid fund or scheme approved by the
Minister on recommendation of the Commission”
Therefore the legislation defines the target population to be all employed lives, including the selfemployed, that are not currently members of a medical scheme. It is important to consider the status of
PSEMAS in so far as medical scheme status is concerned. PSEMAS is exempted from the Medical
Schemes Act and therefore by implication also from the ambit of NAMFISA, the regulator for the medical
scheme environment. Therefore PSEMAS is not necessarily a medical scheme in terms of its legal status,
however it does provide coverage for medical costs to the government employees of Namibia.
The population can therefore also be divided along the lines of those employed by government and those
that are not. This is shown below diagrammatically.
Total Namibian
population
2 165 828
Total employed
population (including
self employed)
279 446
Government
employees
122 483
PSEMAS
(principals)
85 885
Total unemployed
population
1 886 381
Non-government employees
(including self employed)
156 963
Non-PSEMAS
(uncovered)
36 598
Non-medical scheme
(uncovered)
79 339
Medical scheme
63 811
*The government employee data is as provided by the Ministry of Finance income data, whereas the PSEMAS principals were
provided by the PSEMAS administrator.
* The non-government employees population does not divide equally between the sub-blocks due to uncovered population including
all beneficiaries, whereas the covered population will only include principal members.
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The objective of the NMBF is to provide medical cover for those employees who do not currently have
medical scheme coverage. We recommend that a phased approach be adopted as follows:



Phase 1: The current PSEMAS population forms the basis of the NMBF.
Phase 2: The NMBF is extended to include government employees who are currently not covered
by PSEMAS or another medical scheme (for example through their spouses’ medical scheme
membership)
Phase 3: Solidarity is achieved through the inclusion of non-government employees (with the selfemployed) who are not members of a medical scheme
The above therefore ultimately covers all employed individuals that are not members of a medical
scheme.
This is outlined in the graphic below.
Phase 1:
PSEMAS lives
Phase 2:
Government employees
not on a medical scheme
Phase 3:
Employed not on a
medical scheme
The details of the phased approach are outlined below:
Phase 1: NMBF coverage commencing with PSEMAS
We recommend that the NMBF be based on the current PSEMAS lives. This could be achieved by
adjusting the current benefits of PSEMAS to provide a benefit design that meets the needs of the
government employees and their dependents while at the same time controlling costs. We recommend
that benefit package continue to provide for hospitalization benefits in the public sector.
There are advantages and disadvantages of this approach.
Advantages





The risk pool created is large thus enabling effective risk pooling and cross subsidization.
The Ministry of Finance would no longer be required to bear the responsibility of financing and
managing PSEMAS.
The coverage of this population enables the restructuring of PSEMAS so that it can be managed
on a more sustainable basis.
The SSC could negotiate favourable tariffs on behalf of the NMBF thus improving the
management of costs.
This group of lives provides a platform for the building of the NMBF.
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Disadvantages




PSEMAS is a benefit available to all government employees. Any alterations to the structure of
this benefit will require approval and the necessary buy-in from relevant stakeholders.
The Namibian population, for the purposes of eligibility of the fund would become divided along
type of employment which may create distortions in the medical scheme risk pools.
There may be anti-selective movements by currently employed and covered individuals towards
the NMBF if this package is deemed to be more attractive financially compared to current medical
scheme benefits available in the market (for government employees).
NMBF would need to demonstrate an ability to improve the claims costs of current PSEMAS lives
in order to create an appropriate basis for this fund.
Phase 2: NMBF coverage extended to include government employees who are not on PSEMAS
Once the SSC has established the NMBF based on the current PSEMAS group of lives, it is
recommended that the risk pool be expanded to include all government employees (and their
dependents) who are not covered by PSEMAS. This group of lives consists mostly of lower income lives
who have not joined PSEMAS due to affordability constraints. These lives are also correspondingly older
compared to the covered lives. These demographic features are summarized in the following section of
the report.
The inclusion of more lives within the existing PSEMAS risk pool may enable more cross subsidization
and thus improve the achievement of better healthcare for more individuals. This further enables bulk
tariff negotiation and expansion of healthcare benefits in this risk pool. The Fund becomes an effective
basis for the creation of a solidarity environment.
The expected claiming costs of this group of lives is not known. It is likely that the claims for these lives
may be lower than that of the existing group during the first few years of joining the fund. Thereafter, their
costs may increase, the extent of which depends on changes in demographics, claims behavior,
availability of benefits and knowledge of benefits.
Phase 3: Inclusion of those employed but not on a medical scheme
We recommend that the final phase of coverage for the fund be for those who are employed but not a
member of a medical scheme. This includes the self-employed.
The characteristics of the employed uncovered lives are not known. There is a risk of anti-selective
movements from existing medical schemes towards the NMBF should this package be deemed more
attractive than medical scheme benefits. Therefore, the eligibility for the NMBF will need to take this into
account.
The mandate of the SSC for the NMBF precludes the coverage of the medical scheme population;
therefore this risk pool remains within the existing medical scheme environment.
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15.2
Estimating the covered population size and profile
Data
The following data sources were used to estimate the size of the various population groups:
Data
Employed population
Current medical scheme beneficiaries
Current spouses per principal member
Population growth rates
Government employees income data
Year
Source
2008
Namibian Labour Force Survey
2010
Methealth, Medscheme, Prosperity
Health and Paramount administrators
2008 - 2012
2012
UN population projections to 2025
Ministry of Finance
Methodology
This section provides a description of each subgroup of the population that was considered as a potential
target population for the NMBF and hence, an input into the costing exercise performed. In addition, this
section specifies the methodology utilized and the assumptions required to estimate the size and
demographic profile of these subgroups.
Covered population
The covered population encompasses the total number of principal members currently on medical
schemes in Namibia (including PSEMAS lives).
This population was calculated via a detailed analysis of medical scheme data provided by all the medical
aid fund administrators in Namibia for the 2010 calendar year.
This number was then increased by the growth rate implied by UN projection numbers to arrive at the
mid-year 2012 total covered taxpaying population principle member numbers, split by age and gender.
Therefore the assumption applied is that the medical scheme lives increase in the same proportion as the
total population. This may not be the case in practise as medical scheme participation rates are
dependent on a number of factors including affordability, necessity etc.
PSEMAS population
The total number of principal members currently on PSEMAS is a subset of the covered population data
described above.
This number was then increased by the growth rate implied by UN projection numbers to arrive at the
mid-year 2012 total covered PSEMAS principal member numbers, split by age and gender.
The assumption applied is similar to the above.
Employed uncovered population
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The estimation of the number of employed lives currently not on a medical scheme presented a challenge
due to a lack of data available.
Preliminary research failed to identify existing literature which empirically estimated the uncovered
taxpaying populations at a level of detail sufficient for our purposes. The original data analysis involved
the use of taxpayer data from the Ministry of Finance (based on tax returns). However when comparing
this data to the medical scheme population data, as well as the 2008 Namibian Labour Force Survey,
these numbers appeared too low to serve as an initial estimate of the potential medical scheme
population.
Therefore, the following five-step process was used to estimate this population:
Step 1:
The total full-time employed population was taken as per the Namibia Labour Force Survey 2008. This
amounts to 269,491 (as at 2008) people. The full-time population excludes temporary employed persons
who are unlikely to form part of the medical scheme population. The age distribution was assumed to be
the same as the employed population as per the Namibia Labour Force Survey 2008.
Step 2:
This number of full time employed people was then increased by the growth rate implied by UN
population projection numbers to calculate the mid-year 2010 full-time employed population. This was
done to ensure that the estimated population, based on 2008 labour force data, was consistent with the
2010 medical scheme data used later in the analysis. The resulting estimate of full time employed people
is therefore 274,626.
Step 3:
The number of 2010 principal members on medical schemes in Namibia, split by age band and gender,
were then subtracted from the above to leave the number of uncovered taxpayers. However, this number
will include employed people who are covered as dependents on their spouse’s scheme.
Step 4:
Due to poor quality data being provided by medical aid scheme administrators, the number of married
principal members and hence the number of spouses on medical schemes in Namibia had to be
estimated. This was carried out by assuming that if a principal member had an adult dependant of the
opposite sex and whose age was within seven years of the principal member’s age, then this adult
dependant was treated as the spouse of the principal member. The result implies that about 23% of all
principal members are married and 74% of all adult dependants in the medical scheme industry are
spouses.
In order to obtain the total uncovered tax-paying population, the number of employed spouses need to be
subtracted from the resultant figure of Step 3. The number of employed spouses were estimated by
multiplying the total number of spouse dependants on current medical schemes by 50%.
The 50% adjustment estimate was not based on an empirical data analysis due to a lack of relevant data.
A 100% adjustment would imply that all spouses of medical scheme members are employed, which is an
unlikely occurrence so we would expect this adjustment to be somewhat less than 100%. Another factor
to consider when estimating this percentage adjustment is that the lower the assumed percentage, the
higher the estimated NMBF target population, and hence the more prudent the assumption.
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Given the relatively small effect of this adjustment, due to a small percentage of spouses, as well as a
desire to avoid spurious accuracy, a 50% adjustment was deemed satisfactory for the purpose of this
exercise Please see the appendix.
We are now left with the total uncovered taxpaying population.
Step 5:
This number was then increased by the growth rate implied by UN projection numbers to arrive at the
mid-year 2012 total uncovered taxpaying population numbers.
It is therefore effectively assumed that the number of medical scheme lives and uncovered taxpaying
lives increase at the same rate as the total population as implied by the UN projections.
Total taxpaying population
This is the sum of the covered and uncovered population groups described above.
Government employed uncovered population
The government employed uncovered population refers to all government employees who are not
PSEMAS members. Older age bands were assumed to be equal to the number of people in the estimated
uncovered population (this adjustment was applied only where the age band totals would have been
higher than the corresponding uncovered population numbers). This adjustment was made to allow for
the following concerns:



