Covered, but not fully - why a joint review of your medical scheme benefit and gap cover is crucial in your financial planning

South Africa's open medical schemes have now published their contribution increases for 2027. Discovery Health Medical Scheme has announced a weighted average increase of 8.2%, with individual options rising by between 7.4% and 8.9%. Momentum Medical Scheme and Medshield have both landed at 7.9%. Bestmed has announced an average of 7.35%.

The figures sit well above the regulator's guidance. In Circular 20 of 2026, the CMS suggested schemes anchor increases at 3.8%, in line with the Reserve Bank's inflation forecast, plus a reasonable allowance for utilisation. A year ago, its guidance was 3.3%. The weighted average increase it ultimately approved for 2026 was 8.1%.

The reality is that medical schemes are balancing affordability, sustainability and value for members against increasing healthcare costs. This remains a difficult task given that the cost of healthcare provisioning, including charges from healthcare providers, is rising significantly and ahead of general inflation. Schemes are facing increasing claims costs, higher utilisation and an ageing membership base.

Martin Rimmer, CEO of Sirago Underwriting Managers, explains: “For many scheme members, affordability will drive medical scheme decisions in 2027 with more members considering buying down to lower-cost options such as core hospital plans, moving to network plans or restructuring their healthcare cover to manage monthly expenses, while attempting to retain cover for private hospitals. But lower cost options can increase the healthcare financial risk. More affordable options often make greater use of provider networks, co-payments, deductibles, formularies and managed-care rules. The bottom line is that medical schemes simply cannot keep pace with the rate of medical inflation while keeping premiums affordable,” Rimmer explains. “The result is continual benefit erosion and an increase in member exposure to your own out-of-pocket funding. What members often don't see until they are in hospital is how much of the bill their option will not pay in full.”

These shortfalls - the differences between what healthcare providers charge and what medical schemes reimburse for qualifying in-hospital procedures - are among the expenses that gap cover is designed to address. For example, a medical scheme option may reimburse a provider at 100% of its tariff, while a specialist may charge more than that amount. The member may then be responsible for the difference, subject to the terms of the medical scheme and any applicable supplementary insurance policy.

What the gap claims are telling us

Sirago's claims data indicates how quickly that shortfall exposure has grown. The following is an analysis of gap cover claims paid by Sirago Underwriting Managers across a representative sample of 2330 large loss claims between 2020-2025. (A large loss claim is defined as R50 000+).

These are claims across every age group, for medical conditions ranging from joint disorders to cardiac emergencies to cancer to birth complications to respiratory conditions. In each case represented in this dataset, the medical scheme paid a portion of the treatment cost and Sirago paid an eligible shortfall under the relevant gap cover policy. Without that cover, the relevant shortfall may otherwise have been payable by the member. The claims span all the age groups represented in the dataset:

(Source: Sirago Underwriting Managers claims data 2020-2025. The 'Amount Claimed' shown represents the gap amount or shortfall not covered by the medical scheme and which was paid by Sirago, in addition to the medical scheme’s portion of the total treatment cost. The figures are based on the claims dataset described above and should not be taken as a representation of the benefits payable under every gap cover policy.)

In almost half of Sirago’s large-loss gap claims in 2024, gap cover paid out more than the medical scheme did. In one case, gap cover paid R126,771 while the medical scheme paid only R27,573 - just 18% of the total treatment bill. The member's medical scheme premium was R8,000 a month. Their gap cover premium was R450. Without that gap policy, they would have been personally liable for R126,771. This example illustrates the potential financial exposure in that particular case; actual benefits and premiums vary by policy, member and circumstances of the claim.

The biggest driver is still the difference between what specialists charge and what schemes reimburse, driven by the fact that there is no regulated ceiling on specialist or doctor fees in South Africa. Many specialists bill between 200% and 500% of the scheme rate, while many hospital or core medical scheme benefit options reimburse at only 100% of tariff. Co-payments and sub-limits are the faster-growing problem. "Schemes are using them as a cost lever, especially on elective orthopaedic surgery and internal prostheses," Rimmer says. "Once a sub-limit is used up, the member pays the rest."

Affordability is changing how people buy cover

With salary increases struggling to match contribution increases, many scheme members are moving to cheaper options. Rimmer understands why. "The cost and affordability pressures are real and many are simply unavoidable. The danger though is buying down without understanding what you have given up and where your risks are."

Lower-cost options usually depend on provider networks, lower reimbursement rates, tighter limits and more co-payments. A member who moves from a comprehensive plan to a network hospital plan still has hospital cover on paper. But in practice, their exposure to shortfalls and even outright exclusions can rise sharply, just as their financial cushion is getting thinner. "The greatest risk of underinsurance sits with people who make the cost-cutting decisions, but don’t have the gap cover to protect them against the increased exposures that buying down brings.”

