Co-payments unpacked: the real drivers behind member shortfalls

Welcome back to Cover to Cover: Medical Schemes Explained, a column in partnership with Medihelp, helping financial advisers to break down the complexities of medical schemes so clients can make informed decisions.

Read the earlier editions of Cover to Cover on decoding medical scheme plans, Prescribed Minimum Benefits (PMBs), waiting periods, and medical scheme dependants.

In this edition we explain co-payments – what they are, when they arise, how schemes set them, and practical ways advisers can guide clients through co-payment risk and disputes.

What is a co-payment and how should advisers explain it?

A co-payment is the portion of the account that the member must pay from their own pocket to the provider because the scheme benefit does not cover the full cost of the service.

Good adviser explanation:

“Your medical scheme will pay up to a certain amount for this service. If the provider charges more than that amount, or if the benefit rules say a fixed or percentage co-payment applies, you’ll have to pay the difference yourself – that difference is called a co-payment.”

Key points for advisers to emphasise:

It is not a penalty; it’s part of the benefit design.
It can be fixed (for example, R5 000 per scope) or percentage-based (for example, 20% of the account).
It can arise even if the claim is approved – approval does not mean full payment.

How do schemes determine co-payment amounts?

Broadly, schemes set co-payments based on:

Cost-control objectives (to discourage unnecessary or high-cost use).
Historical claims data (average costs per procedure).
Negotiated tariffs with networks/designated service providers (DSPs).
Regulatory limits (for example, a PMB must be funded in full at DSPs, subject to rules).

Common types:

Fixed rand amount (for example, R3 000 per non-DSP hospital admission).
Percentage of cost (for example, 20% co-payment on certain procedures or prostheses).
Tariff-based shortfall (provider charges 300% of scheme rate; scheme pays 100% or 200%, member pays the rest).

A co-payment cannot exceed the actual cost to the member – what can happen is:

The shortfall can be very large relative to what the scheme pays, particularly with non-network providers or very high charging specialists.
But the physical co-payment is still limited by the total bill.

Common situations that trigger co-payments

Most frequent triggers include:

Using non-network providers.
Non-DSP hospitals, GPs, specialists, or pharmacies, etc.
Procedures with built-in co-payments or procedure-specific co-payments.
Endoscopies (gastroscopies, colonoscopies), certain orthopaedic procedures, cataract surgery, some dental surgeries, etc.
Specialised radiology.
MRI, CT, PET scans often have fixed or percentage co-payments.
Non-formulary or above-reference price medicines.
Using brands that cost more than the scheme’s reference price or that fall outside the formulary.
Out-of-benefit or above-tariff claims.
When the provider charges above scheme rate or the benefit limit is reached.

How do schemes decide when a co-payment applies?

Schemes typically define co-payment rules in their benefit schedules based on:

Procedure type
Certain codes (for example, scopes, cataracts, bariatric surgery) always carry a co-payment.
Provider choice.
DSP vs non-DSP; network vs open.
Service setting.
In-hospital vs day clinic vs out-of-hospital.
Reference pricing/benefit maxima.
Medicine reference prices, prosthesis limits, global fees for procedures.

Internally, actuarial and clinical teams:

Analyse cost and utilisation.
Decide where a member contribution is needed to keep contributions affordable.
Encode this as rules so it’s predictable and consistent.

Differences between in-hospital and out-of-hospital co-payments

In-hospital

Co-payments are often procedure-based or facility-based:

Per admission at a non-network hospital.
Fixed co-payments for specific surgeries.

Aim: influence where care happens (use network hospitals/day clinics) and how (clinical pathways).

Out-of-hospital

Co-payments often relate to:

Medicine pricing (reference price/formulary).
Tariff shortfalls (GPs/specialists charging above scheme rate).
Benefit limits being exceeded (for example, radiology day-to-day benefits used up).

Principles

In-hospital co-payments: steer members to cost-effective providers and facilities.
Out-of-hospital co-payments: steer choices toward formulary medicines, contracted providers, and benefit-efficient use.

How do plans influence co-payment exposure?

Plan design is one of the biggest drivers of co-payment risk.

Entry-level or saver options:

Lower contributions.
More co-payments and stricter networks.
Less cover above scheme tariff results in more shortfalls.

Comprehensive or traditional options:

Higher contributions.
Fewer co-payments, higher reimbursements, better cover for specialists.

Network plans:

Lower contributions because members commit to specific networks.
Low/no co-payments if members stay in-network.
Significant co-payments for non-network use.

Benefit design features that drive co-payments:

Use of restricted provider networks.
Reference pricing for medicines and devices.
Global fees for procedures with member contribution.
Lower reimbursement levels (for example, 100% of scheme rate vs 200%).

Co-payments and PMBs

PMB principle:

For PMB conditions, schemes must pay in full for diagnosis, treatment, and care if:

The treatment is in line with PMB protocols and formularies, and
The member uses designated service providers (DSPs) where applicable.

Members might still face co-payments for a PMB service when:

They choose not to use a DSP (and no valid emergency or other exemption applies).
They insist on non-formulary or more expensive treatment than the scheme’s PMB option.
They use providers who charge excessively above the scheme rate, and the scheme pays up to a defined level even for PMB.

Advisers should emphasise: A PMB does not mean “no co-payment ever” – it’s full cover within the PMB rules (DSP, formulary, protocols).

Co-payment implications for non-DSP use

For non-DSPs, the typical consequences are:

Hospitals

Fixed rand co-payment per admission; or
Scheme pays at a lower rate; member pays the balance.