The income data did not confirm if a particular government employee is a member on a
medical scheme other than PSEMAS.
Given the relative ease for a government employee to leave and rejoin PSEMAS as
required, the income data was deemed to underestimate the effective membership
claiming exposure.
There were a high proportion of government employees at older ages (15% were older
than 60; 4.5% older than 65) which suggests that they were retired yet have still been
captured in the data.
Uncovered including PSEMAS
This is the sum of the uncovered and PSEMAS population groups described above.
Results
Total population estimates
The estimated total population sizes for 2012, split by gender, are provided below.
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Population group
Males
Females
Total
Covered population (incl. PSEMAS)*
84 006
65 690
149 696
Employed uncovered population
63 712
52 226
115 938
PSEMAS*
45 090
40 795
85 885
Total taxpaying population
147 718
117 916
265 634
Employed uncovered incl. PSEMAS
108 801
93 020
201 822
Government uncovered population
14 215
14 754
* this estimate refers to principal members only, therefore excludes dependents
28 969
These estimated total population numbers are illustrated in the diagram below. Approximately 44% of the
taxpaying population is estimated to be uncovered.
Split of taxpaying population
Covered (excl.
PSEMAS)
24%
PSEMAS
32%
Uncovered
44%
* Please note that the above covered and Psemas numbers do not include dependents.
Detailed population estimations by age band are provided in Annexure A.
Age distribution
The analysis of Namibian medical scheme data revealed a distinct dip in principal medical scheme lives
below the age of 30. This reveals that many young, employed individuals in the Namibian work force do
not join a medical scheme.
The estimated uncovered population should therefore be larger at these younger age bands to account
for these young employed lives currently not on medical schemes.
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The age profiles of the principal members on PSEMAS compared to government employees not on
PSEMAS is shown below. It can be seen that the latter are older on average. The age profile of the
PSEMAS dependents reflects that most dependents are children. Very few dependents are parents of the
government employees on PSEMAS.
The population pyramids below reflect the age differences by gender for the uncovered and covered
populations.
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Uncovered population
65+
55-59
45-49
35-39
25-29
15-19
20 000
15 000
10 000
5 000
0
Female
5 000
10 000
15 000
20 000
Male
Covered population
65+
55-59
45-49
35-39
25-29
15-19
15 000
10 000
5 000
0
Female
5 000
10 000
15 000
Male
When considering the taxpaying population as a whole, the population pyramid is more reflective of the
entire Namibian population age structure as it is less biased towards older or younger members:
Covered & Uncovered population
65+
55-59
45-49
35-39
25-29
15-19
30 000
20 000
10 000
0
Female
10 000
20 000
30 000
Male
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Gender distribution
The gender distribution of PSEMAS lives is very similar to government employees not on PSEMAS.
Medical scheme lives (excluding PSEMAS) have a significantly higher proportion of male beneficiaries
older than 60 years.
Percentage of female beneficiaries
Gender profile of Beneficiaries
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Gov employees not on PSEMAS
PSEMAS Principals Members
Medical fund industry (excl. PSEMAS)
Income distribution
Income information was provided to Deloitte for government employees. We were able to split out
PSEMAS lives and non-PSEMAS lives. The income distributions is significantly different with the latter
showing more lower income lives. There are however higher income lives who are not on PSEMAS which
could possibly reflect anti-selective behavior. One of the objectives of the NMBF is to provide social
solidarity therefore it is necessary to cover this group of lives.
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Note: This graph is based on all uncovered government employee lives prior to the abovementioned adjustment to the older age
bands.
The effect of changed tax thresholds on population projections
Since the population projection methodology uses the full time employed population, as per the 2008
Labour Force Survey, and not the number of taxpayers, our calculations will not be affected by a change
in tax thresholds. The table below compares the total number of taxpayers in 2008, as provided by the
Ministry of Finance, to the 2008 full-time employed population used in this analysis:
Full-time employed population 2008
Taxpayers 2008
269 491
156 935
Not all full time employed Namibians pay tax, therefore, depending on the funding approach to be taken,
the use of taxpayers only would under-represent the employed membership base, while on the other
hand, the use of the full time employed population would overstate the number of tax payers that could
support this through personal income tax.
MSD membership vs. Estimated full-time employed population
The total estimated full-time employed population in this report (279 446) differs to the membership figure
for the MSD fund (398 786) stated in a draft of the report concerning the effects of contribution changes to
the ECF and MSD funds. The report was submitted to the SSC by Jacques Malan Consultants &
Actuaries (Jacques Malan) in April 2012. (Jacques Malan Actuaries & Consultants, 2012). However, the
age distribution of the estimated full-time employed population as stated in this report is closely consistent
with the age distribution of the MSD membership stated in the Jacques Malan report, as is illustrated in
the diagram overleaf. As the estimated NMBF costs are sensitive to the age distribution, rather than the
absolute population size, this difference in population sizes does not affect the results of the costing
exercise.
In addition the MSD data that Deloitte has received is not consistent with the reported membership
statistics in the Jacques Malan report. This could be attributed to a number of reasons, the main
102 | P a g e
contributing factor being the poor quality of the MSD membership data: unreasonable ages for employees
and unreasonable income e.g. N$ 1.
15.3 Membership Options
This section explores the various possible membership base combinations for the NMBF, detailing the
advantages and disadvantages of each membership base. The membership bases considered here are:






PSEMAS
PSEMAS and uncovered government employees
Uncovered population
Uncovered and Medical scheme population
Uncovered population and PSEMAS
Uncovered, PSEMAS and Medical scheme population
Prior to analyzing the different membership bases, it is necessary to draw a distinction between nongovernment employed uncovered lives and government employed uncovered lives. This distinction is
important when considering the advantages and disadvantages of various membership bases as the
options available to the two groups differ. Government-employed uncovered lives will have an option to
join PSEMAS whereas currently uncovered non-government lives do not have this option. This distinction
bears particular relevance to the following membership bases:


Uncovered plus medical scheme lives
Uncovered lives
This is further discussed below within the two affected membership base sections.
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PSEMAS
Description: This group represents the current PSEMAS membership and their dependents.
Advantages



No reform. Under this arrangement the medical fund industry
remains unchanged, thereby avoiding a reform of the industry
required under other scenarios which require a consolidation of
the medical schemes industry.
PSEMAS reform PSEMAS in its current form has been
described as unsustainable. This may represent an opportunity
to re-visit the pricing and financing structure of the PSEMAS
structure and create one which is more sustainable in the long
run.
Avoids implementation resistance (PSEMAS). This option
also avoids the implementation risks posed by altering the
PSEMAS structure. PSEMAS is an employee benefit so it will
be very difficult to remove or reduce the benefits. (e.g.
resistance from labour unions, political resistance and legal
resistance).
Disadvantages


Implementation resistance (PSEMAS). Should the PSEMAS
benefit and contribution structure change as it is transitioned to
an NMBF package then this could encounter strong political
and legal resistance.
Legislative risk. This membership base will not satisfy the
SSC Act in its current form as it does not include currently
uncovered lives. It is therefore not consistent with legislation.
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PSEMAS and Uncovered Government Employees
Description: The current PSEMAS membership in addition to the uncovered government employees and their dependents.
Advantages




No reform. Under this arrangement the medical fund industry
remains unchanged, thereby avoiding a reform of the industry
required under other scenarios which require a consolidation of
the medical schemes industry.
PSEMAS reform PSEMAS in its current form has been
described as unsustainable. This may represent an opportunity
to re-visit the pricing and financing structure of the PSEMAS
structure and create one which is more sustainable in the long
run.
Avoids implementation resistance (PSEMAS). This option
also avoids the implementation risks posed by altering the
PSEMAS structure (e.g. resistance from labour unions, political
resistance and legal resistance).
Ease of extension to uncovered government employees. By
making PSEMAS membership compulsory for all government
employees, this option will be able to extend cover to
uncovered government employees relatively easily. However
there will likely be need for greater subsidies in order to make
the contributions affordable to the uncovered government
employees.
Disadvantages