There is a second critical consideration. Gap cover is regulated in that it can only respond when the medical scheme has paid its portion of a claim. It cannot do the job of a medical scheme benefit, so gap cover cannot pay for a procedure that your medical scheme does not cover. "If your new option totally excludes a procedure, for example it won't fund an MRI or CT scan, then your gap policy can't step in either," Rimmer explains. "That is the biggest misconception we deal with. Gap cover tops up your scheme benefit where there is a shortfall or a co-pay on an in-hospital procedure. It doesn't replace or substitute it." 1

"For some families, a core hospital plan paired with strong gap cover can be a sensible structure. But it only works if the two are properly matched with the input and advice of a professional healthcare financial advisor, and if the family can still fund day-to-day costs themselves such as GP visits, dentistry, chronic medication and other out-of-hospital health needs."

Managed care and networks are reshaping the shortfall

Schemes are leaning harder on prevention, managed care and networks to contain costs. "Prevention is good news for members, schemes and for gap insurers," Rimmer says. "Earlier diagnosis usually means less invasive and less costly treatment. But managed care also changes where shortfalls land."

Members who don't follow scheme protocols, use a non-network hospital  can face penalty co-payments. On some options, a co-payment on internal prostheses can reach 30% of the hospital account. Not every gap policy covers penalty co-payments, so members need to check their policy wording. Prescribed minimum benefits (PMBs) add another layer. Whether a condition qualifies, how the scheme applies its protocols and whether a designated service provider is involved all affect what is paid. "PMB disputes are common," Rimmer says. "While they are being resolved, the member is recovering at home and the accounts keep arriving."

For gap cover providers, staying relevant means keeping pace with scheme benefit design each year. "Every benefit cycle brings a new co-payment on one option and a reduced sub-limit on another. Our products have to respond to that, and we have to premium rate it responsibly. A gap policy designed around last year's scheme rules can leave holes."

The risks on the horizon

Looking three to five years ahead, Rimmer expects medical technology to be one of the biggest sources of new shortfalls. Robotic-assisted surgery, transcatheter heart valve procedures and advanced cancer therapies are becoming more common. Schemes often fund them with limits or co-payments attached.

The medical scheme and gap cover membership base is ageing too. Since 2019 the average age of medical scheme members has risen from 35 to 37 as fewer young South Africans join. According to the Board of Healthcare Funders, total benefits paid by schemes grew from about R218 billion in 2022 to roughly R259 billion in 2024. A shrinking specialist pool, driven by emigration and limited training capacity, keeps upward pressure on fees as demand for skills grows.

Rimmer also flags a risk that threatens gap cover itself. "We see the same procedure, by the same surgeon, billed at 200% of the scheme rate for one patient and 500% for another. Often the only difference is that the second patient mentioned their gap policy." A small number of providers are behind it, he says, but the cost is significant. This is where data matters. Claims analytics is our early-warning system," he says. "Tracking shortfalls by procedure, provider and scheme option shows us where risk is building before it becomes a crisis. It helps us spot billing that doesn't add up and price fairly. It also gives brokers real cases to show clients."

Value only becomes visible at claim stage

Gap cover is usually judged on its monthly premium. Rimmer believes that is the wrong test. "The premium is what you see. The benefit is what you need when the specialist's account arrives. Comparing two policies on price alone tells you very little about what each one will actually pay."

The numbers make the point. A family (members under the age of 64), on Sirago's most comprehensive option pays around R780 a month at 2026 rates. A single average large-loss claim of R63 000 equals close to seven years of those premiums.  He says the industry must explain cover in real terms. "Percentages above scheme rate mean little to most people. Show them an actual spinal operation or cancer diagnosis, what the scheme paid and what the family would have owed. That changes the conversation."

Brokers and healthcare advisers sit at the centre of this. "A good adviser treats the scheme option and the gap policy as a single solution. They look for overlaps and for holes. Above all, they make sure the gap policy's limits and co-payment cover match the option the client is actually on, especially important after a benefit option buy-down."

Members generally have until the beginning of December to change their scheme and or option for 2027. Rimmer's advice is to use that window well. "Don't review your medical scheme in isolation. Sit down with your adviser, look at both policies together and ask one question: if I am admitted to hospital next year, what am I covered for? If you can't answer that clearly, your healthcare funding plan needs detailed attention."

1.     The availability and extent of benefits differ between products and benefit options. Particular co-payments, shortfalls, procedures and medical expenses may be subject to specific limits, sub-limits, waiting periods, exclusions and other policy conditions. Members should consult their own policy wording to establish the benefits available to them.)

Claims statistics referenced are from Sirago Underwriting Managers' large-loss claims analysis, 2020 to 2025.

The claims examples and statistics are based on Sirago's internal claims analysis and should be read in the context of the dataset, definitions and period stated. Individual claim outcomes vary according to the applicable medical scheme rules, policy terms and circumstances of each claim.

Sirago Underwriting Managers (Pty) Ltd is an Authorised Financial Services Provider (FSP: 4710). Products are underwritten by GENRIC Insurance Company Limited (FSP: 43638), an authorised Financial Services Provider and licensed non-life Insurer and a member of the Old Mutual Group.

The information contained in this material is for informational and educational purposes only and does not constitute financial advice. Sirago gap cover policies are subject to terms and conditions, and premiums are reviewed annually. For more information, please visit www.sirago.co.za (terms and conditions apply).