Raising South African taxes for NHI - not good

Raising taxes to pay for NHI ‘premature’

Before the government considers raising taxes to pay for national health insurance (NHI), it should meet its own promise to allocate 15% of its budget to health.

CAPE TOWN — Before the government considers raising taxes to pay for national health insurance (NHI), it should meet its own promise to allocate 15% of its budget to health in line with the Abuja target, according to University of Cape Town health economist Prof Di McIntyre.

The government also needed to improve public health facilities and win the trust of the public before increasing the tax burden, she said ahead of today’s publication of a European Union- funded study on the financial implications of alternative scenarios for health sector reform.

The study concludes that an NHI-style model was the most affordable.

“I don’t believe people should be asked to pay the tax until they see tangible benefits,” said Prof McIntyre, who is also a member of the ministerial advisory committee on the NHI, set up by Health Minister Aaron Motsoaledi last year.

The Abuja target was set by African heads of state in 2001 and reaffirmed this year in August in Kampala. SA still has a considerable way to go to meet this goal, as health got just 11,5% (R104bn) of the R907bn budget for the 2011- 12 fiscal year .

Prof McIntyre’s comments follow the release last month by the African National Congress (ANC) of a discussion paper on NHI, and add to the debate about health sector reform.

The ANC is proposing the introduction of a central fund to pay for public health services, financed by increased government spending of up to 14,5% of the national budget, a mandatory NHI contribution of up to 8% (split between worker and employer), and possibly increasing value added tax. The party is proposing to phase in NHI over 14 years, starting in 2012, and projects costs will rise from R128bn to R376bn by 2025.

The Strategies for Equity in Less Developed Countries study examined health inequalities in Ghana, SA and Tanzania and investigated how these gaps could be closed by reforms.

In the South African component, Prof McIntyre and her team modelled the costs of phasing in three different scenarios over 15 years: leaving the status quo unchanged (with about 16% of the population belonging to medical schemes), introducing mandatory medical scheme membership for everyone in formal employment, and an NHI-style “universal coverage” model which would have more people relying on state- funded healthcare.

It concluded that the most affordable option for SA would be the “universal coverage” model.

This would require public spending on health of between 5% and 24% of gross domestic product (GDP) by 2025, with the “best guess” being 6,4%, said Prof McIntyre. The wide cost variation was largely due to different estimates of the unit costs of services. If the “best guess” scenario was introduced today it would cost R196bn (with R102bn coming from the public purse) and rise to R394bn (with R295bn from public funds) by 2025 in current terms. In this scenario, administration costs would be tightly controlled, and unit costs for services would be lower than current private sector rates.

Under this scenario, medical schemes would continue to exist but with a smaller membership base, and so they would account for spending equivalent to 2,2% of GDP by 2025. About 40% of medical scheme members would be likely to drop out. About 8% of SA’s GDP is spent on health at present, said Prof McIntyre.

The range of services offered by the state under this scenario would have to be limited, she said. “There is going to be rationing,” she said, implying that those who could afford to would continue to buy from the private sector the services not provided by the state. “There is rationing in the (UK) National Health Service, there is rationing everywhere.”

Source - Businessday.co.za

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Metropolitan and Momentum merger potential job losses reviewed

Tribunal raps insurers over job losses

The Competition Tribunal rebuked insurance giants Metropolitan and Momentum for a lack of clarity over potential job losses resulting from the proposed merger between the two.

THE Competition Tribunal yesterday rebuked insurance giants Metropolitan and Momentum for a lack of clarity over potential job losses resulting from the proposed merger between the two, leading to a lengthy discussion that lasted most of the day.

The hearing, which was initially expected to run from 10am to 1pm, dragged on for about six hours as the tribunal searched for clarity on the exact details of the proposed job cuts. The tribunal criticised the two companies, who plan to merge into JSE-listed MMI, for the lack of clarity in their documentation detailing their proposed merger. A merger would create a company with an embedded value of R30bn.

“What does it mean that the parties will investigate opportunities for supporting the employees? What does this mean and can you enforce it? What’s the likelihood of reskilled people getting employment?” tribunal chairman Norman Manoim asked.

While the deal has received shareholder approval, there has been opposition from the National Education and Allied Health Workers Union (Nehawu). Last week the union said it feared the loss of more than 1000 jobs as a result of the deal. 

The exact number of potential job losses was a major point of contention at the hearing in Pretoria. During the six hours of discussions, the exact number of potential job losses at the two companies changed, falling from 1000 to between 300 and 500 based on the companies’ detailing of alleviation measures.

The tribunal had requested that conditions be placed on mitigating the effect of these job losses. These would be along the lines of training workers that were unskilled or semiskilled, for employment elsewhere.

When the tribunal asked Momentum CEO Nicolaas Kruger, who was representing both companies, why his group had failed to describe an accurate number of potential jobs lost, he replied it had come from “estimates”. This was partly because it was difficult to ascertain the exact magnitude of cost cutting that the companies would have to undergo. He said part of the reason for the estimations, particularly on the effects on staff, was the parties needed to avoid colluding before they had become one entity.

The tribunal also asked Mr Kruger if he had done any study into the social effect of retrenchments on workers’ families, bearing in mind that South Africans were highly indebted , and the economy was “not creating any jobs”. Mr Kruger said no such research had been done but if the merger went ahead, MMI would work to ensure that retrenchments would be capped at 1000 over next year and 2012.

