Rising mega gap claims signal growing healthcare funding woes
The South African private healthcare sector is experiencing a fast-worsening healthcare funding crisis, according to a five-year review of gap cover claims. According to data from Sirago Underwriting Managers, the volume and value of mega gap claims – those worth more than R50,000 – have increased by 512% and 437%, respectively, between 2020 and 2024.
Image credit: Towfiqu barbhuiya on Unsplash
The numbers tell a stark story: where 89 mega gap claims totalling R6.2m were paid in 2020, this figure rocketed to 549 claims worth R34m in 2024.
Perhaps most concerning is that claims exceeding R60,000 are now daily occurrences, with the average large loss gap claim sitting at R63,000 — a far cry from the R6,000 to R12,000 averages seen pre-2020.
Shifting healthcare landscape
This upward trajectory reflects a fundamental shift in South Africa's healthcare landscape.
Medical schemes — constrained by affordability, access, ageing membership populations, and where private healthcare already consumes up to 20% of household income — are systematically reducing benefits and transferring more risk onto the member, rather than increasing premiums to match out-of-control healthcare provider cost inflation.
Healthcare provider costs have consistently outpaced inflation by more than double for years, yet unlike pharmaceuticals, there's no pricing regulation on healthcare provider tariffs.
In a country facing a dire shortage of healthcare professionals, specialists are free to charge rates often 500%+ higher than medical scheme reimbursements.
The regulatory framework compounds this issue.
The Registrar of Medical Schemes mandates that for Prescribed Minimum Benefit (PMB) conditions, where no Designated Service Provider agreement exists, healthcare providers must be paid in full regardless of the charge — essentially providing a blank check.
Mega claims data
Five-year trend analysis
- 2021: 118% increase in claims value paid compared to 2020, driven by Covid-19 impacts and deferred elective surgeries.
- 2022-2024: Average annual increase of 35% year-on-year in large loss claims volumes.
- Highest claims: R200,000+ for ischaemic heart disease conditions in the 50+ age group.
Age demographics challenge assumptions
Contrary to expectations, healthcare crises aren't limited to older populations:
- 50-65 years: 31% of claims (average: R65,065).
- 66-75 years: 27% of claims (average: R64,213).
- 76+ years: 18% of claims (average: R62,773).
- 30-49 years: 18% of claims (average: R58,116).
- 0-29 years: 5% of claims (average: R63,360).
The under-49 age group constitutes 23% of all large loss claims, dispelling notions that major health expenses only affect older demographics and highlighting the risk transfer challenges faced and imposed by medical schemes.
Claims distribution
- 62%: R40,000-R60,000.
- 30%: R61,000-R100,000.
- 6%: R101,000-R150,000.
- 2%: R151,000-R210,000.
Leading conditions driving claims
Musculoskeletal dominance
Over 51% of claims across all age groups involve musculoskeletal conditions, with spinal stenosis leading the charge.
Medical schemes often impose strict limits on elective musculoskeletal surgeries due to high costs, particularly for internal prosthetics, where co-payments can reach 30% of the hospital account if members don’t subscribe to the scheme-imposed protocols.
Cancer and circulatory conditions
Each representing 10% of large loss claims, these conditions reflect both the effect of the delayed diagnosis impact of Covid-19 and the high-cost nature of specialised treatments.
Malignant neoplasms of the breast, prostate, and colon lead cancer claims, while acute ischaemic heart disease dominates circulatory conditions.
The exploitation factor
Gap insurance is increasingly becoming a target for exploitation.
Healthcare providers now routinely ask patients upfront about gap coverage before determining charges, creating a troubling paradox where 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.
This exploitation threatens the sustainability of gap insurance itself. If current trends continue, gap insurance premiums will inevitably rise, making this crucial protection unaffordable for many South Africans.
Why gap cover is crucial
Despite these challenges, gap cover remains essential, irrespective of the medical scheme option.
Most medical schemes have deductibles, co-payments, and reimbursement limits that can leave members significantly out of pocket.
The gap between scheme payments and specialist charges can be substantial — often 200% to 500% above scheme tariffs, and this isn't limited to basic hospital cover options.
Even comprehensive, top-tier medical scheme benefits leave members facing substantial tariff shortfalls for in-hospital procedures.
The mega claims data reveal a private healthcare funding system under severe strain.
As medical schemes transfer more financial risk to members through tariff shortfalls, co-payments, and exclusions, gap insurance becomes not just “a nice-to-have” insurance policy, but essential for financial protection.
However, the sustainability of this model depends on addressing the root causes: unregulated provider pricing, systematic benefit erosion, and the exploitation of gap insurance by unscrupulous providers.
Without intervention, South Africa's healthcare funding crisis will continue to deepen, leaving patients to bear an ever-increasing financial burden.
About the author
Martin Rimmer is the CEO of Sirago Underwriting Managers