Buy-down risk (cross benefit option). There is a risk of buydown between NMBF benefit options. For example, healthier
people may choose the less comprehensive benefit option
leaving the comprehensive benefit option with a more risky risk
pool.
Implementation resistance (PSEMAS). Under this
arrangement the increased financing requirements involved
with a larger membership base will likely result in the current
subsidy arrangement enjoyed by PSEMAS members to be
drastically reduced. This proposition is likely to meet political
and legal resistance.
Older lives. The uncovered government population has an
older age structure compared to the PSEMAS lives. An older
population will be more prone to disease and other health
related expenditure hence resulting in higher costs and higher
contributions rates.
Financing. One reason these lives may not be PSEMAS
members is because they cannot afford the already heavily
subsidised premiums. Therefore the contributions will need to
be further subsidised to make it affordable to this group,
thereby leading to financing risk.
Legislative risk. This membership base will not satisfy the
SSC Act in its current form as it does not include currently
uncovered lives from the private sector. It is therefore not
consistent with legislation.
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Uncovered
Description: Consists of those employed individuals who are not members of a medical scheme nor are they PSEMAS members. Under this
scenario a distinction needs to be drawn between uncovered-government employees and other uncovered employed. This is because uncovered
government employees will have a choice of joining either PSEMAS or the NMBF, dependent on which fund ultimately provides a better value
proposition.
Advantages



Younger members. The uncovered population has been
estimated to have a young age structure. A young population
will be less prone to disease and other health related
expenditure hence resulting in lower costs and lower
contributions rates. However the effects of HIV AIDS in eroding
age cross subsidies (as AIDS prevalence is generally higher in
younger age groups) will tend to counteract this advantage.
No reform. Under this arrangement the medical fund industry
remains unchanged. This means that a reform of the entire
medical scheme industry, as required under other scenarios
explored later, is avoided.
Avoids implementation resistance (PSEMAS). This option
also avoids the implementation risks posed by altering the
PSEMAS structure (e.g. resistance from labour unions, political
resistance and legal resistance).
Disadvantages



Small risk pool. This will result in a small and concentrated
risk pool. The age distribution is heavily skewed to younger
ages and they are expected to be in lower income groups.
Hence there will be limited scope for risk and income crosssubsidisation.
Buy-down risk (cross sector). There is a risk of buy-down
between sectors, where people move from the private medical
fund industry into the NMBF as it may be cheaper (due to
contribution subsidies). The subsidised contributions may mean
that the medical fund industry is not able to compete on a cost
basis with the NMBF, thereby leading to an eventual
transformation of the industry into catering to people seeking
more comprehensive cover. This competitive concern may
result in opposition from the medical fund industry hence there
will be a trade-off between subsidised contributions (and
medical fund industry opposition) and un-subsidised
contributions (leading to lack of NMBF affordability).
Pricing risk. The lack of data regarding the uncovered
population means that the demographics of the population used
in setting and costing benefit packages may be different to that
expected. This could lead to inappropriate costing of the benefit
packages resulting in pricing risk. This is worsened by the lack
of information regarding the claiming patterns of the uncovered
population.
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Uncovered and Medical Schemes
Description: Combines the current medical scheme population with those employed who are not currently on a medical scheme. Under this
scenario a distinction needs to be drawn between uncovered-government employees and other uncovered taxpayers. This is because uncovered
government employees will have a choice of joining either PSEMAS or the NMBF, dependent on which fund ultimately provides a better value
proposition.
Advantages:



Large risk pool. The risk pool under this option will be large
and varied. The benefits of a larger and more varied risk pool
are a more stable claims experience (which limits the extent of
pricing risk) as well as greater opportunities to allow for income
and risk cross-subsidisation when setting contribution rates.
Younger members. The uncovered population has been
estimated to have a young age structure, which will allow for
risk cross-subsidisation between the new younger members
and the older medical scheme members. However the effects
of HIV AIDS in eroding age cross subsidies (as AIDS
prevalence is higher in younger age groups) will tend to
counteract this advantage.
Avoids implementation resistance (PSEMAS). This option
avoids the implementation risks posed by altering the PSEMAS
structure (e.g. resistance from labour unions, political
resistance and legal resistance).
Disadvantages



Reform. This arrangement will require a consolidation of the
medical scheme industry. The necessity for reform will likely
encounter substantial political and legal resistance from the
medical scheme industry.
Affordability. There will likely be extensive income crosssubsidisation between current medical scheme members and
the uncovered members in order to keep it affordable for the
uncovered population. This is based on the assumption that a
large portion of the uncovered population currently forgoes
medical scheme coverage due largely to income constraints.
The result will be higher contribution rates for medical scheme
members, compared with what is currently paid, in order to
subsidise the uncovered members’ contributions for affordability
reasons. The nature of the income cross-subsidisation will
depend on the financing method chosen.
Buy-down risk (cross sector). There may be buy-down risk.
Uncovered-government and covered-government employees
will face a choice between the NMBF and PSEMAS
membership. Should the NMBF cost/benefit ratio be superior to
PSEMAS then they will be likely to join the NMBF and vice
versa if the cost/benefit ratio is inferior.
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Uncovered and PSEMAS
Description: Consists of those taxpayers who are not members of a medical scheme in addition to the current PSEMAS members.
Advantages




Large risk pool. This will result in a larger and more varied risk
pool than PSEMAS currently consists of. The benefits of a
larger and more varied risk pool are a more stable claims
experience (which limits the extent of pricing risk) as well as
greater opportunities to allow for income and risk crosssubsidisation when setting contribution rates.
Younger members. The uncovered population has been
estimated to have a young age structure, which will allow for
risk cross-subsidisation between the new younger members
and the older PSEMAS members. However the effects of HIV
AIDS in eroding age cross subsidies (as AIDS prevalence is
generally higher in younger age groups) will tend to counteract
this advantage.
No reform. Under this arrangement the medical fund industry
remains unchanged, thereby avoiding a reform of the industry
required under other scenarios which require a consolidation of
the medical schemes industry.
PSEMAS reform. PSEMAS in its current form has been
described as unsustainable. This may represent an opportunity
to re-visit the pricing and financing structure of the PSEMAS
structure and create one which is more sustainable in the long
run.
Disadvantages


Implementation resistance (PSEMAS). Under this
arrangement the increased financing requirements involved with
a larger membership base will likely result in the current subsidy
arrangement enjoyed by PSEMAS members to be drastically
reduced. This proposition is likely to meet political and legal
resistance.
Buy-down risk (cross sector). There is a large risk of buydown between sectors, where people move from the private
medical fund industry into the NMBF as it may be cheaper (due
to contribution subsidies). The subsidised contributions may
mean that the medical fund industry is not able to compete on a
cost basis with the NMBF, thereby leading to an eventual
transformation of the industry into catering to people seeking
more comprehensive cover. This competitive concern may
result in opposition from the medical fund industry hence there
will be a trade-off between subsidised contributions (and
medical fund industry opposition) and un-subsidised
contributions (leading to lack of NMBF affordability).
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Uncovered, PSEMAS and Medical Schemes
Description: The largest possible target membership base (i.e. the total employed population). This group will ensure that the entire taxpaying
population is on one medical fund. The literature review on social health insurance models highlights the principle of compulsion which ensures
that the social security system operates at an optimal level. This membership base is formed by making it compulsory for all taxpayers to join the
NMBF and is therefore the optimal grouping within a social solidarity context.
Advantages:



Large risk pool. This option represents the largest and most
varied risk pool, and as such would benefit the most from a
stable experience as well as risk and income crosssubsidisation opportunities.
PSEMAS reform. PSEMAS in its current form has been
described as unsustainable. This may represent an opportunity
to re-visit the pricing and financing structure of the PSEMAS
structure and create one which is more sustainable in the long
run.
Achieves social health insurance. This grouping includes all
employed people and hence satisfies the definition of social
health insurance. An important advantage of this position is
that, should the political will exist, Namibia will be faced with a
less daunting task in order to achieve universal coverage via
national health insurance in the future.
Disadvantages



Reform. This arrangement will require a consolidation of the
medical scheme industry. The necessity for reform will likely
encounter substantial political and legal resistance from the
medical scheme industry.
Implementation resistance (PSEMAS). Under this
arrangement the increased financing requirements involved with
a larger membership base will likely result in the current subsidy
arrangement enjoyed by PSEMAS members to be drastically
reduced. This proposition is likely to meet political and legal
resistance.
Buy-down risk (cross benefit options). There is a risk of buydown between NMBF benefit options. For example, healthier
people may choose the less comprehensive benefit option
leaving the comprehensive benefit option with a more risky risk
pool.
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15.4 Actuarial costing of benefit packages
The feasibility of the NMBF rests in the design and level of benefits offered and its associated costs. This
report has detailed the design of the Fund from a Social Health Insurance perspective and expands on
the key requirements and principles to be met. This section of the report details the design and its
implication from an actuarial and insurance perspective, including the benefits to be offered under various
health packages and its associated cost implications.
In general, healthcare benefits on a medical fund/scheme can be classified into the following high-level
benefit categories:

Hospital benefits

Emergency evacuation

Chronic care

Day-to-day benefits

Major disease benefit
The cost of a healthcare benefit package is a function of a number of factors including:

The type of benefits offered e.g. Are day-to-day benefits included? Will chronic care be covered?
etc.

The limits applied to the various benefits e.g. Will hospital benefits be unlimited? What limits are
applied to out-of-hospital diagnostic and preventative care? etc.

Re-imbursement of service providers e.g. Will providers be reimbursed at 100% or higher than
the NAMAF tariff? etc.

