Medical Scheme membership is fast becoming unaffordable for many South Africans, even for those who might be receiving a part subsidy of their membership costs from their employer as part of an employee benefit scheme.

For many households, retaining their medical scheme membership will often involve trade-offs, having to redirect other essential household expenditure to foot the bill, and in many instances they may have to buy-down on their level of cover to a core hospital plan, which means a commensurate decrease in what and how much is covered, increasing the likelihood of tariff shortfalls that they will have to self-fund.

“The reality is that medical scheme cover can cost 20% or more of monthly disposable household income.  If you consider the hyper-inflationary growth in healthcare costs which have tracked well above 10% for many years, the average annual medical scheme increases of 8-10%, and the fact that salary increases in many  industries have declined to lows of 3% annually, if any at all, it is clear that medical scheme costs are eating into a much greater share of monthly household disposable income than ever before.  But given the disastrous state of the public healthcare system, having access to quality private healthcare is an expensive but essential safety net that consumers who can afford it understandably do not want to live without,” explains Martin Rimmer, CEO of Sirago Underwriting Managers, a leading provider of gap cover solutions, underwritten by GENRIC Insurance Company Limited.

“After bond repayments, healthcare funding is easily the biggest cost, and it’s this cost that is behind the annual ‘buy-down’ experienced by medical schemes – where consumers reduce the level of cover on their medical scheme benefit options to ‘core’ plans due to affordability challenges, but still want to retain access to private in-hospital care in a worst-case scenario. It’s important to understand that any buy-down in medical scheme benefits comes with a commensurate reduction in benefits, both in terms of what is and is not covered, as well as the rates at which claims are reimbursed. More affordable medical scheme options mean less benefits and more restrictions related to accessing benefits – and this is where gap cover and supplementary insurance solutions becomes a crucial consideration for consumers as part of their financial planning,” explains Rimmer. 

If you are a member of a medical scheme, you may have already discovered that while your medical scheme benefit will cover you for many in-hospital events and costs, it does not always cover you for everything in full. For example, in many instances, you may even find that before any hospital admission, you are required to pay a non-refundable deposit (referred to as a co-payment), upfront to the hospital. Post treatment, you may also get a bill for tariff shortfalls which you will need to fund – these shortfalls occur when the tariff that the medical scheme refunds the healthcare provider at – such as the specialist doctor – is lower than what the healthcare provider charges.  This is where gap cover comes in.

Gap claims case studies

Sirago provides the following gap claims case studies (paid in 2022) to illustrate just how onerous these shortfalls can be and how gap cover responds:  

• Cancer:  Besides dealing with the trauma of a cancer diagnosis, our client was faced with a hospital bill of almost R82 000, of which the medical scheme only paid R17 354.  The client’s gap cover settled the huge shortfall of R61 264 in full.  
• Confinement:  This new mother gave birth via caesarean section and received a bill from the gynaecologist of R27 000. Her medical scheme benefit only paid R3 786, leaving a huge shortfall of R23 213 which her gap cover settled in full. 
• Penalty fee: Certain medical schemes charge a penalty fee of approximately R14 000 if members don’t subscribe to scheme/option rules for hospital admissions, which is payable upon admission.

“Very few people have this sort of spare cash available, illustrating the invaluable role that gap cover plays in your healthcare financial planning. Key in this process is to understand what gap cover is, what is and is not covered, and how you can mitigate the gaps in your risk planning in an affordable and effective manner – a task with many complexities and moving parts that is best undertaken with the advice and guidance of your accredited intermediary,” adds Rimmer.  

When and how does my gap cover come into play?  

Sirago offers the following insights as to what exactly gap cover is, what it covers (and not!) and when and why you need it: 

1. Gap cover is a cost-saving supplementary insurance solution and add-on to your medical scheme benefit. It is not the same as a medical scheme benefit, nor can it do the job of your medical scheme. You cannot purchase and or use gap cover if you do not belong to a registered medical scheme.
   
   
2. Gap cover will pay for the shortfalls where doctors and healthcare providers charge more than the medical scheme rate at which you are reimbursed for in-hospital events/procedures.  These shortfalls can range anywhere from 200% to 500% higher than the rate paid by your medical scheme. So, if your medical scheme option only pays out at 100% of tariff, like many core hospital plans do, you will then be liable to pay the shortfall of the other 300% to 400% charged by your healthcare provider as an “out of pocket” expense - this could be financially debilitating for many consumers.
   
