Gap cover analysis shows massive erosion of medical scheme benefits

An analysis of the top 20 mega gap claims shows the massive erosion of medical scheme benefits and huge cover shortfalls for members, highlighting an alarming reality for medical scheme members where their medical aid just does not cover enough.

The analysis by Sirago Underwriting Managers during 2024 paints a clear picture of the erosion of medical scheme benefits resulting in members facing huge financial shortfalls for in-hospital treatment not covered by their medical scheme benefits. 

Martin Rimmer, CEO of Sirago Underwriting Managers, says without gap cover in place, these 20 claims alone would force these medical scheme members to collectively pay R3 million from their own pockets for in-hospital treatment.

“In many instances, the gap provider is paying more than the medical scheme, a complete misalignment if one considers the significant difference in premium/contribution between the two.”

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What is gap cover?

Gap cover is supplementary insurance to a medical scheme benefit that covers the difference between what healthcare specialists charge for in-hospital procedures and what a medical scheme pays.

• Of these 20 gap claims, all shortfalls were more than R100 000, while three reached the maximum overall annual limit of R191 000 that a gap policy may cover, per member.
• In almost half of the claims, gap cover paid more than the medical scheme paid. In one particular instance, gap cover paid R126 771 while the medical scheme paid just R27 573 which was just 18% of the entire treatment bill that the medical scheme paid.
• Of the total healthcare cost across all 20 claims, the gap covered 40% of the total cost, while medical schemes covered only 60% of the total costs for in-hospital treatment.

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Concerning statistics about medical schemes

“These are massively concerning statistics and demonstrate just how financially devastating the shortfalls are for in-hospital treatment that medical schemes are not paying for. It shows how medical scheme benefits are being eroded as schemes try to limit premium increases.

“Members are getting less cover and lower benefit limits, despite the premium increases in their medical scheme benefit every year. Secondly, specialist fees and healthcare cost inflation are out of control and certainly not aligned with what schemes or consumers can afford.”

Rimer says in the absence of any price regulation and the absence of any competition as medical specialists are in short supply, things can only get worse. “Providers are free to charge any rate they wish, often many more times the rates that medical schemes reimburse at.”

He warns this continued acceleration of mega claims is putting the premium under pressure which inevitably will result in high premium increases every year. “Sirago points to its gap claims trends over the last four years, which clearly demonstrate that being on a medical scheme option – even a comprehensive one – is no guarantee that your bills for in-hospital treatment will be paid for in full by your medical scheme.  And the shortfalls are growing rapidly in financial amounts.

“Of these 20 mega claims alone, the shortfall paid by gap cover was between R120 000 to R191 000.  These are huge numbers that very few people can afford to fork out from their savings or go into debt for – which they would have to do if they did not have gap insurance in place. Just consider the implications for a 30-year-old with a growing family to support and serious financial constraints, or a 70-year-old having to fund such a cost from their retirement savings.”

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Time of the year for medical scheme members to decide on benefits

Medical scheme members have until the end of November to make any changes to their medical scheme options which will take effect from 1 January 2025.  Rimmer says given the affordability constraints, many are looking to cut back but still want access to private healthcare for any hospitalisation or serious health crisis they may face in future.

Sirago advises that you work with your professional healthcare financial advisor to do the sums, take you through a comparison of the various benefit options and then devise the best plan to ensure that your healthcare needs and access to private healthcare are covered, as best possible. 

“If you are on a medical scheme benefit, adding gap cover to your healthcare plan is non-negotiable if you want to protect yourself from shortfalls on in-hospital treatment and specialist charges which can be anything from a few thousand rand to over R190 000. 

“If you are on a medical scheme option that covers 100% or 200% of the tariff charged, you are going to face shortfalls when you consider that many specialists charge upwards of 500% of the medical scheme tariff. You will be liable to pay those shortfalls from your own pocket if you do not have gap cover.”

Rimmer says consumers must always engage the advice and services of an accredited, skilled and experienced healthcare broker or advisor who will help you make informed decisions when needed most, as well as support you through the administration processes with getting your cover in place.