Demographic and health profile of the lives to be covered
Thus, balancing the cost of a benefit package and providing comprehensive benefits is a delicate task. In
designing the benefit package, the following factors need to be considered:

past utilisation patterns amongst the covered lives

occupational health priorities of employer groups

disease burden of the country

competitor product offerings
This approach to benefit design will most likely result in a benefit package that is marketable and
addresses the health needs of the concerned population. However, benefit design alone does not provide
sufficient tools for ensuring both cost-effective healthcare delivery as well as sustainability of the Fund.
The Fund will need to consider a range of more direct interventions such as managed care and
contracting with providers to control claim costs whilst still maintaining quality of care. These
recommendations will be discussed in a later section of the report.
Based on the above considerations, we have considered three illustrative benefit packages for the
NMBF, namely:
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1) “Hospital” benefit package which covers:
a. Hospital benefits (private hospitalization)
b. Emergency evacuation
c.
Major disease benefit
2) “Hospital plus Day to Day” benefit package which covers:
a. Hospital benefits (private hospitalization)
b. Emergency evacuation
c.
Chronic care
d. Day-to-day benefits
e. Major disease benefit
3) “Adjusted PSEMAS package” which covers:
a. Hospital benefits (public sector only)
b. Day-to-day benefits
It is important to note that PSEMAS affords cover only in Windhoek Central Hospital (public sector
hospital) while the Hospital and Hospital plus Day to Day packages are based on private sector
hospitalization.
Data received
We received the following data for the purposes of costing benefits for the NMBF:



Medical scheme demographic and claims data per benefit option covering all Namibian medical
scheme benefit options.
PSEMAS demographic and claims data.
Demographic data for all the government employees
The above claims data sets are for the calendar year 2010 and are therefore fully run off.
107 | P a g e
“Hospital” benefit package
In order to understand the total costs associated with a hospital benefit package, the claim experience of
a number of hospital options in Namibia were analyzed. In doing so, the benefits offered and risk profiles
were compared to ensure consistency across the different options. Costs were standardized to allow for
differing benefit levels and age distributions between options, where applicable.
Based on the data provided, practice code descriptions were subsequently used to map claim costs to
various benefit categories as per the benefit schedules. However, this approach limited the extent to
which certain hospitalization benefits such as maternity, major diseases etc. could be identified. On
further analysis it was confirmed that these costs were implicit in the hospitalization practice code.
Once practice codes were mapped to the various benefits, claim costs were modeled by calculating the
claim frequency and severity using past experience for the various benefits. This provided an initial cost
per family based on the benefit offering. In order to extrapolate this experience to be applicable to the
proposed covered lives on the NMBF, statistical models were applied to unpack the drivers of claim
experience. Due to limitations in the data provided we were only able to allow for the impact of a
difference in age profile between the investigated population and that to be covered on the NMBF.
In the absence of a desirable volume of relevant medical scheme data with respect to Hospital benefit
packages having definite reliability and consistency, the representative benefit package was also adjusted
in light of comparable South African experience to ensure the reasonability of the constituents of the
benefit package. It is important to note that the South African medical scheme database used accounts
for approximately 4 million beneficiaries ensuring that the sample size is sufficient. In addition, benefit
schedules were reviewed to ensure that benefits are comparable in this regard and hence claim costs will
not be distorted by the availability of benefit. In addition, the costs implicitly reflect current management
practices and hence improvements in claim costs associated with better benefit, case and hospital
management have not been included. Therefore it should be noted that future management practices will
have an impact on the level of costs arising from the NMBF.
Apart from the costs, the age profile of the South African database was compared to the medical scheme
population of Namibia, to ensure that claiming behavior would be comparable and claim costs not
distorted due to differing risk profiles. This is shown below:
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Age
A: Under 1
B: 1-4
C: 5-9
D: 10-14
E: 15-19
F: 20-24
G: 25-29
H: 30-34
I: 35-39
J: 40-44
K: 45-49
L: 50-54
M: 55-59
N: 60-64
O: 65-69
P: 70-74
Q: 75-79
R: 80-84
S: 85+
South African
Database
0.00%
0.00%
0.00%
0.00%
0.04%
3.29%
13.07%
16.67%
19.09%
16.68%
13.07%
9.01%
5.24%
2.43%
0.84%
0.38%
0.14%
0.03%
0.01%
Medical Scheme
Population Namibia
0.01%
0.01%
0.03%
0.06%
0.54%
7.32%
13.88%
15.28%
14.18%
13.36%
13.34%
9.68%
5.83%
2.99%
1.52%
1.01%
0.58%
0.27%
0.11%
From the above table, it can be seen that the underlying age distribution is negligibly different between
the South African database and the medical scheme population in Namibia. Therefore the application of
the South African database is deemed reasonable for the purposes of this study.
Benefit package based on Hospital plan costs
It is important to note that the claim costs shown below are based on 2010 claim experience. The costs
are grossed up by approximated health care cost inflation to reflect 2012 values. Costs shown are based
on tariff amount and not claimed amount i.e. the costs assume that the Fund would pay a 100% of
NAMAF tariffs. In addition, the costs implicitly reflect current management practices of the underlying
benefit packages used in the calculations as explained above. This implies that differences in claim costs
associated with better or worse benefit, case and hospital management have not been included. The
table below summarises our recommended Hospital benefit package and the associated costs per family
per month. The benefit package has been designed to ensure consistency with current benefit levels
offered in the market and simultaneously address the basic health concerns of the Namibian employed
population.
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*All benefits are subject to prior approval and the overall annual limit
**Private Wards are excluded
*Benefit
Overall Annual Limit (OAL)
Recommendation
1.5 million per family
General Hospitalisation
**Accommodation and Theatre Fees
Medicine
Blood Transfusions
Expected
Cost per
family per
month
Unlimited (subject to OAL)
Maternity
Confinement fees - including full procedure
2D Sonar Scans
Unlimited (subject to OAL)
maximum of 3 days for
normal delivery and 4
days for caesarean
2 Scans
N$793.64
Oncology
All services (including chemicals)
N$300 000 per family
Internal Prosthesis
Includes all materials used and actual cost of prosthesis
N$30 000 per family
Specified Illness Condition
Organ Transplants - Full procedure
N$400 000 per family
Renal Dialysis
N$150 000 per family
HIV/AIDS (in-hospital)
Unlimited (subject to OAL)
General Practitioners/Medical Specialists
Consultation
Unlimited (subject to OAL)
Procedures
Dentistry
Maxillo Facial
Unlimited (subject to OAL)
Oral/Trauma Surgery
Diagnostics
Advanced Radiology (in and out-of-hospital)
N$10 000 per family
Basic Radiology and Pathology (in-hospital)
Unlimited (subject to OAL)
Mental Health
Mental Health Psychiatric Treatment (inclusive of medication)
N$20 000 per family
Other Services (subject to OAL)
Physiotherapy (in-hospital)
Unlimited (subject to OAL)
Private Nursing
N$3000 per family
Emergency services
Unlimited (subject to OAL)
Total 2010
Total 2012
N$174.31
N$0.40
N$95.63
N$0.51
N$8.20
N$1.95
N$17.21
N$1091.86
N$ 1196.68
Furthermore, the costs for the South African experience shown below provide a comparative basis and a
reasonability check on the expected base costs (as described above) per family per month for the
hospital benefit packages currently found within the medical scheme environment in Namibia.
110 | P a g e
Costs are shown per family per month as at 2010 which are again increased by approximate health care
inflation to reflect 2012 values.
South African Experience
Per family per month
Expected Hospital benefit
Per family per month
R820.84
N$793.64
R201.32
N$174.31
R0.40
N$0.40
Diagnostics
R123.94
N$95.63
Mental Health
R14.53
N$0.51
Physiotherapy (in-hospital)
R20.44
N$8.20
Private Nursing
R10.92
N$1.95
Benefit
General Hospitalisation
Maternity
Oncology
Internal prosthesis
Specified Illness Condition
General Practitioners/Medical Specialists
Dentistry
Emergency services
R16.39
N$17.21
Total 2010
R 1208.78
N$1091.86
Total 2012
R 1324.82
N$ 1196.68
Overall, it can be seen that the expected cost of this package is reasonable and consistent with industry
experience. The differences in mental health and physiotherapy claim costs are a function of “medical
practice/culture” in South Africa.
“Hospital + Day to Day” benefit package
A similar analysis as per the Hospital package was performed to determine the costs associated with a
Hospital + Day to Day benefit package i.e. the claim experience of a number of options with comparable
day-to-day benefits in Namibia were analyzed. In doing so, the benefits offered and risk profiles were
compared to ensure consistency. Costs were standardized to allow for differing benefit levels and age
distributions between options, where applicable.
It is important to note that the costs shown below are based on 2010 claim experience. These costs are
grossed up by approximated health care cost inflation to reflect end of year 2012 values. Costs shown are
based on tariff amount and not claimed amount i.e. the costs assume that the Fund would pay a 100% of
NAMAF tariffs.
Due to limitations in the coding of the medical scheme data, in-hospital and out-of-hospital claims could
not be segregated at the desired level. However, based on the discipline and practice code, claims were
mapped to the various benefit categories. In addition, the costs implicitly reflect current management
practices and hence improvements in claim costs associated with better benefit, case and hospital
management have not been included. As stated above, it should be noted that future management
practices will have an impact on the level of costs arising from the NMBF.
111 | P a g e
Similarly to the hospital option, to ensure that the cost per family quoted below is both reasonable as well
as consistent with industry experience, a comparison to the South African medical scheme industry was
performed. It is important to note that the South African medical scheme database used accounts for
approximately 4 million beneficiaries ensuring that the sample size is sufficient. In addition, benefit
schedules were reviewed to ensure that benefits are comparable. The table below summarises our
recommended Hospital + Day to Day benefit package and the associated costs per family per month.
The benefit package has been designed to ensure consistency with current benefit levels offered in the
market and simultaneously address the health needs of the Namibian employed population.
112 | P a g e
Benefit
Recommendation
Overall Annual Limit (OAL)
1.75 million
General Hospitalisation
Accommodation and Theatre Fees
Medicine
Expected
Cost per
family per
month
Unlimited (subject to OAL)
Blood Transfusions
Maternity
Unlimited (subject to OAL)
maximum of 3 days for
normal delivery and 4 days
for caesarean
2 Scans
Confinement fees - including full procedure
2D Sonar Scans
Oncology
All services (including chemicals)
N$758.91
N$300 000 per family
Internal prosthesis
Includes all materials used and actual cost of prosthesis
N$35 000 per family
Specified Illness condition
Organ Transplants - Full procedure
N$400 000 per family
Renal Dialysis
N$150 000 per family
HIV/AIDS (in-hospital)
Unlimited (subject to OAL)
General Practitioners/Medical Specialists
Consultation and Procedures (in-hospital)
Unlimited (subject to OAL)
Consultations and out-of-hospital services (out-of-hospital)
N$384.66
N$5 500 per family
Dentistry
Maxillo Facial
Unlimited (subject to OAL)
Oral/Trauma Surgery
Basic Dentistry (out-of-hospital)
Specialised Dentistry (out-of-hospital)
Limit of N$11 000 per family
with sublimit of N$4 500 for
basic dentistry
Orthodontics
Dental Implants - Full procedure
N$118.09
Optical
N$2 700 per family over two
year benefit cycle i.e. frame
every two years
Eye Examinations/Consultations
Spectacles and Lenses
N$67.74
Diagnostics
Advanced Radiology (in and out-of-hospital)
N$12 500 per family
Basic Radiology and Pathology (in-hospital)
Unlimited (subject to OAL)
Basic Pathology and Radiology (out-of-hospital)
N$187.58
N$4 500 per family
Mental Health
Mental Health Psychiatric Treatment (inclusive of medication)
N$25 000 per family
N$3.85
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Allied Health Services
Chiropody, Psychology, Dietician, Homeopath (consultation
only),Occupational therapy, Speech Therapy, Physiotherapy
(out-of-hospital),Podiatry, Chiropractor, Social Worker
N$10 000 per family
N$68.19
Medication
Acute Medication (out-of-hospital)
N$5 000 per family
N$442.59
Acute Medication (in-hospital)
Unlimited
Chronic Medication
N$ 17 500 per family
N$250.32
Other services (subject to OAL)
Physiotherapy (in-hospital)
Private Nursing
Emergency services
Total 2010
Total 2012
Unlimited (subject to OAL)
N$8.20
N$28 000 per family
N$6.32
Unlimited (subject to OAL)
N$17.21
N$2313.67
N$2535.78
Due to marketing considerations as well as the need to cater for different health profiles etc. the day-today benefits offered differed. Nonetheless, we have provided a comparison to the South African
environment and noted the differences that were benefit driven.
114 | P a g e
South African Experience
Expected Hospital plus
day-to-day benefit cost
R867.84
N$758.91
General Practitioners/Medical Specialists
R466.25
N$384.66
Dentistry
R72.98
N$118.09
Optical
R76.59
N$67.74
Diagnostics
R206.33
N$187.58
Mental Health
R14.53
N$3.85
Allied Health Services
R15.99
N$68.20
Medication
R222.20
N$692.91
Physiotherapy (in-hospital)
R20.44
N$8.20
Private Nursing
R10.92
N$6.32
Emergency services
R16.39
N$17.21
Total 2010
R 1990.47
N$ 2313.68
Total 2012
R 2181.56
N$ 2535.78
Benefit
General Hospitalisation
Maternity
Oncology
Internal Prosthesis
Specified Illness Condition
From the above table, it appears that for the level of overall benefit offered on the Hospital + day-to-day
benefit package, the associated cost per family per month is consistent with industry experience.
However, what is evident is the impact of availability of benefit on claim costs for categories such as
dentistry, diagnostics and allied health services. This is a function of a number of factors including:


