Gap cover: The back-up plan for medical aid shortfalls

It only takes one procedure to expose medical aid as a costly illusion. Specialists can charge up to 700% above medical aid rates, and when they do, the shortfall lands with the patient. Gap cover is the insurance product designed to absorb that hit – and most South Africans don’t have it.

About 15% of South Africa’s 62-million people have medical aid – about 9-million to 10-million people. Fewer than 19% of those hold gap cover, meaning roughly 2%-3% of the total population is protected, according to Total Risk Administrators (TRA), a specialist risk-management firm.

“Healthcare costs show no signs of slowing their upward trajectory, while medical aid schemes continue facing pressure to control costs by limiting coverage,” TRA says. “This fundamental tension means that the gap between medical aid payments and actual healthcare costs will likely continue to widen.”

Gap cover requires existing medical aid membership. It is most relevant to people on basic or mid-range plans, where specialist shortfalls are most acute. Those on top-tier comprehensive plans face less exposure.

The claims

Gap cover administrator CompliMed has published examples of actual claims. A hip replacement costing R64,571 saw medical aid pay R16,326 and gap cover pay R46,361. A spinal discectomy claim of R101,302 was split into R34,343 (medical aid) and R66,959 (gap cover). A caesarean section costing R35,808 had medical aid covering approximately 20% (R7,324), with gap cover paying the remaining 80% (R28,485).

A five-year study by gap cover underwriting firm Sirago Underwriting Managers found more than 51% of major claims involve musculoskeletal conditions, with spinal stenosis the leading diagnosis. Cancer and circulatory conditions form the next-largest category: breast, prostate and colon malignancies dominate cancer claims, while acute ischaemic heart disease leads the circulatory category.

Who buys it?

TRA research shows adoption rises sharply at household incomes above R60,000 a month, and is highest among medical aid members over 50 – 22% for the 50-65 age group and 33% for those 65 and older. Medical engineers show a 37% adoption rate; network engineers, doctors and dentists are at 28%. Self-employed individuals sit at 25%; retired individuals at 29%, reflecting higher health risks and greater familiarity with healthcare costs.

Gap cover is particularly relevant for those managing costs associated with major surgery, cancer treatment, MRI or CT scans, childbirth, joint replacements and diagnostic procedures.

What it costs – and what it excludes

Premiums range from about R100 for basic plans to more than R600 for comprehensive options. A mid-range policy covering up to 500% of the medical aid tariff typically runs at R160-R280 a month. 

Most policies cap annual payouts at between R120,000 and R350,000. South Africa has more than 20 gap cover providers, offering basic, comprehensive, cancer and dental options. Most stop accepting new members at age 65, according to financial comparison platform Plancheck.co.za.

Policies vary, but standard exclusions typically cover mental health conditions, cosmetic procedures, drug- and alcohol-related treatment, transport and emergency services costs, and certain precautionary diagnostic procedures. Waiting periods generally run three months for new claims and 12 months for pre-existing conditions.

The exploitation risk

Sirago has flagged a growing threat to the product’s sustainability: healthcare providers now routinely ask patients about gap coverage before determining charges – effectively pricing procedures up to the limit of available insurance.

“A R700 monthly gap policy might pay R130,000 for an orthopaedic surgery shortfall, while the medical scheme with an R8,000 monthly premium pays just R30,000,” Sirago warns. “If current trends continue, gap insurance premiums will inevitably rise, making this crucial protection unaffordable for many South Africans.”

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