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Gap cover: A financial essential

Even with comprehensive medical aid benefits.
Image: Shutterstock

The growing quantum of gap claims values are showing a marked increase in the shortfalls between what medical schemes pay versus what healthcare providers charge for in-hospital procedures. Recent ‘mega’ claims handled by Sirago Underwriting Managers, a gap insurance provider, have rattled the status quo, tallying almost R500 000 on just three claims for the gap portion alone. Without gap cover in place, a medical scheme member would be liable to pay for this shortfall from their own pocket.

Gap insurance covers the difference that arises from the rate that healthcare specialists charge for in-hospital procedures versus what medical schemes pay. Unlike the pharmaceutical industry, there is no pricing regulation on healthcare provider tariffs, and with South Africa facing a dire shortage of healthcare professionals, specialists are free to charge any rate, often more than 300% to 500% higher than the rate paid by medical schemes. If your medical scheme option only pays out at 100% of tariff, you will then be liable to pay the shortfall of the other 200% to 400% charged by your healthcare provider as an “out of pocket” expense which can easily run into tens of thousands of rands.

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Sirago recently paid three large claims for cancer and musculoskeletal surgeries coming in at R153 000, R142 000 and R162 000 per claim – until recently, claims of this magnitude were the exception, but are now becoming more common.

A few short years ago, gap claims averaged around R6 000 to R12 000. Because of the significant increase in claims volumes, the average gap claim remains within that range, however, we are seeing claims of R40 000 for gap claims almost on a daily basis. It remains to be seen whether this jump is an anomaly attributed to the Covid-19 pandemic, and whether claims will revert back in the coming months.  These claims are for tariff shortfalls not covered by medical schemes that clients would have had to pay from their own pockets, had they not had gap insurance in place.  It is certainly not only members on lower benefit options that are facing these shortfalls – even on comprehensive, top of the range medical scheme benefit options, members are facing onerous tariff shortfalls for in-hospital procedures.

Medical schemes recently announced their tariffs and benefit changes for 2021, and members have until the beginning of December to make any changes to their medical scheme benefits for the following year. In the current environment where private healthcare costs are in an unsustainable upward spiral, gap cover is proving as essential as private medical scheme membership given the parlous state of the public healthcare sector.

When you consider the potential financial quantum of a shortfall on your medical scheme benefits, and that a gap cover premium is around R400 per month for a family (2021 Sirago Gap Plus), and each family member is covered for up to a maximum of R164 000 per annum (R174 000 from January 1, 2021), it is clear that gap cover is a non-negotiable part of your healthcare strategy, at a very affordable monthly premium. A single gap claim of R60 000 would be the equivalent of almost 13 years of premium payments at current premium rates.

An analysis of private healthcare costs from 2000 to 2012 show that in real terms, costs doubled. The cost trajectory tells us that by 2028, they will have doubled again. Medical schemes, which carry the bulk of these costs, rank within the top five highest household expenses for many South Africans.  Most notable is that while medical scheme contributions increase every year, the benefits are actually decreasing, while healthcare costs are increasing by much more than inflation. This places a double burden on consumers who not only will be forking out more for the same or less medical scheme benefits, but will also shell out for greater out-of-pocket healthcare expenditure than ever before.

At the same time, consumers remain under tremendous financial pressure and over the coming weeks may be looking at ways to save on healthcare costs by cutting back on their benefits.  There are many interconnected and complex variables to consider, so engage with a professional and accredited healthcare broker who can guide you through the process, and ensure that any changes you make won’t leave you or your family financially compromised in future. Given the current trajectory, medical scheme members cannot afford not to have supplementary gap cover to fill the holes in their medical scheme cover, especially the high-risk treatments such as surgery, confinement and oncology where the tariff shortfalls can easily  breach the R100 000 mark.

On a closing note I advise consumers to always negotiate the pricing of any planned surgery with healthcare providers before and ask for a formal quote from all the medical role players – from the surgeon to the anaesthetist.  That way there are no surprises or unexpected costs creeping in after the fact, unless there were specific complications during the procedure.