He said just more than R5m would be available for the training of unskilled and semiskilled employees who lost their jobs through any merger.

Nehawu advocate David Unterhalter said if the merger was to take place, MMI had to weigh the new levels of efficiency it would achieve against whether or not job losses could be justified. Mr Unterhalter wanted clear details of how the job losses would be mitigated. “The endeavours which will be made to assist those who lose jobs are too vague and uncertain,” he said.

The companies expect the merger to save them as much as R750m. The hearing was adjourned until today at 9am

Source - Bussinessday.co.za

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Insurance companies consider people within this bracket to be of lower risk

Consumers who actively look for ways to reduce their carbon footprint and make use of renewable energy products are set to be rewarded with lower insurance premiums.

According to Delouise Marias (Pictured right), Head of Personal Lines at Pinion Insurance Brokers - an Aon group Company; lower premiums is one way South African insurers are hoping to incentivise clients to invest in more environmentally friendly lifestyles.

"We are working with insurance companies to offer "green" products, and encouraging the uptake of these by rewarding savings and low priced coverage to customers willing to make environmentally friendly decisions about the way they live."

She says recent studies have shown that customers who are doing their part to reduce their impact on the environment and preserve the planet use fewer natural resources and also tend to be healthier and drive less.

"Insurance companies consider people within this bracket to be of lower risk and therefore are less likely to file a claim.  Motorists who drive hybrid vehicles in particular are viewed as low risk, so insurers are looking at offering special coverage for drivers of these vehicles going forward."

She says Pinion has now partnered with an insurer to offer clients the opportunity to replace a burst geyser with a new solar geyser.

"Clients who install a solar geyser can also take advantages of the electricity rebates from Eskom for using solar power," says Marais.

All paper work is taken care of on behalf of the client and pay-in amounts can be as low as R3000.00 for the first approved instalment of a brand new solar geyser.

According to Marais, this is not only to encourage environmentally friendly behaviour in clients, but also due to the insurance advantages of solar geysers.

"Solar geysers are generally placed outside the house. As such, they are less likely than normal geysers to cause major damage if they burst, resulting in smaller claims overall."

Currently, approximately 20% of the money spent on a solar geyser is returned by Eskom to the purchaser. Furthermore, Eskom provides an approximate saving figure of between 30% - 50% on the electricity portion of the water & electricity bill in the case of approved solar geyser replacements.

To give an example, if a monthly electricity portion equates to R1000.00 rand a month then by installing a solar geyser, clients could save R3600.00 per annum.

"The rebate for installing solar is a limited fund. When it is exhausted, there will be no more available. This is another reason why we are encouraging our clients to consider their energy situation now," explains Marais.

With the growing interest in solar water heaters, most insurance companies insure solar water heaters like any other household item.

However, Marais warns that not all systems available on the South African market comply with the standards demanded by the insurance industry.

She advises homeowners to ensure that they understand their insurance company's policies on solar water heaters so that they can be assured of total cover in the event of needing to file a claim.

Marais comments that in the high net worth space, South African clients are actively looking for ways to go green and are increasingly choosing companies and brands that enable them to do so.

"A sense of social consciousness drives our clients and environmental sustainability has become a primary discussion point among them."

"We believe that companies who offer a green strategy and personalised green solutions for clients, are not only taking steps to combat climate change but also have a competitive advantage in the marketplace," concludes Marais.

Source -ITnews.co.za

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Follow Up Momentum and Metropolitan merge

Life Insurance -

It is five months since we last heard from life offices Metropolitan and Momentum on their merger talks. There are still some more hurdles to jump: the shareholders of both companies will vote on September and the investigations by the competition tribunal and the Financial Services Board are still taking place.

But some important issues have been resolved. The holding company will have the rather unimaginative name of MMI Holdings. The CEO has also been announced. Nicolaas Kruger, the CEO of Momentum will be the new boss of MMI, while Metropolitan CEO Wilhelm van Zyl is the deputy head. It is an indication that Momentum considers itself the senior partner.

But Van Zyl has been a graceful loser, and he will take responsibility for the integration of the asset management, employee benefits and health businesses.

And at least the finance director, Preston Speckmann is from Metropolitan.

There will inevitably be some retrenchments at asset management, which includes many of the best paid people in the groups. There will be only one manager, the core of which will be the RMB Asset Management team in Sandton.


 Competent fund managers at Metropolitan Asset Managers such as chief investment officer Romeo Makhubela will have a good chance of staying but the organisation will not have room for two heads of equity or two bank analysts.

There will be little room for job reduction in the core retail life assurance business, as Metropolitan focuses on households with incomes of R15000/ month or less and Momentum well above that. The separate brands will be used when selling life products to the public. MMI, after all, sounds more like a discount motor spares retailer.

Kruger says he expects the new MMI shares to be listed by mid-November.

A concern from analysts is the extent of FirstRand influence on the board. 


FirstRand chairman Laurie Dippenaar will chair MMI. FirstRand CEO Sizwe Nxasana and COO Johan Burger will sit on the board. MMI and FirstRand do not compete now, but as financial services evolve they will certainly bump heads. Kruger says the intention was to keep it simple and merge the two boards. “The shape of the board could be quite different in a year or two.”

Source- BusinessDay.co.za


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