The Growing Gap Between Healthcare Costs and Cover

Why Gap Cover Matters

The affordability of private healthcare in South Africa continues to face mounting pressure, with medical scheme members paying a significant portion of their household income to access private quality care in their time of need. While medical scheme membership remains a critical component of quality private healthcare access, many members are often surprised to discover that their cover does not extend as far as expected.

“Private healthcare offers access to high-quality treatment and shorter waiting times, but it does not guarantee full financial protection. For medical schemes to balance the nuances between, short term affordability for members and long term sustainability for the scheme, as well as the sustainability of specific plan options offered by a scheme, certain co-payments, deductibles and in hospital, non-contracted specialist costs are reviewed in line with mitigating risks to the schemes overall financial stability and members short term affordability. This does mean that medical scheme contributions have increased over the years driven by higher claims costs, increasing utilisation and an ageing medical scheme population,” explains Jacqui Nel, Business Unit Head of Healthcare at Aon South Africa.

“Many households continue to buy-down in medical scheme benefit options to core plans due to affordability challenges. It directly translates to lower benefits and greater exposure to more self-funding of healthcare treatment from their own pockets,” she adds.

The drivers of this erosion of medical scheme benefits are often outside of the control of healthcare funders and their members. As just one example, there is no pricing regulation on healthcare provider tariffs and in South Africa, we are also facing a dire shortage of healthcare professionals. This dynamic leaves specialists who are not contracted with medical schemes free to charge any rate they prefer, often more than 300% to 500% higher than the rate paid by medical schemes.

As just one example, Nel quotes a scenario where a lower benefit option may only reimburse in-hospital specialist services at a rate of 100% of scheme tariff, while the healthcare specialist charges 500% of scheme rates[1]. “This mismatch creates a funding shortfall of 400% that members must pay themselves - sometimes amounting to thousands of rand for a single hospital event. This is where gap cover is an essential financial protection.”

What Is Gap Cover?
Gap cover is supplementary short-term insurance that works alongside your medical scheme benefits. It helps cover the difference between what healthcare specialists charge for in-hospital procedures and what your medical scheme pays. While gap cover can reduce your out-of-pocket expenses, it may not eliminate all shortfalls. Even so, it remains an important part of limiting your financial exposure.

“It is important to note that gap cover is not a substitute for medical scheme membership, but rather a complementary product that enhances financial protection for in-hospital events,” Nel explains. “You cannot purchase and or use gap cover if you do not belong to a registered medical scheme. For a gap cover benefit to be paid out, the trigger event is an initial payment from your medical scheme to pay their portion of the claim. As a simple example, if your medical scheme option does not provide any cover for an MRI or a prosthesis, 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. In simple terms, gap cover helps protect medical scheme members from unexpected medical expenses that arise when treatment costs exceed medical scheme limits.”

What Gap Cover Typically Covers
“These shortfalls occur in several ways including when healthcare providers charge more than the rate at which your medical scheme option pays 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 in-hospital items and appliances have annual sub-limits, for example the internal prosthetic devices used in a joint replacement procedure,” explains Nel.

Gap cover focuses primarily on in-hospital shortfalls and related costs, including:

• Tariff Shortfalls - Covers the difference when specialists charge above medical scheme rates.
• Co-payments and Deductibles - Upfront or fixed payments required for certain procedures or admissions.
• Sub-limits - Covers costs that exceed medical scheme limits on procedures such as prostheses.
• Oncology Shortfalls - May cover co-payments or shortfalls once oncology limits on the medical scheme benefit option are reached.
• Casualty Benefits - Limited cover for emergency room treatment following an accident.

Key Considerations
While gap cover can provide valuable financial protection, there are important factors to keep in mind:

• It complements, not replaces, medical aid - Membership of a registered medical scheme is required. 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. The biggest misconception is that gap cover is a safety net for everything that the medical scheme does not cover.
• Annual limits apply - Benefits are capped in line with regulatory limits set by the Financial Sector Conduct Authority (FSCA), which means that gap cover provides cover for shortfalls up to an annual Overall Annual Limit (OAL), per beneficiary of up to R223 000 from 1 April 2026.
• Exclusions exist - Typically excludes out-of-hospital expenses, chronic medication and elective procedures, but if there is a co-payment attached to the procedure that is stipulated in the gap cover policy wording then it may be covered.
• Waiting periods may apply - Commonly three months (general) and up to 12 months for pre-existing conditions. If gap cover is provided as an employee benefit your broker may be able to negotiate for preferential underwriting.

Why Gap Cover Is Increasingly Relevant
Due to economic financial pressures, consumers may opt for options that are more cost effective - such as core hospital plans – which means that exposure to in-hospital shortfalls and co-payments become more pronounced. However, as Nel points out, these shortfalls on in-hospital procedures occur even on comprehensive medical scheme benefit options.

Gap cover plays an important role in this environment. “It reduces the financial impact of specialist charges and provides medical scheme members with greater certainty during medical events. The bottom line is that gap cover is an absolute non-negotiable part of your healthcare-financing strategy and medical scheme membership whether on a comprehensive or core benefit option. In a complex and evolving healthcare landscape, understanding your cover - and where potential gaps exist - is essential. Always engage with a qualified healthcare broker who can explain all your benefits, exclusions and options - and help you put the right mix of medical scheme and gap cover in place that aligns with both your healthcare needs and your financial realities,” Nel concludes.