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  No matter what insurance you buy NEVER buy insurance directly, ALWAYS buy through a big broker. As an individual you will have a massive battle on your hands when you have a claim. Insurance companies...  

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Mind the gap

Is gap cover worth it? Industry shares its views and selection tips.

Chat to most people who’ve had a hospital stay (or scan HelloPeter) and you’ll hear complaints of hefty co-payments or of medical aid schemes not paying the bills.

“Medical aids only payout 100% or 200% of their own medical scheme tariff (MST) amounts, where doctors and specialists can charge up to 500% of these MST amounts,” says Megan McWilliam, Zestlife gap business development consultant.

These rates may even be as high as 700% of the MST amounts, adds Total Risk Administrators (TRA) business development officer Pascale Bargehr.

Chartered Employee Benefits healthcare specialist Devlin Ross says as specialists’ fees aren’t regulated in South Africa, medical schemes have created a cap on the percentage of cover they’ll fund.

As such, many financial advisors suggest members take out gap cover. But is it worth it?

A survey of industry experts suggests it is – increasingly so.

Gap cover is a short-term insurance product covering mainly in-hospital shortfalls in the difference between what hospitals, doctors or specialists charge, and the medical aid’s rate.

Some specific out-of-hospital benefits are funded, including chemotherapy, radiotherapy and renal dialysis, as well as co-payments on MRI or CT scans, extended oncology cover, trauma/casualty room cover or even counseling. 

Gap cover is only available to (both open and restricted) medical aid members and Ross says it aligns its [cover] with a medical scheme’s benefits.

Brokers and gap cover firms interviewed, said products range from R100 up to R1 000 a month, depending on various factors.

The upside

Defined waiting periods

In December 2016 the Department of Health and National Treasury published final demarcation regulations defining the roles of medical schemes and insurance products.

Following its enactment, there’s now a three-month general waiting period and a 12-month condition-specific waiting period with pre-existing conditions, according to Jill Larkan, GTC healthcare consulting head.

“For maternity, our gap cover does not offer maternity-related claims for the first ten months of membership…. However, after the ten months, gap cover may aid someone who has a pre-related claim, because specialists may charge more than the medical aid will cover, even though this is a prescribed minimum benefit,” says Bargehr of TRA.

Seemingly, Zestlife, Liberty Gap Cover and TRA don’t have a general waiting period (waiting periods for pre-existing conditions may apply).

All ages

Following the regulations, gap cover providers can’t prescribe a maximum age of 60 years for coverage anymore, says Oracle Broker Services MD Mark Eliason. 

However, providers can still charge higher premiums for members over a certain age, according to James White, Turnberry Management Risk Solutions’ sales and marketing GM. 

Flexibility

“If a member changes from one medical aid to another – as long as they notify the gap provider – [gap cover] benefits will be transferred to the new medical aid option with no additional/new waiting periods,” says White.

To align gap product benefits to the new medical aid benefits – members can change their gap cover to one better suited, says Turnberry CEO Tony Singleton, in this 2016 article.

Employer relief

Larkan believes no employee benefits portfolio is complete without a group medical aid and top-up/gap cover, as employees can ‘afford’ treatment and thus their recovery isn’t prolonged.

Downside

Limitations

If the medical aid doesn’t cover an out-of-hospital procedure from ‘risk’, gap cover won’t help [in paying for shortfalls from specialist rates and stipulated co-payments], cautions David Narun of Informed Healthcare Solutions. 

Following the demarcation regulations, members who had gap cover before April 1 2017 have unlimited benefits until January 1 2018. From April 1 2017, new policies are subject to a R150 000 annual limit per person, says Ross.

However, most shortfall claims range from R500 to just under R110 000, among firms we interviewed.

Exclusions

Day-to-day and chronic medication shortfalls aren’t covered, says Eliason; nor are ward and theatre fees (hospital account), appliances, disposables or day-to-day GP and specialist visits, adds McWilliam.

Bargehr elucidates that cover for mental health is limited and cosmetic procedures etc. are excluded.

She adds that, as with any insurance product, it’s not guaranteed that claims will always be paid 100% of the time. “…often members might not understand what they can and cannot claim for (especially if they are still in the waiting period). 

The onus is on policyholders to check what’s covered, what’s excluded and how much will be paid, says Gerhard van Emmenis, Bonitas Medical Fund acting principal officer.

Monetary considerations

Gap cover contributions are not tax deductible, says Van Emmenis.

As with most insurance policies, [even] if you never claim you never get your premiums back, says Ross.

Who should get gap cover?

The general consensus seems to be, everyone who has medical aid.

All medical aid members who don’t want to risk having to cover a partial payment (if they see someone outside of their network or who charges above medical scheme rates), should have a top-up/gap cover policy, says Larkan.

