Gap Cover: How Does It Work and Do You Need It?

Gap cover, which covers the shortfall between what medical schemes pay out and what healthcare providers charge, has been available in South Africa since the early 2000s. It emerged as healthcare providers began charging more than what medical schemes could afford at reasonable contribution rates, with the result that medical schemes became less able to fully fund their members’ medical costs, especially on the lower-tier plans.

There were also regulation issues. Medical schemes are governed by the Medical Schemes Act, which provides strong protections for consumers. Insurers saw a gap in the market to provide health insurance products, including gap cover, at cheaper rates, bypassing many of these protections. The Demarcation Regulations, issued by the National Treasury in 2017, tightened the regulation of these products and defined the boundaries between medical scheme cover and health insurance. Gap cover, which supplements medical scheme cover, is not classified as “doing the business of a medical scheme” and is allowed to operate under the regulations.

Conditions of cover

For a few hundred rands per month, a family can be covered under any one of a multitude of gap cover products on the market. However, you need to know exactly what you are and are not covered for, which must be fully disclosed to you by the provider or by someone representing the provider. While products may vary, conditions you need to know about include the following:

• Gap cover supplements medical scheme cover. You must be an active member of a registered medical aid scheme; it is not a standalone product.

• It does not cover day-to-day medical expenses, which would include expenses charged to a medical savings account linked to your medical scheme plan. Depending on the product, it may cover the shortfall or co-payment for specialist consultations, out-of-hospital procedures, and diagnostic procedures such as MRI and CT scans.

• Your age is a factor when it comes to premiums and eligibility. Some providers have a cut-off age of 60 or 65 for new members, and many structure their premiums according to age.

• Waiting periods apply. This means you need to wait a few months or up to a year before you can claim. Policies typically impose a general waiting period (usually three months) on all benefits, and condition-specific waiting periods (usually 12 months) for pre-existing conditions, pregnancy, and elective procedures. Medical emergencies may be covered immediately.

• Annual limit: There is a statutory overall annual limit on claims per person. The current limit, which is adjusted annually, is R219 845.

• Exclusions (events not covered) typically include procedures declined by your medical scheme; cosmetic surgery, unless medically necessary for reconstruction; treatment for substance abuse; treatment for self-inflicted injuries; and mental health conditions. Many gap policies do not cover Prescribed Minimum Benefits (PMBs), a list of life-threatening conditions that medical schemes must, by law, cover.

• Penalty co-payments may be imposed for not following your medical scheme’s rules, such as not obtaining pre-authorisation on procedures that require it.

• You typically need to pay the full amount upfront and then claim from the insurer.

Exploitation by healthcare providers

It is known that some healthcare providers, on learning a patient has gap cover, charge higher rates. There is a growing concern that this practice could drive up premiums.

Martin Rimmer, CEO of Sirago Underwriting Managers, says: “Gap insurance is increasingly becoming a target for exploitation. Healthcare providers now routinely ask patients upfront about gap coverage before determining charges, creating a troubling paradox where a R700 monthly gap policy might pay R130 000 for an orthopaedic surgery shortfall, while the medical scheme with an R8 000 monthly premium pays just R30 000. This exploitation threatens the sustainability of gap insurance. If current trends continue, gap insurance premiums will inevitably rise, making this protection unaffordable for many South Africans.”

His message to consumers is always to negotiate pricing for planned surgeries and request formal quotes from all medical role players. “In a system where healthcare providers are price makers and medical schemes and gap providers are price-takers, informed patient advocacy becomes crucial for financial survival and your continued access to quality private healthcare,” Rimmer says.

Do you need it?

The CEO of medical scheme Profmed, Craig Comrie, says that upgrading your medical scheme membership to a more comprehensive plan, which would cover the majority of expenses, may be a better option than taking out gap cover.

“There is only a small case for gap products if you choose the right cover with your medical scheme, and if a person only asks a provider what they charge, many will reduce their rates to more acceptable levels,” Comrie says.

Ultimately, you need to work out, by doing the sums, the most cost-effective route for you and your family.

References:

https://www.masthead.co.za/newsletter/demarcation-regulations/

https://www.sirago.co.za/the-healthcare-financing-crisis-and-the-impact-on-gap-cover/

https://totalrisksa.co.za/what-are-common-medical-gap-cover-exclusions

https://www.moneymarketing.co.za/the-truth-about-gap-cover

https://crue.co.za/gap-cover-top-up-health-insurance-that-can-protect-you-financially/