Finally, be wary of doctors asking you upfront whether you have gap cover or not – overbilling based on a client’s insurance portfolio is a growing unethical practice by some unscrupulous medical specialists looking to capitalise on the patient’s insurance cover by overcharging, knowing that the patient has the insurance to cover the inflated price. Given the fact that most elective surgeries were put on hold due to Covid-19, impacting the incomes of many healthcare providers, there are valid concerns from the insurance sector overcharging may heighten in the coming months.

Martin Rimmer, Sirago Underwriting Managers.

COMMENTS   14

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You get in a car accident and you have coverage, it’s paid. You die and have life cover, it’s paid. You get sick and you have medical insurance, well that’s not covered, that’s at RAMS rates, if you want a better doctor or extra treatment THAT’S EXTRA!! A bunch of thieves!!!!!!!!

Well, you’re insured for the car you have, not the car you wish you had. The amount of life cover is up to you. The more you choose, the more it costs. Surprised ?

It’s a pity you can’t get the gap cover without the medical aid. The trouble with contracted-out medics is that you can’t plan around an uncertain rate.

The whole medical industry from providers to ‘insurers’ (such as Med Aids, Med Insurers and Gap Cover insurers) seems to be fraught with inconsistencies and apparent greed in many cases. I have personally experienced two ‘discounts’ offered by doctors if I paid upfront and claimed from M.Aid afterwards. I saved a lot. I cannot be the only one. I fail to understand the concept of the ‘tariff rate’. Shop around with M.Aids and they say they cover from 100% to say 200% of the tariff rate. What is the tariff rate? Nobody can tell me. How can one compare then? Recently I was charged for a blood test for which I did not have blood taken (and there was no evidence on either arm it was taken while I was unconscious). Although the M.Aid paid, I complained and was told that the blood was taken directly from the incision while undergoing surgery? True? I don’t know. How many other charges (multiple) are used to pad your invoice to the M.Aid? I sometimes wonder if the hospital accounts departments take the particular M.Aid Scheme and or plan into account when preparing an account. Hence I agree – get a quote. But the hospital, as I experienced, only gives an estimated quote. So patients are like the sleeping human settled upon by a mosquito. They suck as much blood as they like. Cynical I know, but that’s how it seems from my direct and indirect (friends and family) experience.

When you join a medical aid the next thing any medical aid member should do is take up Gap cover. Its critical to have in this country. If you live in a larger city and use a private hospital the specialist treating you for an in hospital procedure will be away above the medical aid “rate”. If I was a specialist in private practice I would also charge whatever I liked.
My Gap provider has paid me my premiums back through claims many times over. For what you get its great value.