Supplier induced demand particularly for radiology and pathology i.e. service providers perform
unnecessary tests and scans due to the availability of benefit. As such we have recommended
limits that aim to reduce this behavior.
Different “medical culture” i.e. we have seen significant utilisation of allied health services in
Namibia compared to the South Africa and such behavior has been incorporated in the estimation
of the expected cost of the NMBF under the Hospital + day-to-day benefit package
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Benefit package and membership base combinations: Risk Matrices
This section combines the analysis performed for the potential membership bases and the benefit
package options into risk matrices, showing the significant risks faced for each benefit–membership
combination.
Included in the risk matrices are the expected costs for each combination, based on the actuarial costing
performed in the previous section.
The key below provides an indication of the level of risk for each colour-coded element of the risk matrix:
High risk
Medium risk
Low risk
The risks will have varying levels of significance on the overall effect of the combination chosen. For this
reason the risks have been grouped into “Design” risks and ‘Implementation” risks. Design risks refer to
risks due to the benefit-membership combination not meeting fundamental insurance principles. The
Implementation risks stem from risks in actually enforcing the chosen combination and the potential
hurdles to pass prior to NMBF implementation.
An overall risk rating has been given to the Design and Implementation risk headings in order to provide a
weighted effect of the risks on the overall result.
Costings Methodology
The Hospital benefit package costs presented in section 16.4.2 and the Hospital + Day-to-Day benefit
package costs presented in section 16.4.3 serve as the base costs from which the expected per family
per month(pfpm) costs for the different membership groups in section 16.4.5 are calculated. These costs
are determined as follows:





Base cost is as described in section 16.4.2 and 16.4.3 respectively.
The proportion of principal members in each age band for each target membership group is
calculated.
Through the use of Generalized Linear Modeling, a statistically derived factor which is based on
the population underlying the relevant base cost (described above) is calculated.
Using this information, an appropriately weighted adjustment is determined and applied to the
base cost to obtain the expected pfpm cost for the applicable membership group.
The expected cost allows for approximate health care cost inflation to reflect the value as at
2012.
The methodology used was deemed appropriate due to the following:

The statistical exercise employed to obtain the cost adjustment factors is a generally accepted
method for determining average claims costs used in the medical scheme industry. However, the
specific application thereof applied for the purposes of this report results in the implicit
assumption that the family sizes of the underlying base cost populations are representative of all
other populations costed as per section 16.4.5.
116 | P a g e

However, the analyses shown below provides comfort in that sufficiently similar average family
sizes of the population underlying the base cost and the membership groups to which the
expected costs apply can be seen.
Hospital benefit package
2.33