Narun says it’s useful when having children, “as many medical aid options do not cover treatment provided in the casualty ward (which is most common with smaller children) and some of the gap cover options provide some coverage for these expenses.”

Oracle Broker Services independant financial planner Greg Katz adds that hospital births are often not covered in full.

“A relatively small premium a month could make a big difference,” says Krisascha Crafford, Glopin Healthcare Consultants marketing manager.

Van Emmenis is less enthusiastic. “Taking out gap cover is an individual choice based on a range of factors, centred on personal needs and the benefits of the medical aid plan you are currently on. Waiting periods, limits and exclusions do apply so it is by no means a cure-all solution to avoid co-payments.”

Tips in selecting gap cover

  • Larkan: Find a good advisor. Few people are aware of the additional benefits available.
  • Crafford: Choose an option which matches with your medical aid plan’s benefits. If a procedure is excluded on the medical aid, even if it’s a listed benefit in the gap policy, you can’t submit a claim. Generally, your medical aid should make a payment in order for you to have a gap cover claim. Always read the fine print on waiting periods.
  • Narun: Understand your medical aid option/plan properly: know where shortfalls lie. Then see which gap cover option best fills those ‘holes’. 
  • Ross: Look for 500%/five times medical aid rate cover. Co-payment is a key benefit. Read and understand benefits and conditions. The scheme to which gap cover attaches can be complex – consult an expert for advice.
  • McWilliam: You need not disclose that you have gap cover. 
  • Eliason: Shop around: different plans offer different benefits.

Verdict

White says: “As long as there is a difference in what medical aids cover and what providers charge there will always be a need/space for gap cover products.”

“Given the significant treatment cost shortfalls that medical aid members face, gap cover is becoming an ever-more important means of financial protection and an essential means of ensuring access to the best treatment…,” says McWilliam.

In the short term, [gap cover products] will remain in the current form – although some changes will be forced upon the providers given open enrolment, the popularity of the product, the increasing information shared about the benefits, and the ever-increasing level of claims to be experienced as the awareness thereof grows,” says Larkan.

The verdict is generally in favour of gap cover, although future premiums are a concern. 

“Given the current climate and the current lack of regulation around specialists’ fees in particular, gap cover has become an integral part of the developing healthcare industry and will continue to provide this cover so long as its cost does not make the overall product cost too expensive for the market,” says Singleton.

Ross says based on the changes in legislation and the increase in utilisation there’ll definitely be hefty increases in premiums in years to come.

Narun concurs: “…many specialists have woken up to the fact that a patient having gap cover provides them with an opportunity to charge some really high rates.” This means gap cover providers have seen much higher claims over the past few years, resulting in higher increases in premiums.”

“Should doctors continue to charge the way they are charging, premiums will continue to rise. And at a point – despite medical scheme members having a dire need for gap cover – for many people it may just become unaffordable,” Larkan cautions.

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Peter Nurcombe-Thorne

Peter Nurcombe-Thorne

Rosebank Wealth Group (Pty) Ltd
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The reality is that the South African healthcare system is a mess.

I am all for NHI where hospitals are funded for everyone. Medicine-for-profit is a losers game. Compare medical costs in the US (private medical industry) to medical costs in New Zealand (NHI type scheme).

New Zealand’s medical care is up there with the best in the world and is accessible to their entire population and free for the most part.

The US is so expensive that they required a law labelled “Obamacare” simply to get medical access to a large portion of their population because most procedures in the US are 2 to 4 times more expensive than in South Africa.

The reality is that we should not have allowed the private healthcare sector to go the route that it has and head towards the US model. We should not need healthcare insurance let alone “gap cover” because we are being ripped off between the healthcare insurance wanting to charge more for cover and pay out less for prcedures vs the doctor who wants to charge more for procedures.

What justification is there for health to be limited to the rich? Should whether I live or die come down to how much money I have? And up front at that?

We had perfectly operating state hospitals 20 years ago. State hospitals were so efficient that there was no opportunity for private service providers. What became of them? State hospitals were destroyed by the state.

Do you want to take private healthcare in the same direction? The market in South Africa is moving in the opposite direction to what you suggest. We are using private schools, private security and private healthcare because inefficiency, incompetence and corruption is sinking everything in the hands of government.

In Africa you only have access to the services you supply to yourself. Forget about governments, they are redistribution vehicles and not service delivery vehicles. The ANC will try their best to destroy private healthcare in the same way they are targeting “minority capital”, model C schools and universities.

The bottom line is this – the level of sophistication and efficiency of services and infrastructure in any country is only a reflection of the level of sophistication of the average voter. This is why public healthcare works in NZ and Nordic countries and not in Africa.

