The importance of Gap Cover

In the current South African healthcare landscape, gap cover has transitioned from an optional “add-on” to a fundamental necessity for anyone with medical aid.  As medical inflation consistently outpaces salary growth, medical schemes are under pressure to keep premiums affordable, often doing so by reducing benefits and shifting more financial risk to the member. This creates a paradox:  while your monthly premium might stay within reach, our out-of-pocket exposure during a crisis increases significantly.

The average South African household is under immense financial pressure.  An unexpected R50,000 medical bill for a hip replacement or a complicated birth can be financially catastrophic, leading to debt or the liquidation of savings. Karin Mitchelmore, Executive Head of Healthcare Consulting at advisory firm NMG Benefits, explains this is where the value proposition for Gap Cover becomes undeniable. 

While provider shortfalls are the most common reason for claims, modern Gap Cover policies provide a broad safety net for several other significant financial “traps”.  Some of these include: 

•              Admission and Procedure Co-payments
•              Sub-limit shortfalls
•              Oncology Co-payments
•              Accidental Casualty fees
•              Penalty Co-payments
•              Premium waivers
•              Accidental Death & disability lump sum benefits

Gap cover offers peace of mind that a medical emergency won’t become a financial emergency.  By paying a small predictable monthly premium, you effectively “cap” your medical liability, ensuring that your focus remains on recovery rather than debt collection.  In a world of unregulated feeds and shrinking benefits, Gap cover isn’t just an add-on, it is your primary defence against the rising cost of care.

Gap cover can be secured personally or through an employer.  Employers can amplify the advantages by offering it to all their employees as part of a group scheme cover. Gap cover is by no means new in the market, and many providers target individual consumers. However, group gap cover can mean preferential rates, reduced waiting periods, continuity of cover, and access to value-added services like trauma counselling, top-up cancer cover, and lump sum payouts for cancer diagnoses.

Employers can also play an important role in ensuring that employees’ gap cover policies do not lapse due to non-payment. Running the premiums via a payroll deduction will ensure that payments are always made on time and in full.

Offering group gap cover also offers many benefits to employers such as low absenteeism at work. It is estimated that absenteeism costs the South African economy between R12 and R16 billion annually, with businesses losing up to 17% of their payroll every year, possibly making absenteeism the most expensive challenge for local businesses.

“With worry-free access to the most appropriate medical care, employees can be treated, and recover, with the least-possible impact on their ability to be productive. Not only are they medically ‘fit’; they are also likely to take fewer sick days due to stress and anxiety relating to paying for medical treatments,” says Mitchelmore.

However, when investigating group gap cover options, it is critical to look beyond just the cost; benefits should be compared on an ‘apples for apples’ basis to determine overall value. Mitchelmore encourages employers to work with specialists who can leverage expertise and a thorough understanding of the different products on the market.

“Navigating the gap cover market can be complex. However, working with an experienced employee wellness adviser, like NMG Benefits, will help to ensure that group gap cover solutions align with business needs.”s ensure that more of a member’s hard-earned money stays where it belongs, growing for their future.

Fees are Fees, Not Really.

Market volatility is a fact of life that fiduciaries cannot control. However, there is one variable entirely within the control of trustees and employers, the cost of participation. While a 1% fee might seem negligible on an annual statement, over a 40-year career, it is the difference between a comfortable retirement and a financial crisis.

The Mechanics of "Negative Compounding"

In retirement savings, time is your greatest ally, but fees are your most persistent enemy. We often speak of the magic of compound interest, but fees work in the exact opposite direction. Every Rand paid in fees is a Rand that is no longer earning returns.

Actuarial data shows that a seemingly small 1% difference in annual fees can reduce a member’s final retirement pot by 20% to 25%. This directly impacts the Net Replacement Ratio (NRR) which is the percentage of your final salary that your savings can replace as a monthly pension. If your goal is an NRR of 75%, a high-cost structure could silently erode that to 55%, forcing a significant lifestyle downgrade exactly when you are most vulnerable.