Specialists

Higher shortfalls where the scheme only pays up to a network tariff/scheme rate.

Pharmacies

Co-payments when using a non-network pharmacy that charge higher professional fees even for formulary medicines.

Advisers should explain: “Your medical aid plan is priced on the assumption that you’ll use the scheme’s DSPs. If you choose not to, the scheme will still pay something, but you may face a co-payment or large shortfall.”

Elective vs emergency/clinically necessary procedures

Elective procedures

Co-payments are often higher or mandatory to:

Deter low-value or non-essential use.
Share cost for lifestyle-type procedures (for example, some orthopaedic or cosmetic-adjacent surgeries).
May have stricter pre-authorisation and networks.

Emergency/clinically necessary procedures

Co-payments are usually lower or waived, particularly:

In PMB emergencies.
Where the member had no reasonable opportunity to access services at a DSP.
However, if an emergency stabilises and ongoing care is then outside DSPs or protocols, co-payments can still arise.

Co-payments for non-network hospitals/day facilities

Common approaches:

Fixed rand amount per admission. For example, R8 000 co-payment for non-network hospital admission.
Percentage of hospital account. For example, member pays 20% of the hospital bill (less common because it’s unpredictable).

Difference between negotiated network rate and charged rate:

Scheme pays what it would have paid at a network facility; member pays the difference.

The calculation is based on:

The contracted rate the scheme would pay a network facility.
The scheme’s internal tariff for the procedure.
The benefit rules for that plan (for example, fixed co-payments listed in the benefit table).

Procedures or medicines that commonly attract co-payments

Across the industry, frequent co-payment “hot spots” include:

Endoscopic procedures.
Colonoscopy, gastroscopy, sigmoidoscopy.
Cataract surgery
Especially at non-network facilities.
Specialised radiology.
MRI, CT, PET scans.
Some orthopaedic and spinal procedures.
Arthroscopies, back surgery, joint replacements (depending on plan).
Certain dental procedures in-hospital.
Especially for non-PMB/non-emergency cases.
Non-formulary or high-cost medicines.
Oncology add-ons, biological medicine or originator brands where generics exist.

Why co-payments arise for medicines and how clients can manage them

Main reasons include:

Formulary exclusions.
Medicine is not on the scheme’s formulary; the member pays the full amount or a part of it (depending on the scheme rules).
Reference pricing.
Scheme sets a maximum reference price for a generic/therapeutic class. If the chosen medicine costs more, the member pays the difference.
Non-DSP pharmacy.
Higher professional fees at non-network pharmacies.
Benefit limit or day-to-day exhaustion.
Once limits or savings are used up, the member pays out-of-pocket.

How clients can manage:

Ask for a formulary option or generic equivalent.
Use DSP/network pharmacies.
Check chronic vs acute classification – ensure chronic conditions are registered.
Use the scheme app/website to check co-payment risk before filling prescriptions.

Radiology, pathology, and day-procedure facility co-payments

Radiology

Specialised radiology often has:

Fixed co-payments per scan, or
“If done out-of-hospital, member co-payment applies; in-network day clinic, no co-pay.”
Shortfalls also occur when radiologists charge above scheme rate.

Pathology

Fewer explicit co-payments; more often:
Benefits run out in day-to-day limits, or
Certain tests are not covered (screenings, non-clinically justified panels).

Day-procedure facilities

Co-payments if:

The member uses a non-network day clinic.
The procedure is not clinically indicated according to the scheme criteria.
Benefit design includes a fixed co-payment for specific procedures regardless of facility.

Members most often encounter unexpected shortfalls when:

They assume “authorisation” means full cover.
They are not aware that the facility or specialist is non-network.
They don’t know about pre-set co-payments for scopes or scans.

Medical savings accounts (MSA) and co-payments

Some co-payments can be funded from the MSA (if funds are available), for example.:

Out-of-hospital GP visits.
Certain pharmacy co-payments.

Others are explicitly excluded from savings and must be paid from the member’s pocket:

Penalty co-payments for non-network hospitals.
Some procedural co-payments that are meant to influence behaviour.
Above-threshold or above-benefit expenses.
PMB-related shortfalls.

Advisers should explain:

“Your savings can help with some shortfalls, but not all co-payments are payable from savings. Some are designed as true out-of-pocket costs to influence provider choice and behaviour.”

What should members do if they think a co-payment is incorrect?

Steps to recommend include:

Request the claim breakdown

From the scheme: remittance advice/explanation of benefits.
Check: amount charged, amount paid, reason code for co-payment.
Check the benefit rules.

Compare with the benefit guide:

Is there a listed co-payment for that procedure/service?
Was a DSP required?
Is it a formulary/reference price issue?

Engage the scheme

Call or email the scheme with:

Membership details, claim number, provider details, and why they believe it’s incorrect.
Ask for written clarification.

Ask the provider to assist (if relevant)

For example, switch to formulary medicine, re-code a claim correctly, or adjust account if coded incorrectly.

Escalate internally

If unresolved, follow the scheme’s complaints/internal dispute resolution process.
External escalation (if needed).

If still unresolved, members can escalate to the Council for Medical Schemes in line with regulatory processes.

How advisers can help:

Educate clients upfront about co-payment risks.
Help interpret benefit schedules and explanation of benefits.
Assist in drafting a clear, factual query to the scheme.
Guide them through escalation channels step-by-step.

Bottom line: co-payments are a deliberate feature of benefit design intended to control costs and influence provider choice. Advisers who can explain when and why co-payments arise, and help clients manage and dispute unexpected shortfalls, will reduce shock, improve client outcomes and protect household finances.