Mind the gap
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.
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 shortfalls in the difference between what , doctors or specialists charge, and the medical aid’s rate, says Oracle Broker Services independant financial planner Greg Katz.
It covers mainly in-hospital shortfalls but certain out-of-hospital benefits are funded, including chemotherapy, radiotherapy and renal dialysis, says James White, Turnberry Management Risk Solutions’ sales and marketing GM.
Top-end product providers may also pay for co-payments on MRI or CT scans, extended oncology cover, trauma/casualty room cover and even counseling, adds Jill Larkan, GTC healthcare consulting head.
Gap cover is only available to (both open and restricted) medical aid members and Ross says it aligns its 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.
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, Larkan says.
McWilliam says Zestlife and Liberty Gap Cover don’t have a general waiting period.
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, White adds.
“If a member changes from one medical aid to another - as long as they notify the gap provider – 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.
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.
If the medical aid doesn’t cover an out-of-hospital procedure from ‘risk’, gap cover won’t help , cautions David Narun of Informed Healthcare Solutions.
The demarcation regulations allow for members who had gap cover before April 1 2017 to 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.
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.
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.
Gap cover contributions are not tax deductible, says Van Emmenis.
As with most insurance policies, if you never claim you never get your premiums back, says Ross.
Who should get gap cover?
Basically everyone who has medical aid, says Krisascha Crafford, Glopin Healthcare Consultants marketing manager. “A relatively small premium a month could make a big difference.”
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.
“There are also a number of procedures to which co-payments apply,” adds Crafford.
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.”
Katz adds that hospital births are often not covered in full.
It’s essential for financial planning and helping to avoid unforeseen medical expenses, Singleton says.
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.
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, 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.