Having some form of medical cover is essential for anyone who wants to access affordable private healthcare in South Africa. However, with so many different medical scheme options from which to choose, alongside gap cover and medical insurance, it can become complex and difficult to understand the value these products can add. The decision typically comes down to a combination of factors such as lifestyle, life stage, health, and, most importantly, budget.
Helping your clients to choose the right solution means understanding what is on offer, how the various products work, and the way they cover medical expenses.
Medical scheme cover versus medical insurance
Consumers often confuse a medical scheme with medical insurance, but they are, in fact, separate products that fulfil different needs in the market.
The most basic difference is how they are regulated. Medical schemes are governed by the Council for Medical Schemes, while medical insurance (also called health insurance) and gap cover, which are short-term insurance products, are regulated by the FSCA, as well as the National Financial Ombud Scheme and the FAIS Ombud.
All registered medical schemes must provide continuous care and cover for a set of Prescribed Minimum Benefit (PMB) conditions, regardless of medical scheme or plan type. This includes cover for the diagnosis, treatment, and care of emergency medical conditions, a list of 271 defined diagnoses, and 27 chronic conditions. Medical insurance is not legally required to provide this cover. It is often aimed more at day-to-day medical expenses, such as visits to GPs, as well as dentistry and optometry.
To add to the confusion, both medical schemes and medical insurance may offer something they call a “hospital plan”, but because of the basic differences in the way the types of insurance are regulated, the cover can differ.
Medical scheme hospital plans will cover PMBs and will typically offer cover for elective procedures, up to an overall limit.
Medical insurance typically has set limits on the amount of cover for hospital procedures. This limit is either a set amount per day that the insured is in hospital or a limit per year for hospital events. You also need to pay for the procedure and then claim back from insurance once discharged. In addition, health insurance hospital plans do not include cover for elective surgery.
Where does gap cover fit in?
Gap cover is a complementary product to medical scheme cover, but it can be used only by someone with a registered medical scheme plan, not by someone with only medical or health insurance.
As the name suggests, it covers the gap or shortfall in medical expenses, typically resulting from specialists charging many times more than the medical scheme rate cover.
Gap cover provides cover up to an overall annual limit, which is revised in April each year and is currently R198 660.43 per insured person. This is not only for the principal insured, but for each insured life under the policy.
In many instances, gap cover premiums include cover for the principal insured and immediate family – this means the principal insured person, eligible spouse, and eligible children – who have not attained the age of 26 years unless mentally or physically disabled and are unable to earn any form of income.
Any dependants falling under this definition are included at no additional cost, provided it is not a specified individual product.
If you have an extended family member registered on your medical scheme and they do not qualify in terms of our above definition of a family, you may add them to your policy for an additional premium per month.
Gap cover benefits
Shortfalls are the most significant area of coverage by gap cover providers, and at Turnberry, they account for two-thirds (66%) of benefits paid.
The shortfall is determined by the difference in the level of coverage of a particular medical scheme option and what the specialist has charged in relation to the tariff. Medical schemes cover either 100%, 200%, or 300% of the tariff, depending on the option selected, which typically comes with a significant premium difference.
There are a number of reasons for this discrepancy, including a shortage of specialists, the high costs of insurance that providers need to pay, escalating overhead costs, the cost of maintaining state-of-the art private facilities, and investment in various technologies, such as robotic surgery.
Gap cover options will specify the level of coverage of tariffs they cover up to, with some covering up to 600%.
It is important to note that a policyholder’s medical scheme needs to cover a portion of the expense for gap cover to kick in. This means that if a member does not have a particular benefit on their medical scheme, gap cover will not pay towards that particular procedure, even if it is covered by their policy.
Gap cover also offers cover for co-payments and penalties for using non-designated service provider hospitals. This is an upfront fee that consumers need to pay if they make use of a hospital that is outside of their medical scheme’s network of providers. It also covers investigative scopes, casualty for accidents, and after-hours casualty visits.
Some gap cover providers, Turnberry included, offer a medical scheme contribution waiver and a gap premium waiver in the event of the principal member passing away.
How waiting periods work
Gap cover providers typically impose a three-month general waiting period for all new gap policies, where they will not provide cover for claims. This excludes any accident-related injuries.
They may also have condition-specific waiting periods of up to 12 months, but this will depend on the individual and their pre-existing conditions. Typically, the waiting period for childbirth is 10 months from the inception of a gap cover policy.
It is important to note that if a policyholder decides to move to another gap provider with uninterrupted cover, the new provider may impose waiting periods only on new benefits that the policyholder did not previously have. This is provided that the policyholder has completed the waiting periods with the original provider. If additional dependants are added after the commencement of the policy, they will be subject to new waiting periods, even if the principal insured has passed all waiting periods.
Babies will be automatically covered by gap cover as long as the provider is notified within 90 days of their birth, while most medical schemes will require this notification within 31 days of birth.
Protecting financial futures
Medical expense shortfalls and additional expenses can add up to tens or even hundreds of thousands of rands.
In the past year, we have seen increasing numbers of medical expense shortfalls in excess of R100 000 for various different conditions. This included shortfalls of R128 485 for a polyp of the nasal cavity, R113 867 for a spinal disc disorder, R104 733 for cancer of connective and soft tissue, R102 874 for a heart condition, and R102 592 for spinal stenosis. There were also numerous claims ranging between R60 000 and R100 000 for everything from heart disease, cancer, and spinal disorders to chronic sinusitis and abscesses.
Without their gap cover policies, these consumers would have been liable for massive expenses out of pocket, which is completely unaffordable for most South Africans.
To ensure consumers have the best cover to meet their needs, it is important first to understand the various options that are available and then to assess individual requirements and budgets. From there, brokers can help consumers choose the right combination of products, including gap cover, to ease the burden of increasing medical expense shortfalls.
Brian Harris is the general manager: operations at Turnberry Management Risk Solutions.
Disclaimer: The views expressed in this article are those of the writer and are not necessarily shared by Moonstone Information Refinery or its sister companies.
