In the whirlwind of establishing independence, young adults face countless financial priorities competing for their limited income. Between student loans, rent, building an emergency fund, and the general high cost of living, healthcare financial planning often gets pushed to the bottom of the priority list. After all, you’re young, healthy, and rarely visit a doctor – what could go wrong?
“This mindset, while understandable, represents one of the most dangerous financial gambles young people take. In South Africa, where public healthcare is known to be underfunded and inefficient, the stakes of this gamble are particularly high,” explains Martin Rimmer, CEO of Sirago Underwriting Managers, a Gap insurance provider underwritten by GENRIC Insurance Company Limited. “The most empowering and risk mitigating mindsets to have as a young professional is one of ‘finance priority planning’”, adds Rimmer.
The Reality Check: Health Crises Don’t Discriminate by Age
“The fundamental flaw in the ‘I’m young and healthy’ reasoning is the assumption that health calamities only affect older people or those with existing conditions. The harsh reality is that medical emergencies are, by definition, unexpected and can strike anyone at any time”, adds Rimmer.
Consider these scenarios that could happen to any young adult:
- A serious sporting injury requiring surgery and extensive rehabilitation
- A car accident resulting in multiple fractures or traumatic injuries
- A workplace accident leading to severe injuries
- A victim of crime
- A bolt-out-of-the-blue diagnosis of cancer – with conditions like breast cancer, melanoma, lymphoma, and certain types of leukemia increasingly affecting younger demographics, even without family history.
“These aren’t distant possibilities – they’re real risks that can transform a healthy 20-something year old’s life overnight – and we see this more often and regularly in our claims’ statistics. When such a crisis strikes, the last thing you want to worry about is whether you can afford quality medical care or if you’ll be bankrupted by medical bills,” adds Rimmer.
The South African Healthcare Reality
South Africa’s two-tier healthcare system creates a stark divide between public and private care. While the public sector serves much of the population, it’s plagued by chronic understaffing, equipment shortages, long waiting times, and inconsistent service quality. This is definitely not an option in the current healthcare system. Private healthcare, though expensive, offers world-class facilities, shorter waiting times, and access to quality care, treatment and outcomes.
“For young adults, the question isn’t whether they can afford private healthcare – it’s whether they can afford to be without it when life happens. Access to quality private healthcare should never be left to chance, it should be a cornerstone of your financial planning from the moment you become financially independent. This is where the role of an independent financial advisor plays a critical role in your understanding, adoption and funding of your various insurance needs,” says Rimmer.
Smart Healthcare Financial Planning for Young Adults
Effective healthcare financial planning doesn’t require a massive budget – it requires smart strategy and professional advice.
Step 1: Get Professional Advice: Healthcare financial planning is complex, so don’t attempt a DIY approach. A qualified healthcare and financial advisor can identify your specific needs, highlight potential pitfalls, and ensure you’re not paying for unnecessary coverage while leaving critical gaps unprotected. This professional relationship extends beyond the initial policy purchase – a good advisor provides ongoing support as your life circumstances and financial situation evolve. Ultimately, your financial advisor should become your financial coach!
Step 2: Consider Hospital-Only Coverage
For budget-conscious young adults, a hospital-only medical scheme option offers an excellent balance between affordability and essential protection. While more affordable than comprehensive plans, these benefits still cover in-hospital care resulting from sudden injury or illness. When selecting hospital-only coverage, pay attention to:
- Network hospitals and their accessibility to you
- Oncology benefits that provide adequate cancer coverage
- The impact of managing Prescribed Minimum Benefits (PMB)
- Understanding that you’ll need to self-fund primary care costs like GP visits, dental care, and optometry. The key is to build a disciplined mind-set to set aside funds for routine healthcare expenses while having solid protection against major medical catastrophes.
Step 3: The Critical Importance of Gap Cover
Most medical schemes have deductibles, co-payments, and reimbursement limits that can leave you significantly out of pocket as a result of a hospital event. The gap between what medical schemes pay and what specialists actually charge, can be substantial – often 200% to 500% above what the scheme tariff is. This can be especially evident on lower benefit options such as ‘hospital cover only’.
For example, you may be on a hospital benefit plan that pays providers at 100% of the medical scheme tariff, however many providers may charge at 200-500% of this tariff – which means you may have to fund this shortfall from your own pocket if you don’t have gap cover in place.
Sirago’s claims statistics show the average “large loss” gap claim, now, sits at around a R40-60K shortfall. When you consider the potential financial impact of a shortfall on your medical scheme benefits, and that a Gap cover premium is around R172 per month for a single person under age 30, and that you are covered up to a maximum of R213K per annum, it’s clear that Gap Cover is an essential part of your affordable healthcare strategy. Sirago’s Liberal Gap Cover covers up to 400% above scheme rate to a maximum of 500% or at the stated benefit value as determined by your medical scheme. This small monthly investment provides significant and essential financial protection.
Build Your Healthcare Safety Net While You’re Young and Healthy
“Effective healthcare financial planning isn’t about being pessimistic – it’s about being mentally and financially prepared. With a solid healthcare plan in place, you gain the freedom to fully embrace life’s adventures, knowing that if the unexpected happens, your financial future remains secure. Your healthcare strategy should adapt with your life stages. Single coverage becomes family coverage, hospital-only options might expand to comprehensive benefits as your income grows, and your gap cover protects you from onerous shortfalls.
Start by consulting with a qualified healthcare financial advisor who can assess your specific situation and recommend appropriate coverage levels. Remember, this isn’t about buying the most expensive plan available – it’s about securing the right protection for your circumstances and budget. In a country where quality healthcare often determines outcomes, ensuring access to private care isn’t a luxury – it’s a necessity that could save both your life and your financial future,” concludes Rimmer.