This article paints practicing Dr’s in a bad light and shows a lack of understanding of the system. It seems that Dr-bashing seems to be in vogue at the moment. Strange, when those same Dr’s are/were at the frontline(along with all the other healthcare workers) of the COVID pandemic. In reality, the majority of Dr’s want to help their patients. Asking someone to pay upfront, for a service that has not been rendered, is not accepted by the HPCSA and the healthcare worker can be reported. Each Dr is supposed to have a billing policy that is given or explained to a patient prior to the consultation. No Dr can decide to bill someone according to whether they have Gap cover. If they do, they can be reported to the HPCSA.
Copayments are not only for the Dr, or healthcare worker, but often for the hospital as well.
The problem is that each medical aid determines the rate that they are going to pay. For the healthcare provider, these rates have been increased by sub-inflation rates for the last 15-20 years. All the running costs of a specialist practice have increased by inflation. At medical aid rates, being a specialist in private is not financially viable. Some specialists can work in excess of 100hours a week(including weekends). We are very fortunate to have excellent specialists in this country and the number that have moved abroad to have successful careers is a testament to the quality of our training institutions. The problem is a complex one. The costs of healthcare are expensive. This is the cost of progress. Safer, faster and simpler technology or techniques are often more expensive. However, in the bigger picture, they save costs, due to fewer complications, shorter hospital stay, sooner return to normal functioning and better long term outcomes.
I wonder what the administrative costs of each medical aid have increased by annually over the last few years? Somehow I think it would be at inflation, or above-inflation rates. Consumer contributions have been increasing by rates that are well above inflation. By decreasing the rate that they were willing to pay, the medical aids have created a whole industry in GAP cover. It is a complex issue and one in which the funders(medical aids) are now trying to decrease the cost of healthcare and concomitantly increase the costs of administration.
Becoming a specialist is not easy. From starting the undergraduate degree, to completing the speciality takes in excess of 12 years. Some medical aids pay less than R400 for a specialist consultation. Some medical aids pay less for an emergency or after-hours consult than what a plumber would charge. Would a lawyer, engineer or accountant at that level be reimbursed at that rate? Healthcare workers need to get paid what they they are worth. Unfortunately this doesn’t align with what medical aids are willing to pay. Medical aids are happy to pay their brokers more than they pay General Practitioners. Medical aids are squeezing the profession and my fear is that in 10-15 years time there is a going to be a dire shortage of healthcare workers in this country, with plenty of accountants and actuaries to run the administration of healthcare. Or maybe NHI will eventually arrive and we will see an exodus of specialists anyway.

I think part of the negativity arises from frustration with the ever-increasing complexity of medical aid and insurance policies and people’s sense that they don’t understand whether they’re getting value or not. So for example, why would a medical aid have different network hospitals and specialists for different products ? Is the network for the cheaper option somehow inferior ? Or is the more expensive one ripping you off ? Is the difference just a nicer waiting room ? How would you know that ? Your GP doesn’t know all the ins and outs of your particular medical aid product, so s/he just refers you to a specialist s/he knows. If the specialist is outside your medical aid’s network, how many people would ask for a different referral ? Maybe your broker can advise, or is the broker a tied sales agent ? Chances are if you need specialist medical attention these aren’t things you as a layman want to be researching or worrying about.

A specialist can charge what he likes – and he does. There’s clearly something wrong where a person who is put in the fortunate position of setting a price takes full advantage of that situation, because in matters of personal health the punter doesn’t have the advantage of being able to just walk away – as he might when seeking the services of other professionals. There’s a simple remedy for this situation – train more doctors, if necessary by economising on lawyers, philosophers and sports scientists. Heaven knows you don’t need to be a genius to be a doctor – but you do need to get a decent matric.

Probably not going to improve anytime soon. The pool of medical professionals is getting smaller and the cost of business increasing. NHI will accelerate this trend.

Lol brokers get paid from R20 a month to maximum of plus minus R100 a month for one medical aid client and gap cover is similiar so how is that getting paid more than Dr’s? Lol

Go take a look at the financials. They are available.
Companies get their entire staff complement onto medical aids. This is done via a broker. Some of those employees have never met their broker.
The broker is also getting commission/fees for other products that he sells as well.

I want to add something to your post. A doctor while removing a wart from my leg was telling me that years ago he saw it coming what is happening now. He says that people driving Volkswagens had Mercedes Benz Medical Aids. He said he knew this could not last. People were buying ray bans sunglasses, radios etc. through there Medical Aids. So I added that now we as patients and doctors must suffer because of those who misused the medical aids. So the blame as I see it, lays everywhere namely the medical aids, the members, the doctors, and the hospitals.

Whenever I have reviewed it gap cover seemed absurdly overpriced based on what you were actually getting and the super low cap on the amount of a claim (about R100-200k). Just wasn’t worth it – if you could afford the cover you could just as well self-cover the capped gap. I was looking for something with a cap of R1M-R2M but found nothing.

Agree, nothing around. Probably best to look at taking a dread disease cover. Especially if you are self-employed.

End of comments.

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