The Myth of the "Free Lunch"

In a competitive market, service providers often market "zero-fee" administration or heavily discounted consulting. As the saying goes, there is no such thing as a free lunch. In an integrated pricing model, costs are rarely eliminated; they are merely shifted.

A "free" service is often a psychological nudge to obscure higher margins elsewhere, such as in the Total Expense Ratio (TER), the annual percentage of assets used to cover investment management and operational costs. If a service appears free, fiduciaries must interrogate where the provider is recovering their margin. Failing to "unbundle" these costs. separating administration from investment management, leaves members at risk of cross-subsidising hidden inefficiencies.

Comparing Apples with Apples: The RSC Standard

The greatest barrier to fair pricing is "information asymmetry" which is where providers know more than the clients they serve. For years, comparing different funds was nearly impossible because of fragmented disclosure.

To fix this, the industry should use the ASISA Retirement Savings Cost (RSC) Disclosure Standard. Unlike a standard TER, which only looks at the investment level, the RSC is a holistic tool. It forces providers to break down costs into four clear pillars:

  1. Investment Management: The cost of the "engine" (including performance fees).
  2. Administration: The cost of record-keeping and member systems.
  3. Advisory: The fees paid to consultants or brokers.
  4. Other: Regulatory levies and audit fees.

For trustees, the RSC is the only way to ensure an "apples-with-apples" comparison. If a provider cannot or will not provide an RSC-compliant breakdown, it should be viewed as a major governance red flag.

The "Two-Pot" Pressure

The regulatory environment in South Africa has again become more complex, notably with the implementation of the “Two-Pot” system. This system aims to protect long-term savings while providing short-term liquidity, and the administrative re-engineering required prior to implementation was significant.

Administrators face higher costs for system upgrades and member education. Fiduciaries must ensure these costs are managed with discipline. The implementation of new laws should not be a "blank cheque" for service providers to permanently increase their fee structures.

The Fiduciary Charge

Trustees and employers are the last line of defence for member wealth. Effective fee stewardship requires moving beyond passive oversight. It demands:

In the South African retirement industry, value for money is not just a negotiation tactic; it is a moral imperative. By challenging every basis point, fiduciaries ensure that more of a member’s hard-earned money stays where it belongs, growing for their future.

Why South Africans need a true healthcare adviser, not just a broker

When it comes to the healthcare industry, advice matters. The kind of advice that cuts through complexity, balances affordability with adequacy, and empowers people to make informed decisions that impact their wellbeing. These days, organisations are being let down by the kind of advice that prioritises plan selection over people.

Karin Mitchelmore, Executive Head of Healthcare Consulting at advisory firm NMG Benefits, believes that brokers must evolve from intermediaries to strategic advisers who can truly guide organisations through one of the most fragmented and misunderstood parts of employee benefits.

A new environment and what has changed.

The traditional 70/30 split between corporate and retail healthcare members has flattened significantly. As more employers move away from subsidies or shift towards cost-to-company models, individuals are taking on more responsibility for their cover. That shift in burden, from employer to employee, means the role of a broker has changed fundamentally. And so should the expectations we have of them.

As a trusted advisory firm, our job is no longer just about optimising a medical aid plan once a year. It is about being a trusted partner to the employer and an accessible resource for every employee. We need to understand their workforce, their culture, their risks, and their affordability constraints, and then create tailored strategies that keep their people healthy, covered, and productive.

That includes everything from benefit counselling and one-on-one plan reviews to structuring hybrid solutions that integrate medical insurance and medical aid across income levels. It includes negotiating directly with product providers for underwriting concessions that make a difference, like removing waiting periods for new hires or ensuring chronic medication continuity during plan changes.

Countering AI

In a market saturated with comparison tools and AI-generated summaries, NMG Benefits offers something more important: insight. “We do not believe that a chatbot can replace an informed conversation that factors in your life stage, family plans, health history, budget, and future goals. Nor do we believe that algorithms can explain the implications of hospital shortfalls, waiting periods, or the dangers of losing credible coverage after opting out of a medical scheme”, says Mitchelmore.

