Consumers continue to take serious financial strain related to funding their health needs. With healthcare costs growing at levels well-beyond inflation, the man on the street is left with little to no choice but to buy down on medical aid benefit options every year as a result of medical scheme benefit design, in a bid to retain membership to medical schemes and access to private in-hospital care.
This has thrown the spotlight on the critical need for Gap Cover to ensure that consumers are not slapped with onerous out of pocket expenses for in-hospital treatments as they contemplate migrating to more affordable, lower benefit options.
“The reality is that medical aid cover can cost up to 20% of monthly disposable household income. Given the disastrous state of the public healthcare system, it’s an expensive but essential safety net that consumers who can afford medical scheme membership, understandably do not want to live without. However, as the economy slows and household incomes take a hammering, many consumers are buying down on their medical scheme benefit options. As a rule, cheaper options mean less benefits and more restrictions related to accessing benefits. Buying down could leave you exposed to onerous out of pocket expenses if you don’t have Gap Cover to protect you from shortfalls that exist between the agreed medical scheme rate and the rate that the healthcare provider charges,” explains Martin Rimmer, CEO of Sirago Underwriting Managers, a provider of Gap Cover Solutions underwritten by Genric Insurance Company Limited.
Essentially, Gap insurance covers the difference that arises from the rate that specialists charge for in-hospital procedures – which are often as high as 400% to 500% higher than the rate paid by your medical scheme. If your medical scheme option only pays out at 100% of tariff, you will then be liable to pay the shortfall of the other 300% to 400% charged by your healthcare provider as an “out of pocket,” expense.
These shortfalls occur in several ways including:
- Surgeons, anaesthetists and other specialists charge more than the contracted / agreed rate with your medical scheme for certain in-hospital procedures;
- Your medical scheme applies co-payments or deductibles on certain in-hospital admissions and or procedures;
- Certain expensive in-hospital items and appliances have annual sub-limits, for example the internal prosthetic devices used in a joint replacement procedure.
Healthcare intermediaries are increasingly reporting that clients are asking about moving to more affordable ‘core hospital plans’, adding gap insurance to cover any potential in-hospital tariff shortfalls, and then taking on a certain level of self-funding to pay for their day-to-day medical expenses for GP visits, dentistry, optometry and the like.
“Where costs are of concern, this is a savvy option to retain access to quality healthcare while providing some financial relief. However, given the complexity of comparing different benefit options and matching this to your needs analysis based on your claims history, state of health, any chronic conditions and financial position, it’s a task best done with the guidance and advice of a professional healthcare advisor. With such a wide variety of insurance solutions and the complexity of product and benefit structures – some 24 open medical schemes and 179 different benefit options – the ordinary man on the street will be hard pressed to make an informed choice about something as fundamental as healthcare funding without professional advice. While the need to manage costs and reduce expenses is real, it is equally important not to leave yourself financially compromised,” adds Rimmer.
During October 2018, Sirago paid one of its highest Gap claims ever – R150 000 for a spinal surgery. In one week, the UMA processed six massive claims that collectively amounted to almost R650 000 in tariff shortfalls not covered by Medical Aid that clients would have had to pay from their own pockets had they not had Gap insurance in place. There are very few people who can manage this kind of financial impact without taking additional Gap Cover. Sirago has seen a marked increase in high cost Gap claims of around R40 000 per claim, a clear indication that not supplementing your Medical Aid benefits with a Gap Cover policy could be a very costly mistake.
“When you consider the potential financial quantum, and that a family Gap premium is around R356 per month in 2018 and each family member is covered for up to a maximum of R150 000 per annum, it is clearly evident that Gap Cover policies are a critical part of an individual or corporate employers strategy to insure against medical scheme shortfalls at a cost effective monthly premium. Looking forward, there’s every reason to believe that demand for gap cover will grow significantly as certain healthcare providers continue to charge above the contracted medical scheme rate, which in turn is a driver of medical scheme premium increases well above inflation rates,” says Rimmer.
A major health event such as surgery in hospital is usually an unpredictable event and can strike a family at any time. An accident, heart attack, spinal injuries and more prevalent at the moment – cancer which is one of the current top high claims causes – can leave families financially destitute and in a crisis if they do not have the financial means to cover these shortfalls. Consumers are mainly at risk when it comes to in-hospital treatment where shortfalls of R30 000 to R40 000 are now the norm and no longer the exception.
“Given the affordability challenges and the way that medical schemes are having to restructure their benefit options to ensure sustainability, the need for Gap Cover and Co-payment Cover as an insured solution is critical in the future of the average consumer’s personal healthcare planning in South Africa. Gap Cover remains the only solution that offers consumers complete peace of mind in knowing that should they ever need expensive in-hospital medical care, that their costs are properly taken care of at a time when they should be focussing on their recovery and not on the financial worries of hospitalisation,” concludes Rimmer.
Note: The content of this article does not constitute financial advice.