Contrary to popular belief – the public health care system works in SA. Actually, more and more people are dropping their medical aids and using public hospitals – you may have to wait a while, but it is much cheaper. My mother in law had a heart valve replacement and lung cancer treatment at Groote Schuur, no problem and free of charge.
Father in law just had his Femur joined at Victoria Hospital, free of charge and will get a month’s rehab free of charge!!!

The medical system in the USA is NOT a private system. It is at best 50% private. The state sets the crazy rules that drive up the prices.
Have you ever lived in a country like the UK with a public medical system? 6 month waiting list to see a toe doctor. By the time you get your appointment your toe is long gone. Also, the NHS in the UK is incredibly expensive. There might not be any “profit” in a public system, but the bureaucracy is much worse, gobbling up more money than “profit” can ever do.

Having recently had some experiences with private and public hospitals, I can tell you that SA’s medical industry is not that bad at all. Especially compared to the states or the UK.

The US is expensive because of the malpractice claims that go against doctors, it makes the cost of practicing a lot more there.

The one problem with SA is that medical costs should perhaps be further regulated. A friend of mine got quoted R400k for a simple scope for an ulcer. Public hospital did it for free and although they are not that pleasant, public hospitals get the job done.

Now when you go to the hospital/specialist and they ask you the question “Do you have gap cover?”, you must answer NO I don’t have gap cover.

My friend went to take his daughter for a procedure and answered Yes to the gap cover question. He is convinced that answering yes to the question was a bad decision as there was no mercy on his bill??

Does it make a difference then I ask? Well if it made no difference then why do the hospitals/specialists ask the question? Surely it is of no consequence to them. I would contact the gap cover independently before the procedure to ensure that you will be covered and claim in after the charges are levied.

Is this not an opportunity for hospitals/specialists to charge more? I don’t know the answer to this question but I am sure that there is surely a temptation to charge more if the patient has this extra cover?

You are absolutely right. A client of mine needed a procedure and when asked if she had gap cover she replied she had ( incorrectly she thought gap cover meant her medical aid ). When she received her bill and then found out she did not have gap cover she pleaded with service provider who immediately reduced the bill.

The medical industry in south Africa has consistently charged higher prices wherever there is higher cover available. This is the difficulty with PMBs. Since there is no mechanism to limit or even rationalise the amounts charged they just explode to irrational ammounts. It’s not about your scheme wanting to pay out lower and lower benefits. It is about how much the medical industry will charge for a job of work. Some of the charges are ridiculous, irrational even.

I can only add that I am so pleased that I did take out a Gap Cover policy about 12 months ago. The scheme was recommended by my medical aid. It cost R155 per month, though this has now risen to R210 pm. (This was anticipated). I had several hospital and clinic stays between September 2016 and March 2017, and my Gap Cover paid for all the “above-MSR” charges.
By the way, it’s true that Gap cover premiums cannot be claimed as part of your contributions for tax purposes, but I have it on good authority that the premiums CAN be included in the “medical expenses exceeding the amount medical aid does not pay”. You don’t get so much “relief” as the formula for calculation is a bit more harsh, but every little bit counts! Does anyone have any other views on what I have been told?

If these experts (or the MW community) can satisfactory answer these 2 questions, I am in:

How come these policies can cover up to 4X what the medical aid does, for a fifth of the premium?

Why, if it was so easy/cheap, does the medical aid not simply increase their cover, for an increased premium?

A couple of reasons come to mind.

1) The medical aids have to cover PMBs in full – this apparently accounts for around R600pm per person of the risk cover.

2) The medical aids generally have arrangements with certain hospitals and specialists where they cover the full costs if you use them. Not all hospitalisations require Gap Cover.

Wendy,

Sounds reasonable on the face of it. What is your view on the following:

For medical aid, I use the difference between main and adult member’s premium as a crude indication of the MA’s admin fee. This alone is much more than Gap Cover.

You argument on PMBs hold here to an extent, but can it explain everything?

Medical schemes in their present form and model is a rip-off and outdated. We need something like car insurance. When you sick go to the doctor if his charge is affordable pay out of your pocket if too much let the medical scheme pay in full and you pay a regulated excess. Why would a human being need to spend over a million rand for procedures, he may not have even earned that his entire life…

With car insurance there is always an excess, to discourage dealing with small claims. What you are suggesting would lead to doctors always overcharging so they would know where to draw the line. The difference is that if the car is buggered you say, “Ah well, have to wait before I get another one”. When you are buggered up it ain’t quite so easy – there isn’t another one to wait for!

No matter what insurance you buy NEVER buy insurance directly, ALWAYS buy through a big broker. As an individual you will have a massive battle on your hands when you have a claim. Insurance companies cannot afford to screw their big brokers customers.

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