Average Family Sizes
Hospital + day-to-day
PSEMAS
benefit package
2.45
2.13
Medical Scheme Population
1.88
The average family size of the Uncovered and Government Uncovered principal members is
assumed to be the same as that of the lives underlying the Hospital and Hospital + Day-to-Day
packages. Hence, a vast deviation from the estimated cost is not expected due to significantly
differing family sizes.
In the absence of data of the desired detail the method is deemed to be sufficiently rigorous.
117 | P a g e
Public hospital benefit package*
Uncovered
Uncovered + PSEMAS
Uncovered +
PSEMAS +
Medical
Schemes
Uncovered +
Medical schemes
PSEMAS
PSEMAS +
uncovered
government
Design risk
Limited risk pool
Pricing risk
Affordability risk (for members)
Buy-down risk (between options)
Buy-down risk (between sectors)
Insufficient risk cross-subsidisation
Insufficient income cross-subsidisation
Financing risk
Implementation risk
Legal risk
Political risk
Provider supply capability
Sustainability
Extent of reform required
* Costs cannot be determined for this benefit package due to the data limitation of not being able to extract public hospital costs from the PSEMAS data.
119 | P a g e
Adjusted PSEMAS benefit package
Uncovered
Uncovered +
PSEMAS
Uncovered +
PSEMAS +
Medical
Schemes
Uncovered +
Medical
schemes
PSEMAS
PSEMAS +
uncovered
government
Design risk
Limited risk pool
Pricing risk
Affordability risk (for members)
Buy-down risk (between options)
Buy-down risk (between sectors)
Insufficient risk cross-subsidisation
Insufficient income cross-subsidisation
Financing risk
Implementation risk
Legal risk
Political risk
Provider supply capability
Sustainability
Extent of reform required
Estimated costs pfpm (N$)
725.61
841.85
874.43
815.02
998.46
972.89
Total costs per annum (N$)
1 009 503 250
2 038 841 237
2 787 336 170
1 757 992 568
1 029 023 245
1 340 876 911
These costs are based on PSEMAS claims experience and hence indicate the costs expected if the PSEMAS benefit package were to be
extended to the above populations. PSEMAS benefits are provided at either ninety-five percent of the 2008 NAMAF tariff (less ten percent
3
payable) or ninety-five percent of the cost . The benefits to which these rules apply are stated in the PSEMAS benefit schedule.
3
Information provided by PSEMAS
120 | P a g e
Private Hospital benefit package
Uncovered
Uncovered
+ PSEMAS
Uncovered +
PSEMAS +
Medical Schemes
Uncovered +
Medical
schemes
PSEMAS
PSEMAS +
uncovered
government
Design risk
Limited risk pool
Pricing risk
Affordability risk (for members)
Buy-down risk (between options)
Buy-down risk (between sectors)
Insufficient risk cross-subsidisation
Insufficient income cross-subsidisation
Financing risk
Implementation risk
Legal risk
Political risk
Provider supply capability
Sustainability
Extent of reform required
Estimated costs pfpm (N$)
898.74
936.35
954.73
939.25
987.13
979.23
Total costs per annum (N$)
1 250 369 966
2 267 706 827
3 043 300 735
2 025 955 828
1 017 346 429
1 349 614 959
121 | P a g e
Private Hospital plus Day-to-Day benefit package
Uncovered
Uncovered +
PSEMAS
Uncovered +
PSEMAS +
Medical Schemes
Uncovered +
Medical
schemes
Estimated costs pfpm (N$)
1850.87
2146.90
2222.12
2067.11
2546.53
2506.05
Total costs per annum (N$)
2 575 018 648
5 199 487 143
7 083 237 596
4 458 742 137
2 624 480 264
3 453 940 921
PSEMAS +
uncovered
government
PSEMAS
Design risk
Limited risk pool
Pricing risk
Affordability risk (for members)
Buy-down risk (between options)
Buy-down risk (between sectors)
Insufficient risk cross-subsidisation
Insufficient income cross-subsidisation
Financing risk
Implementation risk
Legal risk
Political risk
Provider supply capability
Sustainability
Extent of reform required
122 | P a g e
Limitations and considerations:
Population covered
The costings are based on the claims experience of a subset of the current medical scheme population
and PSEMAS. These costs therefore take into account the health seeking behavior of these lives. The
healthcare costs relating to the uncovered employed population who would be covered by the NMBF are
not accounted for explicitly in these costs as there is an absence of data for this group. This limitation is
fairly commonplace in countries where detailed public healthcare sector data is not available. Therefore it
is necessary to conduct further research to understand the healthcare claiming of these lives. The cost of
claims may be higher for this group since on entry to an insured environment, their health seeking
behavior may increase as they seek to use the benefits available to them, potentially at a lower cost than
previously available to them. Alternatively, their costs could be lower as they may not be aware of the
insurance benefits or how to access them. The uncovered lives may also be younger thus requiring lower
healthcare consumption.
Benefits
The benefits costed in this report are a hospital option and a hospital plus day-to-day option. The NMBF
is expected to comprise one set of healthcare benefits only. The use of multiple benefit options is
commonplace within medical schemes in which members can select their benefit option, often on the
basis of affordability and health requirements. This leads to anti-selection whereby the sicker lives buy the
more expensive options which may lead to a worsening of the risk profile on these lives as the costs of
claims increases and the younger and/or healthier lives buy down. For a social fund such as the NMBF
the use of benefit options bears no relevance as the aim is to provide a standard package of care to the
covered population.
Co-payments and balance billing
In order to fulfill the requirement of maximizing pre-funding of healthcare costs, the use of co-payments
needs to be minimized. Therefore, the design of the NMBF does not explicitly make use of co-payments.
However, to the extent that benefit limits used are lower than the cost of claims, beneficiaries will be
required to fund the balance out of pocket.
The NMBF costings have taken into account the claiming patterns of the medical scheme lives in
Namibia. The extent to which copayments are used within these benefit options to contain costs are
reflected in the data.
Balance billing occurs when benefits are set in relation to a tariff which is lower than the scheme agreed
rate and service providers bill members the difference between the tariff and the service provider rate.
This results in additional out-of-pocket costs for members. This practice undermines direct reimbursement
agreements and impacts negatively on members. This should be taken into account in the management
of the Fund.
Role of medical schemes
Medical schemes currently provide a wide range of cover to beneficiaries, from basic hospital packages
to comprehensive cover including hospitalization and day-to-day out-of-hospital benefits. There is
123 | P a g e
significant variation in the latter, with some benefit options offering very comprehensive cover. With the
introduction of the NMBF covering the employed population, excluding those currently covered, the role of
medical schemes is expected to remain similar. However, anti-selective movements off medical schemes
to the NMBF must be managed, for the benefit of both risk pools.
Deloitte has not explored the likelihood and consequences in detail of lives currently on private medical
schemes with similar benefit packages to that of the suggested NMBF Hospital benefit package resigning
and joining the NMBF.
Factors to consider would include:




The negative impact on private medical schemes as their risk pools diminish
Resistance from the private sector as they struggle to compete on a cost basis against subsidized
NMBF contributions
If the benefit package is based in the public sector then there may be capacity concerns if a
portion of the private sector suddenly becomes dependent on public sector facilities
The potential strain on the administrative capability of the NMBF’s administrator
Complimed cover
The Complimed product underwritten by Prosperity Life provides top-up hospital cover through two
products:

Complimed Private Hopsital Gap Plan (For members of PSEMAS Medical Aid Fund):
If the service is available in the public sector but the scheme member wishes to have the service
provided at a private hospital then PSEMAS will review the case and decide what portion of the
cost will be covered. Complimed will cover the rest subject to benefit limits.

Complimed Plus Private Hospital Gap Plan
The gap in the cost of the procedure and the tariff amount paid by the member’s medical aid fund
will be covered by Complimed Plus subject to benefit limits.
If the NMBF is structured to provide public hospital benefits, then there is a significant advantage
available in Complimed gap cover being available to members who would prefer to make use of private
hospitals. The existence of this gap cover may limit the provision of overly comprehensive benefits to
NMBF members but in the same breath provides incentive to design a package with limited benefits.
The number of people currently receiving Complimed cover (2010 data):
Scheme
Number of members
Private schemes
14 601
PSEMAS
45
Total
14 646
It is clear from the data that the utilization of the Complimed product by PSEMAS members is very low.
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Subsidy arrangement
Appendix B contains an analysis of what the estimated net contribution would be if the budgeted
PSEMAS subsidy, received from the Ministry of Finance, were made available to the NMBF. Given that
the PSEMAS conributions include the non healthcare component while the estimated NMBF amounts
only refer to healthcare contributions, this leads to an overstatement of the subsidy by the amount of the
non healthcare expenses.
Total annual non-healthcare costs in the Namibian medical fund industry
The total average non-healthcare expenditure cost per principal member in the Namibian medical funds
industry was N$ 258.8 per member per month in 2010 (this figure was calculated using the figures
provided in the NAMFISA 2011 annual report).
The graph below illustrates the increasing trend of non-healthcare expenditures in the Namibian medical
funds industry since 2006:
Historical trend of Namibian medical
funds' non-healthcare expenditure
Cost per member per month (N$)
270
250
230
210
190
170
150
2006
2007
2008
2009
2010
*
The above figures were sourced from the 2011 NAMFISA annual report
This report cannot at this stage estimate non-healthcare costs for the NMBF until the structure is decided
upon. However it is important to note that non-healthcare expenditures vary by scheme depending on
various factors such as:



Economies of scale
Efficiency of administration systems
Extent of managed care activities adding to costs
125 | P a g e



Quality of administration
Number of scheme options
Complexity of benefit design rules
A comparison of possible NMBF contribution costs with current medical fund contributions
Due to a lack of information regarding the income distribution of the possible NMBF membership bases it
is not possible to directly compare NMBF contributions with current medical fund contributions. This is
mainly due to the fact that Namibian medical fund contributions differ by income band. In other words
higher income earners pay higher medical fund contributions, all else equal. This lack of comparability is
compounded by the wide variation in benefit package compared to what the envisioned NMBF benefit
packages will offer. This is also particularly due to the fact that Namibian medical schemes have benefit
packages served by the private sector, while PSEMAS enables access to public hospitalisation.
Furthermore, schemes experience different non-healthcare costs and also include allowances for
reserves and solvency all of which are not included in the NMBF estimated healthcare cost. For example,
medical schemes in South Africa are legislated to set aside 25% of total contributions for solvency
purposes which would be required to be funded from the contributions in addition to the non healthcare
expenses.
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16. Conclusions and
Recommendations
16.1 The enabling legal framework for the NMBF
The Social Security Act 34 of 1994 provides for the establishment, constitution, powers, duties and
functions of the Social Security Commission. The Act paves the way for the establishment of a National
Medical Benefit Fund (NMBF) which is to provide for the payment of medical benefits to employees.
Section 20 (1) of the existing Social Security Act firmly defines the envisaged target population for the
NMBF as follows:
•
•
The NMBF requires registration of every employee of every employer
“Except if he or she is a member of any other medical aid fund or scheme approved by the
Minister on recommendation of the Commission”
However PSEMAS is exempt from the Medical Schemes Act and so may be considered not to be
excluded from the NMBF membership base. This distinction is vital and has far reaching consequences
for the eventual form and feasibility of the NMBF. The research conducted takes into account both
options for the purposes of illustrating the impact and constraints of including PSEMAS in the NMBF.
16.2 Health insurance models
Of the four main health care models (NHI model, SHI model, Beveridge model, Out-of-pocket) it is the
SHI model which is aligned with what the NMBF is meant to achieve.
The NMBF is intended to ensure that all employed persons are members of a medical fund. Based on the
literature review of international experience the objectives of the NMBF are consistent with the Bismarck
Social Health Insurance (SHI) model where all employed persons form part of a prepaid health
arrangement. It is therefore distinct from more universal health systems such as National Health
Insurance which is extended to the unemployed population, and in which all have access to healthcare
facilities and services irrespective of ability to pay.
The Social Security Act paves the way for the NMBF, which essentially aims to insure the currently
uninsured in the formal sector. Once the NMBF is implemented, it is envisaged that, a mix of private
medical funds and a single State fund (the NMBF), will cover all members employed in the formal sector
and their dependants (thereby achieving SHI).
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16.3 International experience with SHI
A detailed literature review of international experience was performed, illustrating the path to achieving
universal coverage, as well as important lessons that have been learnt from such experience.
SHI was found to be one of the main funding models used for healthcare financing. Many SHI initiatives
have taken place in Africa, Asia, and Latin America. A total of twenty seven countries have introduced the
overriding principle of universal coverage via SHI (Hsiao & Shaw, 2006).
The following factors were found to contribute positively to an enabling environment for SHI (Hsiao &
Shaw, 2006):