The truth is that the average person does not know what they are covered for. Not really. They see a premium, some savings, and assume they are protected. That is, until they claim and discover the gaps. One of our key goals is education. Our teams are constantly on the ground, in boardrooms and staffrooms, running sessions, answering questions, explaining the basics and the nuances.

We have also invested in building member-facing tools that provide instant clarity. For example, a chronic medicine calculator that shows whether a treatment will be covered under a different plan, or a hospitalisation estimator that forecasts likely shortfalls based on real data. These tools are not gimmicks but are born out of actuarial insight, built by experts, and designed to empower people before they sign on the dotted line.

An integrated fee

This kind of advice does not come at an extra cost. Most people do not realise the broker fee is already embedded in their plan. Which means the difference between good advice and bad advice is not about price but about who you choose to guide you.

Employers have a responsibility to offer more than compliance. They have an opportunity to be part of the solution by ensuring their employees are covered and truly cared for.

That is where the role of a trusted adviser becomes indispensable by helping employers and employees make better decisions with the information they already have and the support they did not know they needed.

Because behind every medical aid plan is a person. And behind every person is a story. Our job is to make sure they are protected, understood, and never alone in navigating one of life’s most essential decisions.

South Africa’s workforce is drowning in debt: Here’s how employers can help

According to Stats SA, April 2025 saw more than 26,000 debt-ridden South Africans being summoned to appear in court. While this is a slight decrease from the first three months of the year, R30.2 million (12%) of the debt against which this action was taken is for rent – a basic necessity.

SA Reserve Bank figures show the outstanding balance of household debt growing at an average annual rate of 5.2% from 2015 to 2022. And, Experian reports that vehicle finance accounts in default rose by 31% from March to June 2024 alone. 

Lettesha Pillay, Head of Business Development at advisory firm NMG Benefits, says this financial distress is the norm rather than the exception. Data from DebtBusters supports this: the most vulnerable consumers, taking home R5,000 or less per month, use 76% of their income to repay debt, and those earning R35,000 or more spend 77% servicing debt.

Pillay says that South Africa’s financial stress landscape is different from other countries. “Strained household finances stem from endemic unemployment that often pressures households budgets even if there is one breadwinner. It is compounded by soaring living costs. Multiplied by dealing with medical and other emergencies. And rooted in a lack of basic financial education.”

It thus critical for employers that wish to better support their workforce, to partner with local experts who understand the nuances of our economy and workforce behaviour.

However, Pillay notes that many employers are at a loss on where to start and understandably so. Money brings up a lot of emotions, including fear, guilt, and shame, and NMG case studies show that employees fear judgment and career repercussions if their employers learn the extent of their over-indebtedness. They are unlikely to open up unless they feel safe and protected; confidentiality and trust are crucial. All of which makes one-on-one, anonymised, confidential interaction essential for driving real behaviour change.

As a leading financial advisory expert and employee benefits provider, NMG does not impose untested programmes on the employer groups that it works with. A case in point: they rolled out a financial support solution called SalarySaver in-house, and quantified its success, before adding it to their offering.

“NMG SalarySaver goes far beyond surface-level budgeting advice,” says Pillay. “It tackles the root causes of financial distress with practical support that’s scalable, sustainable, and measurable.” The programme targets the high-impact areas of the “systematic drains” on employees’ salaries:

SalarySaver’s financial professionals help employees consolidate multiple funeral and credit life policies into a single, more affordable and more beneficial policy, often saving hundreds of rands a month. Debt restructuring is a major focus area, and the programme has helped employees move from exploitative short-term loans to affordable credit solutions with a total cost of credit (TCOC) of 15%–19%, resulting in meaningful monthly savings. Wherever possible, SalarySaver steps in when it comes to managing garnishee orders, along with accessing responsible salary advances. For those starting to save, it also includes access to an innovative, flexible retirement annuity, into which employees can direct any savings – even if the amount differs from month to month.

