Medical scheme gap cover insurance is becoming more relevant but also more complex. It is now almost as difficult to choose as a medical scheme option, with more than 80 policy options from 20 different insurers at the last count.
More employers are offering this cover on a group basis, but you can and should consider all your options, though the group rate could make group cover a no-brainer.
Martin Neethling, the head of Sanlam Health insurance and distribution, says group gap cover can be up to 60% cheaper than individual cover as the insurer considers the group rather than individual risk (group underwriting) and because there is no antiselection (people taking out cover when they know they will need to claim).
When you make comparisons, it’s easiest to consider benefits in four main categories.
This cover pays out when doctors who treat you in hospital charge more than the rate your scheme pays for their service. Schemes set their own rates based loosely on previous guideline tariffs adjusted for inflation. Schemes typically pay low multiples of this rate, for example, one times (100%) or two times (200%).
However, in recent years specialists have increased their charges to multiples as high as seven times the scheme rates, increasing the shortfall in cover to which you can be exposed.
Neethling says claims experience shows a year-on-year increase in specialist fees averaging above 10% and 11% over the past couple of years. Schemes, however, are putting through lower increases of about inflation plus 2% and some are increasing co-payments.
The result of the higher increases from providers and lower increases from schemes is that the shortfall that insurers must cover is increasing at a higher rate.
A projected 10% increase in provider cost when scheme benefits increase at only 7%, results in a 17% increase on the shortfall that insurers need to cover, he says.
Gap cover policies differ widely on the rate at which they plug this shortfall, from two times to six times the scheme rate.
In the past gap cover providers relied on their own tariffs to define their benefits for in-hospital specialist cost shortfalls.
But Richard Eales, managing executive at Guardrisk, says this was problematic as the insurers’ tariffs were out of line with those that schemes were using.
Insurers are now almost all defining their benefits as multiples of the rate your scheme pays, Eales says.
If your scheme pays only 100%, but your gap cover provider pays three times, it means your specialist can charge 400% of your scheme rate before you face a shortfall resulting in an out-of-pocket payment.
Sebastian Zoutendyk, a director of gap cover provider ZestLife, suggests you look for cover up to 500%.
Schemes impose co-payments on hospital admissions and procedures to make you (or your doctor) think twice about the treatment or using hospitals outside the scheme’s network. Jill Larkan, head of health care at GTC, says in this way your scheme shares risk with you to manage costs and limit future contribution increases.
Eales says copayments are like excess on your vehicle insurance policy and gap cover can make co-payments more affordable, making an expensive service such as an MRI scan accessible if you really need it.
But don’t expect your insurer to cover the gap in full, Eales says.
When comparing policies, you will find some providers will not cover you for co-payments when you do not adhere to your scheme’s protocols — for example, if you don’t go to a GP and get a referral to a specialist or you do not get preauthorisation — and some do not cover co-payments for using a private ward in hospital, Larkin says.
Some have no sublimits on their cover except the overall annual limit, while others may have a rand amount limit on each co-payment and on co-payments for the year.
You are often expected to fund these copayments upfront and may only claim this back from your gap cover provider after the procedure, Larkan says.
Cancer co-payment cover is an important benefit to look for as many medical scheme options have an oncology limit, Zoutendyk says.
This may mean you do not have enough benefits to cover the cost of cancer treatment with new medicines, especially biologics, or, once you reach the benefit limit, cover may continue but with a co-payment of 20%, which can also cost you.
When you compare oncology extender or co-payment benefits on gap cover policies, look out for rand limits and limits per claim for oncology.
Watch out too for exclusions on copayments when you don’t use the designated health-care provider or if you require breast reconstruction your scheme does not cover, especially for the “unaffected” breast, Larkan says.
Some gap cover policies also offer a lump sum payout for first-time cancer diagnoses that may or may not be subject to the overall limit. You may or may not need this benefit depending on whether you already have dread disease cover.
Zoutendyk says specialist tariff shortfalls and co-payments account for 99% of the shortfalls medical scheme members encounter and you will find the best value from policies that cover these two common shortfalls comprehensively.
Beyond this, however, Larkan says some insurers offer worthy benefits for the cost of out-of-hospital specialist visits, such as R1,000 per consultation up to three per person a year.
Some policies are designed to match the gaps in certain medical scheme options, but Zoutendyk does not believe this specialisation is necessary.
A newer benefit that is proving useful to members, both Zoutendyk and Eales say, is emergency room cover. Many medical scheme options do not pay from scheme benefits for visits to the emergency room, unless your condition is deemed to be a prescribed minimum benefit (PMB).
Unless the condition is a PMB or you are admitted to hospital, this cost will be for your medical savings account or your own pocket, Larkan says. Casualty room cover is therefore invaluable for young families with children, who may require treatment after a school sports injury, a fall off a swing or stepladder.
Eales says you should also look for a trauma counselling benefit as after violent crime your whole family may need continued counselling that extends beyond your medical scheme benefits.
Sublimit extender benefits
Some gap cover policies extend medical scheme benefits that are subject to sublimits, such as those on prosthetic devices, dialysis, scans or scopes, such as gastroscopes, arthroscopies, and colonoscopies or appliances such as wheelchairs, hearing aids or nebulisers.
Larkan says sublimit extender benefits allow you to select superior devices, or undergo extended treatment, without a severe out-of-pocket payment.
This benefit could be worth as much as R30,000, for example for a longer lasting titanium prosthetic device, she says.
Setting the overall limit
When the demarcation regulations under the Short-term Insurance Act and Long-term Insurance Act were implemented in March 2017, they set the benefit limit for gap cover policies at R150,000 per life insured (for each member of your family) on your policy per year.
The regulations state that this amount can be increased each year by inflation.
Eales and Zoutendyk say most insurers have applied increases, bringing the cover amounts to about R164,000 and this will increase again in April 2020.
You must remember that this overall limit could affect the amounts you can claim annually, but Zoutendyk says while there are cases of this, they are the exception.
The demarcation regulations allow insurers to apply to your gap cover policy a three-month general waiting period and a 12-month pre-existing condition-specific waiting period on a condition you have or had treatment or advice for 12 months before you take out the policy.
The aim is to prevent people taking out cover only when they need it, claiming and then making the cover more expensive for everyone else.
Zoutendyk says you should avoid policies that apply a three-month general waiting period and those that have treatment or procedure-specific waiting periods such as those on adenoidectomy; tonsillectomy; myringotomy/grommets, cardiovascular procedures, cataract removal, hernia repairs, joint replacements, MRI, CT, PET scans, nasal and sinus surgery, pregnancy and childbirth, spinal procedures and scopes.