Large formal sector employment
High wages and salaries
Low poverty rate
Small family and/or household size
Efficiently functioning provider networks
Strong human resource capabilities
Strong administrative support
Government capacity to regulate
The literature review identified the following major challenges to implementation of SHI, which need to be
accounted for in the implementation of the NMBF in Namibia:


Enforcing the collection of contributions
Contributing members may not afford contributions in respect of dependents

Actuarial costing of the benefits package requires technical skills and data, and is essential to
determine the financial sustainability and survival of SHI
Enrolment of those in the informal sector and the self-employed, since mandatory enrolment is
not easily enforceable
Defining, certifying, and subsidising the poor
Supply will have to be built up progressively if clients in semi-urban and rural areas are to have
access to adequate health care
Provider payment mechanisms that aim to shift the financial risk of provision to the provider, will
have to be continuously monitored and evaluated
Administrative efficiency improvements e.g. associated with the consolidation of existing social
insurance and other risk-pooling schemes
Leakage of SHI funds because of corruption will be a perpetual threat.






16.4 Collection methods for the NMBF
The Namibian tax system is perceived to be equitable and transparent, and after the introduction of the
value-added tax in November 2000, tax collection has significantly improved. Countries who have
implemented Social/National Health insurance typically have a considerably higher total tax rate.
However if Namibia is to fund the NMBF through taxes it will need to consider the increase to the tax rate
to accommodate this. This will have many other implications that will need to be considered such as the
128 | P a g e
effect on GDP and economic growth. An alternative option is for the government to redistribute the
current budget in which tax is currently being utilized.
A further consideration for the NMBF is how contributions will be collected via individuals and/or
employers. If government fails to collect contributions successfully, they will not be able to cover the claim
costs and expenses needed to support the fund.
It is recommended that the NMBF, should they chose to use contributions collected from
employers/individuals in order to fund the scheme, use a similar method as the one used in South Africa,
whereby all employed individuals must have medical cover, and contributions are collected via employers
or direct debit orders.
16.5 Legislative considerations: NMBF Target population
From a membership base perspective, it is important to consider whether the proposed membership base
will achieve the ideal that all employed, uncovered lives are covered under the NMBF, as laid out in the
Social Security Act. The target population is defined as all employed persons “Except if he or she is a
member of any other medical aid fund or scheme approved by the Minister on recommendation of the
Commission”. (SSA, Section 20 (1))
As PSEMAS is exempt from the Medical Schemes Act, it is important to distinguish between whether
PSEMAS will be classified as a medical fund or not for the purposes of the NMBF. This definition has far
reaching implications for the NMBF in terms of its design and implementation risks.
Scenario: PSEMAS is classified as a medical fund
From a costing perspective, insuring the currently uncovered population (including government
uncovered) only under the NMBF would, it seems, incur the lowest average member cost to the SSC.
However, the cost as represented does not take sustainability into account; it merely gives an indication
of the expected cost arising from past experience. The small risk pool, poor cross-subsidization and buydown risks identified in the risk matrices illustrate that this group is the worst option in terms of
sustainability and feasibility.
Scenario: PSEMAS is not classified as a medical fund
If one considers the scenario that PSEMAS is not classified as a medical fund, then the membership base
will extend to the uncovered population as well as PSEMAS. If the lives currently on PSEMAS are
included in the NMBF population this would substantially increase the size of the risk pool, thereby
reducing the variability in claims and cost experience. In addition this would present the opportunity to
better manage the benefits and costs of PSEMAS which, in its current form, is financially unsustainable.
However there remains implementation risk due to employee and union resistance should the current
PSEMAS subsidization rate and benefit package be scaled back in order to become more financially
sustainable. There is also the possibility that medical scheme members “buy-down” by leaving their
medical schemes and joining the NMBF. This factor will depend largely on the financing and contributions
structure of the NMBF, in particular the extent to which subsidized contributions result in the NMBF
presenting a benefit package and contribution rates which medical schemes are unable to compete with.
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The risk matrices illustrate that, in the absence of implementation resistance, this option is a superior
choice to the “Uncovered” option.
It is recommended that a phased approach be used to implement the NMBF within this scenario. The
NMBF can initially begin as a reform of PSEMAS, after which coverage can be extended to the
uncovered government employees and finally to all uncovered taxpayers. This allows the NMBF to fine
tune its pricing and administration systems prior to being expanded to the full membership base.
Scenario: Legislation is revised and medical scheme members are no longer excluded
Purely from a design perspective, including the entire taxpaying population represents the most superior
option. The literature review repeatedly illustrated the importance of compulsion to ensure social solidarity
and a well-functioning social security system. By compelling all taxpayers to be NMBF members, this
option avoids many risks faced by the other membership group options. For example, there will be no
buy-down risk, the risk pool will be large, there will also be scope to benefit from extensive income and
risk cross-subsidization which in turn will serve to reduce the financing requirements and enhance
contribution affordability.
However there will be a need for substantial reform of both the medical schemes industry as well as of
PSEMAS for this to occur. This will also require a revision of the current social security legislation, which
combined may make this option practically unviable.
16.6 Benefit package recommendations
Affordability
From current medical scheme members’ point of view, the health care facilities and perceived quality of
care in the private hospitals makes a benefit package with private hospital cover a necessity. However
the costs of extending private hospital type benefits to the uncovered population, who we expect on
average to be poorer, may be too prohibitive from a contributions and financing point of view, especially if
the package also contain day-to-day benefits. The cost of the “Hospital + Day-to-Day” benefit package is
almost certainly prohibitively high, making the “Hospital” benefit package the natural choice with regards
to cost containment. In providing this benefit package a reasonably priced minimum level of cover will be
provided to those who previously did not enjoy these benefits.
However this package may not be deemed adequate as it does not include day-to-day benefits. The
“Adjusted PSEMAS” benefit package makes allowance for these benefits, yet is still cheaper than both
the “Hospital + Day-to-Day” benefit package as well as the “Hospital” benefit package because it is based
in the cheaper public sector.
Based on costs alone, the “Adjusted PSEMAS” benefit package is the superior option and is the most
applicable to the uncovered population which we assume to be on average poorer than the covered
population.
Public versus Private sector
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The choice of benefit package has implications beyond the initial affordability and sustainability concerns.
The foremost implication is the funneling of funds into either the public or the private sector.
A public hospital benefit package allows the NMBF to channel funds into the public sector where they are
most needed. More funds and patients being channeled into the public sector will attract more healthcare
practitioners back from the private sector and thereby go some way towards correcting the current
imbalances in the Namibian health care environment. An uplifted public sector will be better equipped to
serve the unemployed population which uses these public facilities out of necessity.
Therefore the choice of sector will determine the channeling of funds to health care facilities and this