SalarySaver empowers employees to crush debt, optimise insurance, unlock savings, and auto-fund their futures, at no personal cost, while employers get aggregate data to track improvements in workforce wellness.

“On average, we’ve saved 40%-50% on employees’ monthly insurance and debt costs since making SalarySaver available,” says Pillay. “This in turn has helped plug the 23% (average) drainage in employee effectiveness caused by financial stress. By turning take-home pay into long-term wealth, SalarySaver is a true financial transformation model.”

Women On Top QA

  1. What does the recent statistic 26,000 South Africans facing court for debt in April tell us about employee financial strain?

This signals widespread financial distress, especially among working individuals who struggle to meet basic living expenses. The numbers indicate that even essential needs like housing are beyond reach for many people and it is affecting a big portion of the workforce.

  1. Why is employee debt more of a business issue than just a personal one?

Financial stress is manifesting in the workplace, significantly undermining employee performance. It contributes to lost productivity, diminished morale, and increased staff turnover — all of which depletes overall team capacity. Employees burdened by heavy debt often struggle to concentrate, are more likely to miss work, and may become disengaged.

  1. How does financial stress directly impact productivity, absenteeism, and presenteeism?

Financial stress significantly erodes morale and employee engagement, with direct consequences for workplace productivity. It often manifests as absenteeism and presenteeism — where employees are present but mentally disengaged. The impact is measurable: With SalarySaver we’ve identified an average 23% decline in overall effectiveness linked to financial strain.

  1. What specific financial pressures like rent, transport, or informal loans are most common among South African workers?

Employees are grappling with critical financial pressures — overdue rent, expensive short-term loans, and expensive salary advances top the list. Rising transport and medical costs add further strain, while overpriced insurance and inadequate retirement savings leave little room for financial stability. It’s a vicious cycle.

  1. Which wellbeing initiatives (e.g., on-demand pay, counselling, budgeting tools) have delivered measurable results?

SalarySaver, piloted by NMG, and implemented at many clients, helps employees reduce debt costs from 45% to as low as 15%–19%, consolidate expensive insurance, and save up to 50% monthly — driving measurable improvements in financial wellbeing.

  1. Can you share a case where a company-supported financial benefits program improved engagement or retention?

SalarySaver has driven meaningful change by easing financial pressure at no cost to employees, boosting morale and performance, and fostering personal savings and wealth-building — all of which strengthen workforce loyalty.

  1. How important is financial literacy in reducing workplace stress, and what role should employers play?

Financial literacy is essential, as lack of basic knowledge and desperation drives much of the debt crisis. Employers have a responsibility to support their workforce in navigating financial challenges. This includes offering confidential, stigma-free assistance tailored to South Africa’s unique economic landscape — and providing access to meaningful financial wellness programmes that empower employees to build long-term financial stability.

  1. What impact do aggressive debt-collection practices like rental arrears have on employees and workplace morale?

Aggressive debt-collection tactics — such as rental arrears summonses — often deepen employee anxiety and emotional distress. These practices can sometimes damage the trust between staff and employers, while the mounting stress negatively affects morale and contributes to declining mental health across the workplace.

  1. What responsibilities do leaders have in acknowledging and addressing employee financial distress?

Leaders have a crucial role in recognising and addressing financial distress in the workplace. This means confronting the issue with transparency, fostering a culture free from stigma, and ensuring employees have access to discreet and supportive resources. Initiatives should be designed to uphold dignity, promote trust, and empower staff to seek help without fear or shame.

  1. How can employers advocate for fair treatment or provide legal/financial guidance against debt harassment?

Employers can help prevent debt harassment by partnering with financial experts for ethical guidance, offering confidential support for garnishee orders and fair credit, and advocating against exploitative lending and collection practices.

  1. What policies or benefit designs help companies build financially resilient employees and teams?

Programmes like SalarySaver focus on key financial stress pillars — consolidating debt, streamlining insurance, enabling responsible salary advances, and encouraging flexible retirement savings. Delivered through anonymised support, they safeguard employee privacy while driving meaningful financial improvements. By embedding financial literacy throughout the programme, they empower individuals with the knowledge and confidence needed for sustained financial wellness and long-term financial independence.

