Taking a Hybrid Approach to Healthcare Financial Planning

Paul Cox, Managing Director at the Essential Group of Companies including health insurance provider, EssentialMED, explains that the trend of medical scheme members moving to lower benefit and cost options has been consistent for some years now, and the primary driver of this comes down to affordability and perceived value of benefits versus premium paid.

“Recent announcements by medical schemes show that most scheme members are facing weighted average increases to their medical scheme premiums in 2024 of anywhere between 7%-12%, and in some instances a decrease in their funding to medical savings accounts to cover day-to-day primary care needs. In virtually all instances, scheme members are paying a lot more for less benefits and face a growing burden of out-of-pocket healthcare costs which they need to self-fund – a trend that has been consistent for years now.

“Secondly, for many members there is a disjoin between the premium paid, versus the perceived value they receive, and this is especially notable in the younger market. Minimal utilisation members – typically the young and healthy - feel aggrieved at paying the same as high utilisation members, for benefits that they don’t currently use – so are buying down to core hospital plans, or opting out completely. Another driver of private healthcare costs is that healthcare provider costs have also been rising well above inflation for years, and there is currently no pricing regulation as to what they can charge, like in the pharmaceutical sector. Health care providers, notably specialists who are in short supply in South Africa, also face no meaningful market competition dynamics which would rein in unfettered price increases. In the current market, demand for specialist services way outpaces supply, driving up costs. The costs of medicines and advanced medical treatments, notably in the oncology space, are also rising,” he adds.

The bottom line is, regardless of these market pressures and dynamics, maintaining access to private healthcare, especially for hospitalisation, remains high on the list of consumer priorities, given the dysfunctional state of many public healthcare facilities.

“There is a definite approach by healthcare financial advisors to prioritise healthcare funding in a hybrid model, leveraging the synergies between core medical scheme benefits for hospitalisation needs, gap cover for any tariff shortfalls, and health insurance for primary care needs, in a cohesive and complimentary approach,” explains Cox. 

EssentialMED provides a snapshot of the key trends playing out:

  • Moving to a core ‘Hospital’ Plan: While members may be prepared to forego the costs of medical scheme cover for their day-to-day and primary healthcare needs, having a solid hospital plan with their medical scheme is non-negotiable. When you consider that the hospital bill for a health crisis like cancer, heart surgery, car accident or extended stay in ICU can easily run into six-digit numbers, a hospital plan provides the peace of mind and absolute necessity that the big ticket, hospitalisation private healthcare costs are sorted.
  • Gap cover for shortfalls on hospitalisation bills: Gap insurance covers the difference that arises from the rate that healthcare specialists charge for in-hospital procedures versus what your medical schemes benefit pays to providers – the difference can be upwards of 400% and more of medical scheme tariff, particularly on core ‘hospital’ benefit options. If your medical scheme option only pays out at 100% of tariff, you will then be liable to pay the shortfall of the other 200% to 400% charged by your healthcare provider as an “out of pocket” expense if you do not have gap cover in place.
  • Health insurance for day-to-day and primary care needs – when opting for a core hospital plan with a medical scheme, you are covered for in-hospital treatment only, subject to the terms and conditions of your benefit option. Cover for day-to-day and primary health care such as GP visits, optometry, dentistry, specialist consultations, preventative healthcare, acute medication and the like are not covered. Taking out a health insurance benefit for day-to-day primary care is a very affordable way to mitigate and manage these primary healthcare expenses separately, protecting you from onerous out-of-pocket expenses. Many consumers mistakenly believe that it is an ‘either or’ between medial aid and health insurance, which is not the case at all. An option like EssentialMED’s day-to-day benefit gives you access to private primary healthcare at an affordable rate, with unlimited managed visits to network doctors and dentists, unlimited access to acute and chronic formulary medication, radiology, pathology, optometry and even cover for specialists on a managed basis when referred by a network GP.

“By coupling a core hospital medical scheme benefit, gap cover and day-to-day health insurance plan, you get a complimentary and affordable hybrid solution, ensuring that you retain access to quality private healthcare – for in and out of hospital - when you need it most. Your hospital plan ensures access to care in a private hospital. You mitigate against the potential for onerous and unbudgeted out-of-pocket expenses for hospitalisation tariff shortfalls with your gap cover and your day-to-day health insurance plan provides access to essential primary and preventative healthcare that you and your family will require throughout the year,” explains Cox.

Consider the following example:

Based on a family of four - 2 adult dependants and 2 children younger than 20


Comprehensive Medical Scheme option

Core Hospital plan/gap cover/day-to-day health insurance combination


Comprehensive Medical scheme benefit - per month

R17 555

R6 650

Core Hospital Plan – per month

Comprehensive Gap Cover – per month



Comprehensive Gap Cover – per month



EssentialMED Day-to-Day health insurance benefit – per month

Total monthly premiums

R18 085.00

R7 775

Total monthly premiums

(Premiums are based on a leading open medical scheme’s comprehensive benefit and a core hospital plan benefit with premiums valid as at 1 March 2023 as published on their website. Gap cover premium based on a comprehensive gap option and EssentialMED’s day-to-day health insurance benefit, both as at 1 March 2023).

In assessing a hybrid healthcare funding model that caters for all the interconnected variables and your unique current health circumstances, as well as all the unknowns, its crucial to engage with a professional and accredited healthcare broker who will guide you through the process, explain the role of the different options between medical scheme benefits, gap cover and health insurance, and ensure that you have the best solution for your circumstances and budget. Healthcare funding options tend to be complex as there are so many benefit options and solutions to consider, and all vary widely in terms of offering, regulatory framework and benefits – making like-for-like comparisons near impossible. 

“The best approach is to get the expertise of a healthcare broker who is adept at building the right strategy for your needs based on benefit design, contributions, affordability and practicality – aligned to your specific needs analysis and those of your dependants. The emphasis must be on balancing your cover and finding economies where they are to be found, managing your expectations as to what is and is not covered in the varying scenarios, and understanding the inherent role that risk management and your responsibility to that process plays in building your healthcare funding strategy,” concludes Cox.

For more information go to www.essentialmed.co.za

Information provided is general in nature and does not constitute financial advice.