choice must be considered at a strategic level in terms of how the NMBF will improve both health
infrastructure and access to healthcare for the target population while achieving goals on the NMBF.
16.7 A phased implementation approach
A key lesson learnt from the literature review was to limit the level of fragmentation of the risk pool when
implementing an SHI fund. In terms of the risk matrices a direct resultant risk of industry fragmentation is
“buy-down” risk where people move to/from the NMBF into PSEMAS or medical funds depending on the
membership base and cost/benefit ratio (driven largely by the rate of contribution subsidization).
However implementing the NMBF at its full membership base level from the outset faces many practical
problems and leaves little room for error in terms of administration systems, pricing correctly, collecting
contributions and taxes and ensuring optimal service delivery of benefits. It is therefore recommended
that a phased approached be adopted by gradually adding various population sub-groups until the target
population is reached and the legislation’s objectives are met.
The costings performed above contains information for various sub-groups which alone do not represent
a membership base consistent with the SSA (for example “PSEMAS + government uncovered” and
“PSEMAS”) however they are included for purposes of comparison and also to be used when considering
a phased approach to implementation. For example an initial step towards the NMBF could be to ensure
all government employees are PSEMAS members and then move on and add other sub-groups such as
non-government uncovered lives.
In summary, the SSC is faced with the delicate challenge of achieving a balance between choosing a
benefit package which meets the population’s health care needs yet is affordable from a financing and
contributions point of view. This balance extends to applying this package to a membership group which
is consistent with the social security legislation yet also sound from a design and implementation point of
view. The choice of funding method as well as the extent of contribution subsidization will have a direct
impact on the success of the NMBF as well as the extent to which the risks identified in the risk matrices
become a reality.
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Thank you for giving us the opportunity to help you in this important analysis. Please do not hesitate to
contact us with further enquiries.
________________________
Ashleigh Theophanides
Bcom (Hons) FIA FASSA
In my capacity as an actuary and Director of Deloitte Consulting Actuarial & Analytical Solutions
_______________________
Lara Wayburne
MSc FFA FASSA
In my capacity as an actuary of Deloitte Consulting Actuarial & Analytical Solutions
_______________________
Fatima Badat
In my capacity as a Manager of Deloitte Consulting Actuarial & Analytical Solutions
June 2012
Woodmead
132 | P a g e
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for Individual Health Systems, OECD Health Working Papers, No. 15.
du Toit, J. (2009). BHF Conference. Finding a model to suit South Africa.
Haufiku, D. B. (2011, August 24). Could regulating the health prices be the solution? Windhoek.
Hsiao, W. C., & Shaw, P. R. (2006). Social Health Insurance for Developing Nations.
IMSA. (2009a). Glossary of Healthcare Financing Terms. Retrieved from IMSA National Health Insurance
Policy Brief Series: http://www.imsa.org.za/national-health-insurance/policy-briefs/
IMSA. (2009b). Policy Brief 6, Costing and Long-term Modelling of NHI. Retrieved from IMSA National
Health Insurance Policy Brief Series: http://www.imsa.org.za/national-health-insurance/policybriefs/
Ministry of Labour and Social Welfare, N. (2010). Namibia Labour Force Survey 2008.
MoHSS. (2008). Health and Social Services System Review. Windhoek: MoHSS.
MOHSS. (2008). Namibia Demographic and Health Survey 2006-07. Windhoek, Namibia and Calverton,
Maryland: MoHSS and Macro International Inc.
Ndjavera, S. (2011). NAMAF Conference. Sustainability of the Public Service Employees Medical Aid
Scheme (PSEMAS) in context of Contribution and Compliance.
Normand, C., & Weber, A. (2009). Social Health Insurance: A Guidebook For Planning.
NPC. (2005). Namibia Household Icome & Expenditure Survey. Windhoek: Central bureau of statistics.
WHO. (2004). Clarifying efficiency-equity tradeoffs through explicit criteria, with a focus on developing
countries , Discussion Paper, Number 5.
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WHO. (2010). Namibia Health Resource Tracking: 2007/08 & 2008/09. Windhoek: Abt Associates Inc.
133 | P a g e
Annexure A: Population groups
Uncovered population
Age Band
Male
Female
E: 15-19
4484
2026
F: 20-24
13817
9915
G: 25-29
15513
11204
H: 30-34
12287
8410
I: 35-39
9533
10002
J: 40-44
4851
6531
K: 45-49
1779
1543
L: 50-54
492
1707
M: 55-59
957
888
N: 60-64
0
0
O: 65+
0
0
Covered population
Age Band
Male
Female
E: 15-19
440
374
F: 20-24
5777
5193
G: 25-29
11077
9721
H: 30-34
13108
9795
I: 35-39
11905
9343
J: 40-44
10901
9122
K: 45-49
11102
8884
L: 50-54
8689
5817
M: 55-59
5431
3309
N: 60-64
2675
1802
O: 65+
2903
2329
134 | P a g e
PSEMAS
Age Band
Male
Female
E: 15-19
228
147
F: 20-24
3058
2535
G: 25-29
5403
5093
H: 30-34
7027
5380
I: 35-39
6139
5599
J: 40-44
6070
6390
K: 45-49
6994
6750
L: 50-54
4998
4227
M: 55-59
2668
2218
N: 60-64
1248
1205
O: 65+
1256
1250
Covered + Uncovered
Age Band
Male
Female
E: 15-19
4924
2400
F: 20-24
19593
15107
G: 25-29
26590
20926
H: 30-34
25394
18205
I: 35-39
21438
19346
J: 40-44
15752
15653
K: 45-49
12881
10427
L: 50-54
9181
7524
M: 55-59
6388
4197
N: 60-64
2675
1802
O: 65+
2903
2329
135 | P a g e
Covered + Uncovered - PSEMAS
Age Band
Male
Female
E: 15-19
4696
2253
F: 20-24
16535
12573
G: 25-29
21187
15833
H: 30-34
18368
12825
I: 35-39
15298
13746
J: 40-44
9681
9263
K: 45-49
5887
3677
L: 50-54
4183
3297
M: 55-59
3720
1979
N: 60-64
1426
597
O: 65+
1647
1079
Uncovered + PSEMAS
Age Band
Male
Female
E: 15-19
4712
2174
F: 20-24
16875
12450
G: 25-29
20917
16297
H: 30-34
19313
13790
I: 35-39
15672
15602
J: 40-44
10921
12921
K: 45-49
8772
8292
L: 50-54
5489
5933
M: 55-59
3625
3106
N: 60-64
1248
1205
O: 65+
1256
1250
136 | P a g e
Covered - PSEMAS
Age Band
Male
Female
E: 15-19
212
227
F: 20-24
2718
2658
G: 25-29
5674
4629
H: 30-34
6081
4415
I: 35-39
5765
3744
J: 40-44
4831
2732
K: 45-49
4109
2134
L: 50-54
3691
1591
M: 55-59
2763
1091
N: 60-64
1426
597
O: 65+
1647
1079
137 | P a g e
Annexure B: PSEMAS subsidy
The Ministry of Finance currently subsidizes the contributions of PSEMAS members. This section
provides an analysis of what the cost of the NMBF is estimated be under each benefit package and
membership base under the assumption that the same subsidy is paid to the NMBF. The table overleaf
summarizes the effect that such a subsidy will have on the NMBF contribution.
Please note that the NMBF amounts do not include non-healthcare expenses while the MOF
contributions to PSEMAS do include these costs in its subsidy. The negative subsidized NMBF costs
indicate instances where the PSEMAS subsidy, if applied to the NMBF, will more than cover the cost of
expected claims (excluding non-healthcare expenditure).
The total PSEMAS subsidy (2012/2013) figure used (N$1 302 036 000) was provided by the Ministry of
Finance in their PSEMAS budget.
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Uncovered +
PSEMAS +
Medical
Schemes
Uncovered +
Medical
schemes
PSEMAS
PSEMAS +
uncovered
government
Adjusted PSEMAS
Uncovered
Uncovered +
PSEMAS
Estimated costs pfpm (N$)
725.61
841.85
874.43
815.02
998.46
972.89
Total costs per annum (N$)
1 009 503 250
2 038 841 237
2 787 336 170
1 757 992 568
1 029 023 245
1 340 876 911
Total MoF-PSEMAS subsidy
(2012/2013)
1 302 036 000
1 302 036 000
1 302 036 000
1 302 036 000
1 302 036 000
1 302 036 000
Subsidised NMBF cost pfpm (N$)
-210.27
304.23
465.96
211.39
-264.90
28.18
Private Hospital
Uncovered
Uncovered +
PSEMAS
Uncovered +
PSEMAS +
Medical
Schemes
Uncovered +
Medical
schemes
PSEMAS
PSEMAS +
uncovered
government
Estimated costs pfpm (N$)
898.74
936.35
954.73
939.25
987.13
979.23
Total costs per annum (N$)
1 250 369 966
2 267 706 827
3 043 300 735
2 025 955 828
1 017 346 429
1 349 614 959
Total MoF-PSEMAS subsidy
(2012/2013)
1 302 036 000
1 302 036 000
1 302 036 000
1 302 036 000
1 302 036 000
1 302 036 000
Subsidised NMBF cost pfpm (N$)
-37.14
398.73
546.26
335.62
-276.23
34.52
Private Hospital plus day-to-day
Uncovered
Uncovered +
PSEMAS
Uncovered +
PSEMAS +
Medical
Schemes
Uncovered +
Medical
schemes
PSEMAS
PSEMAS +
uncovered
government
Estimated costs pfpm (N$)
1850.87
2146.9
2222.12
2067.11
2546.53
2506.05
Total costs per annum (N$)
2 575 018 648
5 199 487 143
7 083 237 596
4 458 742 137
2 624 480 264
3 453 940 921
Total MoF-PSEMAS subsidy
(2012/2013)
1 302 036 000
1 302 036 000
1 302 036 000
1 302 036 000
1 302 036 000
1 302 036 000
Subsidised NMBF cost pfpm (N$)
914.99
1 609.28
1 813.65
1 463.48
1 283.17
1 561.34
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