Musculoskeletal, connective tissue conditions were key drivers of Sirago’s mega gap claims in 2021.

An analysis of gap insurance claims paid by Sirago Underwriting Managers during 2021 shows that the volume of large or ‘mega’ gap claims paid, had more than doubled in cost and volume when compared with mega claims paid by Sirago in the corresponding period of 2020.  Mega gap claims are internally classified by Sirago as gap shortfalls in excess of R41 000 not paid by medical schemes for in-hospital admissions and treatments.

Of the thousands of claims processed in 2021, Sirago saw an increase of 72% in mega gap claims compared with 2020.  In terms of financial quantum, mega claims value increased by more than 100%, leaping to in excess of R11 million in 2021.  The average mega gap claim paid by Sirago in 2021 was R61 400, an increase of 23% compared with R50 000 in 2020. These are shortfalls not covered by policyholders’ medical scheme options that they would have to pay from their own pockets if they did not have gap cover in place.  For anyone belonging to a registered medical scheme in South Africa, having an additional gap cover policy is proving crucial.

When gap cover was first introduced as a financial solution to protect consumers from medical scheme shortfalls, gap claims averaged between R2 000 to R8 000. However, in the last 2-3 years, large mega claims of R40k+ are increasingly common and affect medical scheme members across the spectrum of benefits – from lower benefit ‘hospital cover only’, designated service provider options (where you are obligated to use the doctors and hospitals as prescribed by your medical scheme), through to comprehensive medical scheme options.

Below is a synopsis of Sirago’s ‘mega’ gap claims trends during 2021:

  • The beneficiary age band with the highest average mega gap claim at R68 550 is 0-29 years The two largest claims were R164 000 and R144 000, and both were for children aged 1- and 12-years old respectively for congenital conditions. While this is the largest average claim cost, it is the smallest percentage of claims volume in the mega claims category.
  • The age band with the second highest average gap claim at R64 000 is 76+ years Claims relate predominantly to musculoskeletal/connective tissue conditions. The highest claim was R129 000. While this is the second largest average claim cost, it is also the smallest percentage of claims in the mega claims category, after the 0-29 years age band and this is as a result of the population size under cover in this age category.
  • The third highest average gap claim value of R62 000 is in the age band 66-75 years with claims mostly relating to musculoskeletal/connective tissue and circulatory conditions. The two highest claims in this age band were R125 000 and R115 000.
  • The age band 50-65 has the highest number of mega claims by a significant margin based on population size under cover, with an average gap claim of R61 000 and claims relating to musculoskeletal/connective tissue conditions, neoplasms (cancer), circulatory system and digestive system conditions. The highest two claims were R158 000 and R134 000.
  • The age band 30-49 years has a mega gap claim average of R56 000 and the third highest number of mega gap claims. Claims causes relate predominantly to musculoskeletal / connective tissue and respiratory conditions. The highest claim in the age band was R121 000.

The age bands are ranked as follows in terms of the percentage of total mega claims Rand value paid out in 2021, but not necessarily commensurate with the population size per category:

Age band Average Claim Amount % of Rand value of mega claims paid
0-29 R68 550 8%
30-49 R56 532 18%
50-65 R61 359 36%
66-75 R62 046 26%
76+ R64 056 12%

“To some extent, it’s an expected trend given where we are coming from over the last 24 months of lockdown. In reality, the increase in all gap claims, not just mega gap claims, is coming off a lower claims volume in 2020 given that medical scheme claims volumes (utilisation) were significantly lower if they were elective procedures and not related to COVID-19 (and which would be fully covered by the medical scheme as a Prescribed Minimum Benefit (PMB) and unlikely to have a shortfall). We expect that this trend is likely similar across the entire gap insurance sector but is likely to even out in the coming months as we settle into our “new normal” of living with the pandemic and various stages of the lockdown.

However, one of the key risks we identified due to the reduction in elective procedures in 2020 was the knock-on effect that delaying these elective surgeries and preventative health checks as a result of the pandemic would have on increased healthcare costs, as well as the prognoses for patients,” explains Martin Rimmer, CEO of Sirago Underwriting Managers, a gap cover provider underwritten by GENRIC Insurance Company Limited.

“This has certainly come to bear with doctors and patients playing ‘catch-up’ in the latter half of 2020 and throughout 2021 when it became clear that the pandemic would be a long-term feature in our lives and people could simply no longer delay, in some instances much needed surgical and medical interventions. On one hand, in some aspects, delays have resulted in more challenging prognoses for patients, which for many resulted in the need for more complex health interventions, and thus translated into more invasive and costly treatment and recovery time. But a more concerning and sinister trend is that of overcharging by some unscrupulous medical practitioners to make up for lost income during the height of the pandemic when elective surgeries were on hold, which received a fair amount of publicity during the lockdown,” says Rimmer.

“We are seeing a change in billing protocols and even suspicious use of ICD-10 codes based on a client’s insurance portfolio by some of the medical providers looking to capitalise on the patient’s insurance cover by overcharging, knowing that the patient has the insurance to cover the inflated costs, irrespective of their agreed tariffs with the medical scheme industry. The net result of this behaviour is directly proportionate to the cost of a gap cover policy which will inevitably influence the overall affordability of cover. Given the current state of play in the medical scheme market, it is vital that members have gap cover in place to ensure that, should the need arise, they will not be financially prejudiced in the event of a hospital admission!

“It is now common practice for patient information forms to ask upfront whether a patient has gap cover or not when this should be of no relevance to the healthcare provider whatsoever. This behaviour and ICD-10 coding/gaming of the system has huge implications for the long-term sustainability and affordability of these crucially important insurance-based healthcare funding benefits for consumers,” adds Rimmer.

The increase in gap claims is also reflective of what is happening in the medical scheme environment and the erosion of benefits due to member affordability challenges. Many members downgrade medical scheme benefits to options that they can afford, as opposed to options that they need, to manage their own healthcare needs – largely a result of the economic impact of the pandemic. In turn, medical schemes are under massive pressure due to escalating medical inflation, increased utilisation and an ageing member profile.

“While medical scheme contributions increase every year, the benefits are in some instances reducing, while healthcare costs are increasing by much more than annual inflation. This creates a ‘double whammy’ for consumers who not only will be forking out more for the same or less medical scheme cover but will also potentially have to shell out for greater ‘out-of-pocket’ healthcare expenditure than ever before. In such an environment, it is evident that gap cover is a non-negotiable part of any individual and or employer’s healthcare strategy, regardless of age. A single gap claim of R60k would be the equivalent of around 11 years of gap premium payments at 2021 premium rates, and not too many households can afford a major financial knock like this due to a health crisis in the current environment,” concludes Rimmer.