   
3. These shortfalls occur in several ways including when healthcare providers charge more than the contracted / agreed tariff / rate with your medical scheme for certain in-hospital procedures; or your medical scheme applies co-payments or deductibles on certain in-hospital admissions and or procedures; and when certain expensive in-hospital items and appliances have annual sub-limits, for example the internal prosthetic devices used in a joint replacement procedure. 
   
   
4. Gap cover provides cover for these shortfalls up to an annual Overall Annual Limit (OAL), per beneficiary of R191 000 (as of 1 April 2023), as per legislation. This OAL is able to be revised annually with an effective date of 1 April of every year in line with prevailing legislation.
   
   
5. For a gap cover benefit to be paid out, the trigger event is PRIMARILY an initial payment or intention from your medical scheme to pay their portion of the claim.  This aspect is critical for policy holders to understand. This comes back to the regulations which state that gap cover is not a substitute for medical aid, nor can it do the job thereof. As a simple example, if your medical scheme option does not provide any cover for an MRI procedure, then your gap cover may not provide cover either.  It is only where there is a shortfall on a claim or event that your medical scheme does pay towards, primarily for in-hospital procedures, that gap cover will step in.
   
   
6. On some core hospital plans, medical schemes may exclude certain procedures entirely in a bid to keep the cover more affordable.  For example, procedures like back and neck surgery, bunion and knee surgery, joint replacements and hiatus hernia surgery may be excluded entirely.  This means that should you require a hip replacement for example, you would need to fund the costs of such surgery from your own pocket as your medical aid benefit will not cover it, and nor will your gap cover for reasons explained above.  If you are on such an option, then Sirago’s Exact Cover, which is a stated insurance benefit (and is not the same as gap cover), pays a fixed amount towards the cost of funding such a surgery. For example, Sirago Exact cover will pay R50 000 towards joint replacement surgery, or R10 000 towards MRI and CT scans due to an accident.
   
   
7. If you are moving to a more affordable core hospital plan, then make sure that you add gap insurance to cover any potential in-hospital tariff shortfalls. Also be prepared for a certain level of self-funding which you will need to pay for your day-to-day medical expenses for GP visits, dentistry, optometry and the like which will not be covered on a core hospital plan, nor by your gap cover.
   
   
8. You may want to consider a complementary health insurance benefit which provides cover for primary healthcare needs (out of hospital, day-to-day healthcare) such as GP visits, dentistry, optometry, pathology, x-rays, chronic and acute medicine and so on, up to set limits defined in the policy wording. The primary care services are provided by a national network of healthcare providers that the health insurer contracts with at pre-negotiated rates. This is an affordable and savvy way to protect yourself from out-of-pocket expenses for primary care, which is excluded from your core hospital plan benefit with your medical scheme.

“Given the affordability challenges and the way that medical schemes are having to restructure their benefit options to ensure sustainability, the need for supplementary solutions like gap cover and co-payment cover as an insured solution is an essential part of your healthcare financial planning. At the same time, the complexity of comparing different benefit options and matching this to your needs analysis based on your claims history, state of health, any chronic conditions and financial position, means it’s a task best done with the guidance and advice of a professional healthcare advisor.  With such a wide variety of insurance solutions and the complexity of product and benefit structures, you will be hard pressed to make an informed choice about something as fundamental as healthcare funding without professional advice. Always consult with an accredited financial advisor/intermediary to ensure optimal decision making. While the need to manage costs and reduce expenses is real, it is equally important to not leave yourself financially compromised,” concludes Rimmer.

Note:  The content of this article does not constitute financial advice.

Sirago Underwriting Managers (Pty) Ltd is an Authorised Financial Services Provider (FSP: 4710) underwritten by GENRIC Insurance Company Limited (FSP: 43638), an Authorised Financial Services Provider and licensed non-life insurer.

Terms and conditions apply, for more information visit www.sirago.co.za

Issued by: Teresa Settas Communications
Teresa Settas
(011) 894 2767 or This email address is being protected from spambots. You need JavaScript enabled to view it.
On behalf of: Sirago Underwriting Managers
Martin Rimmer – CEO