  1. Looking ahead, what are the essential first steps for employers serious about embedding financial wellness into their culture?

Employers can begin by teaming up with local experts who truly understand the unique financial challenges and cultural dynamics of their workforce. Offering confidential, one-on-one support builds a foundation of trust and safety — a critical first step. From there, collecting meaningful data helps shape solutions that resonate and deliver real impact. When employees feel supported and respected, broader financial wellness initiatives become more effective and lasting.

The Hidden Retirement Cost: Healthcare Expenses Are Overlooked

As an employer, you invest in your employees’ future through retirement benefits, but one critical factor is often overlooked - healthcare costs in retirement. Rising medical expenses can significantly impact retirees' financial security, leading to unexpected reliance on family, government aid, or even delaying retirement all together.

Why Employers Should Care 

Healthcare inflation outpaces general inflation, making medical expenses one of the biggest threats to a secure retirement. Employees who underestimate these costs may struggle financially post-retirement, potentially returning to the workforce or relying on financial assistance. This challenge affects both productivity and long-term workforce planning.

A recent Just SA survey highlights the issue:

These figures underscore a lack of preparation, leaving many employees vulnerable to rising healthcare costs they have not accounted for.

The Reality of Healthcare Costs in Retirement

Many employees assume their medical aid will cover all their needs in retirement, but essential assistive devices and chronic medication are often excluded. According to Statistics SA:

Healthcare inflation is outpacing general inflation. Rising healthcare costs can rapidly deplete retirement savings, leaving employees with fewer options to maintain a comfortable lifestyle. Without proactive planning, these costs can erode financial security, increasing the risk of financial dependence post-retirement.

How Employers Can Help 

Forward-thinking employers can take steps to ensure their employees are better prepared:

  1. Educate Employees on Healthcare Costs in Retirement: Offer financial wellness programmes that include education on the impact of healthcare inflation and the need for dedicated retirement healthcare savings.
  2. Introduce SmartAid as a Retirement Healthcare Solution: NMG SmartAid provides employees with a way to save specifically for medical aid contributions in retirement. This solution includes a personalised assessment to determine if they are on track and an annual statement reflecting their progress.
  3. Encourage Early and Tax-Efficient Savings: The earlier employees start saving, the less they need to put away each month. Encourage tax-efficient savings options, such as tax-free savings accounts or retirement annuity funds, to help employees prepare for healthcare costs.

Investing in employee financial wellness today ensures a stronger, more resilient workforce - one that can retire with dignity, rather than uncertainty.

Why Group Gap Cover Is a Game-Changer for Employees and Employers Alike

Over the years, there have been many gap cover products launched in the market that target individuals. Group gap cover schemes, however, offer many more advantages and benefits to both the employer and the employee. The payment of premiums is streamlined, there is continuity of coverage for employees who resign, and employers have peace of mind knowing that their employees have a financial safety net for unexpected medical bills. Furthermore, whether the gap cover is offered on a compulsory or voluntary basis, corporates can offer employees additional benefits by negotiating group institutional rates and value adds.

What is gap cover?

Gap cover is a short-term insurance product that covers the shortfall between the medical scheme's rates and the rate that private healthcare professionals charge. It doesn’t replace comprehensive medical cover, it complements it. The good news is that gap cover is affordable, and it could save your employees thousands of rands if they find themselves burdened with unexpected medical expenses and out-of-pocket costs that they didn’t budget for. Gap cover should no longer be seen as a luxury. It is a necessity. If you take the wellbeing of your employees seriously, it is important to make sure they are not left financially destitute in a medical emergency. You can protect their financial future.

Employer versus individual basis

When you arrange gap cover as part of an employee benefit programme, your employees are often given preferential rates, as well as reduced waiting periods. Some providers offer additional value adds such as trauma counselling, top-up cancer cover and lump-sum pay-outs for first cancer diagnoses. It is also important to remember that cost is not always the key indicator of value. You need to compare the benefits you can get for your employees at the cost quoted because you will typically get additional benefits with the corporate offering. The individual costs for group arrangements need to be quoted on a case-by-case basis depending on the number of employees to be covered, as well as the unique benefits required per employer.

