Brian Harris, CEO at Turnberry Management Risk Solutions

The financial risk associated with private healthcare in South Africa is no longer theoretical. The cost of private healthcare increases year on year, placing pressure on healthcare providers, medical schemes and, ultimately, medical aid members. As medical inflation outpaces general inflation and specialists continue to charge higher rates, medical schemes face growing challenges in balancing comprehensive benefits with affordable contributions. The result is that medical expense shortfalls, co-payments and benefit limits are becoming more and more common. Gap cover has therefore become an essential tool in helping clients manage their financial risk, by covering the difference between what medical schemes pay and what healthcare providers charge.

Costs on the rise

Healthcare costs are constantly increasing, but this has been particularly notable in recent years, with the rise being driven by a combination of economic and industry-specific factors. Like any other business, healthcare providers face the pressure of global uncertainty, which has caused operational expenses to increase. There are also rising costs to employ staff, operate practices, invest in medical equipment and technology, and maintain their facilities.

At the same time, advances in medicine continue to improve patient care, but these newer treatments and technologies often come at a higher cost. Specialist fees have also continued to increase, as their expertise is in high demand and their own costs of delivering care have increased. When this is combined with South Africa’s high rate of medical inflation, which is increasing faster than general inflation, these factors put the entire private healthcare system under strain.

Why clients are paying more out of pocket

With the rapid and ongoing increases in cost, medical schemes are faced with the challenge of having to absorb costs while keeping premiums affordable. As a result, they increasingly rely on funding mechanisms such as co-payments, sub-limits, designated service providers and other benefit rules to help manage these costs while maintaining the long-term sustainability of their products.

This means that medical expense shortfalls are becoming more common. Specialists frequently charge above scheme rates, while certain procedures or treatments may be subject to co-payments or benefit limits. Even members on comprehensive medical aid options now experience shortfalls, leaving them liable for expenses that they may not have anticipated or planned for.

For clients, the extent of this financial exposure can often only become clear at claims stage, when an unexpected shortfall turns a planned medical expense into an unplanned financial burden.

Changing the conversation

These rising healthcare costs have changed the role of gap cover from a ‘nice to have’ optional product to an essential component of effective financial planning. Medical expense shortfalls are no longer an occasional or unexpected occurrence, but an ongoing reality of accessing private healthcare in South Africa, and they can affect members on all plan tiers. They can also be hugely financially disruptive, with co-payments of up to R40,000 or more and specialists charging five times the scheme rate.

This consistency changes the nature of the conversation around gap cover. Discussions should no longer be limited to clients with specific health concerns or lower medical aid options. Regardless of age, health status or the medical scheme they belong to, every client faces the possibility of medical expense shortfalls.

Gap cover should form part of every conversation about medical aid, healthcare and financial planning. Clients need to understand not only what their medical aid covers, but also where they remain financially exposed. Explaining these risks upfront allows clients to make informed decisions before they are faced with unexpected medical expenses, rather than discovering the gap when a claim is made.

Managing a growing financial risk

Rising healthcare costs have changed the private healthcare landscape in South Africa. Medical expense shortfalls, co-payments and sub-limits are an increasingly common part of accessing treatment, making gap cover critical in limiting client exposure to medical and financial risk.

The financial risk created by rising healthcare costs is becoming a more predictable part of the healthcare landscape. Helping clients understand where these costs may arise and how they can be managed is therefore an important part of responsible advice. Clients should speak to their broker or financial adviser regularly to review their medical aid and gap cover, ensuring that their cover continues to provide the level of protection they need.

ENDS