The advantages of group gap cover

One of the many benefits of offering group gap cover is improved productivity. Occupational Care South Africa (OCSA) reported that absenteeism costs the South African economy from R12 billion to R16 billion per year, while Human Capital Review estimates the cost to be R19.144 billion annually. Besides improving productivity, gap cover also offers employers these important benefits:

Your employees need to be productive for your business to perform at its best. If you offer your employees gap cover, they will also recover faster and return to work because they have not had to wait until they have enough money to cover their medical expenses. Gap cover provides a safety net that gives both the employee and the employer peace of mind.

A payroll deduction makes paying for gap cover easy

As an employer, you have the choice of paying the gap cover premium for your employees or offering it to them but implementing a payroll deduction. With a payroll deduction you know the premiums will always be paid on time. In addition, your employees don’t feel the deduction because it is taken off before they get their salary in the bank. This provides all parties – employee, employer and provider – with a simplified payment process that ensures seamless premium contributions. This payment method is economical and efficient. It is also convenient for everyone involved. It ensures that your employees don’t slip on the payment of the premiums, giving them another safety net that provides financial peace of mind.

Your employees enjoy continuity of coverage

The continuity of gap cover is an important concern for many employees when they resign from a company. Some gap cover providers in South Africa offer underwriting policies that allow employees to transition from a group scheme to an individual policy with minimal underwriting. This means that, in some cases, they can continue their gap cover without having to go through extensive medical assessments, which could potentially result in higher premiums or exclusions. To make sure there is no break in membership, employees leaving a company can arrange to continue making payments directly to the insurer.

Overall, it's important to recognise that continuity of gap cover is achievable when leaving an employer. Remember to encourage your employees to research their options, communicate proactively and understand the terms and conditions of their gap cover policy. This will ensure they enjoy a smooth transition and continue to receive the benefits they need to cover their medical expenses effectively.

The value of gap cover

In an article published in BusinessTech (2023), there is a real-life scenario of how gap cover helped Mr Smith, 69, in January while visiting his children in KwaZulu Natal. The article said, “Whilst attempting to pack a box into a storeroom, he tripped and fell over an extension cord. Initially, he did not give the incident much thought until the back pain began setting in.” He was later diagnosed with Sciatica in the lumbar region, a condition that required a spinal fusion together with a laminectomy to decompress the nerve.

“Total treatment costs amounted to over R147,000, with the medical aid covering only a small portion of the bills (R20,251 to be exact). Thankfully for Mr Smith, he had taken out medical gap cover through Total Risk Administrators, which took care of the outstanding balance. His story illustrates the importance of investing in short-term insurance, like gap cover, to settle the shortfall between a medical scheme tariff and the applicable rates charged by private healthcare providers.”

The importance of employee wellbeing in the workplace

There is much value in including gap cover in a company’s holistic approach to employee wellbeing and satisfaction. Research shows that as much as 76% of South Africans run out of money before the end of the month. Furthermore, 89% of South African employees worry about being able to pay their bills at the end of every month. Added to this, unexpected medical bills that these employees didn’t plan for can only result in a heavier financial burden and strained wellbeing in the workplace.

When employees are under pressure financially, they find it difficult to concentrate, their morale is low and they are less productive. On the other hand, offering them gap cover as part of a holistic employee benefits package makes them feel cared for and gives them relief. It is also a drawcard for attracting top talent. It really is a small cost to cover when you think of the benefits you will see over the long term.

NMG has experienced healthcare consultants who can help you assess which gap cover provider and plan would best suit your business. They have extensive experience with different providers so they can review requirements and give you quotes on a solution that will best suit your company.

T&Cs apply. NMG Consultants and Actuaries (Pty) LTD is an authorised financial services provider FSP 12968