Why Having Gap Cover Is A Must

Medical aid, being fraught with small-print, is a minefield for the regular Joe out there, who is just looking for the peace of mind that medical aid cover is supposed to give us. All Joe wants to know is, as long as he pays his medical aid contributions, he will be covered in case of a catastrophe, such as a car accident, as well as for his normal day-to-day expenses at a healthcare provider.  Joe definitely does not want to be bankrupted by additional costs he becomes aware of only after he is discharged from hospital. Additional costs which he can ill afford, and which are likely to put him back in hospital due to the financial stress he is now placed under!

100% / 200% / 300% COVER – PLEASE EXPLAIN!

In South Africa, medical schemes have different options from which you can choose, and these options vary in the benefits offered, and of course also the cost of the contributions.  When choosing a medical aid option, you will see that professional services (such as the surgeon or anesthetist) in hospital will be reimbursed at either 100%, 200% or 300% of the scheme rate.  Now anyone will be forgiven for assuming that being covered at 100% means exactly that – you are fully covered!  However, specialists in South Africa are not regulated as to what they can charge patients for their services, and could charge in excess of the 100% rate which medical schemes are willing to pay – sometimes as much as 500% of the scheme rate!  The end result – the patient ends up with a short-fall on the specialist’s account, which he has to pay out of his pocket.

To give an example of how significant these costs could be, have a look at this example of the cost of a caesarean section:-

Specialist              Cost                     Scheme Rate (100%)               Gap Claim                 %            

Anesthetist             R3 770.90             R1 482.65                                      R2 288.25              254%

Gynecologist          R8 833.20              R2 759.09                                     R6 074.11              320%

Total                       R12 604.10           R4 241.74                                     R8 362.36

Cover your whole family for only R170. 00 per month – Its affordable and essentially a must.

From the above, you see that if you belong to a medical scheme option which pays at 100%, you would have to fork out in excess of R8 000 for the birth of your baby. This is an expense you did not consider when joining the medical aid, as you mistakenly believed you were fully covered for hospital expenses!

HOW DOES GAP COVER WORK?

Gap cover does not form part of your medical scheme membership – in fact, it is not even regulated by the same laws! While your medical scheme is regulated by the Council for Medical Schemes, and the Medical Schemes Act, Gap cover falls under the Short-term Insurance Act.

Although there is on-going debate between government and the different stakeholders as to whether Gap cover products are in fact doing the business of a medical scheme, this matter has not yet been resolved, and for now, Gap cover products are available to the public. The value of having Gap cover cannot be stressed enough – even for members of medical scheme options that pay at 300% of the scheme rate.  Although government has published draft regulations to prohibit the marketing of these products, because of the on-going debate, these products are still being marketed – and their value is self-evident!

While your medical aid will reimburse the hospital or specialist directly when you are hospitalised, because of the regulatory issues, your Gap cover provider will refund you, the member, directly.  It is then your responsibility to reimburse the service provider.

The process of claiming is also separate from your medical scheme.  Usually, a Gap cover claim must be submitted after your medical scheme has paid the service provider.  Having a Gap policy is also not dependant on a specific medical scheme.  You can change medical schemes, but still keep the same Gap cover.

IS GAP COVER THE WAY TO GO?

When advising clients on a medical aid option, I always advise them to take additional Gap cover, no matter what rate their scheme reimburses at.  However, this does not mean that I would advise them to downgrade to a less expensive medical scheme option.  Because medical scheme membership is perceived as expensive in South Africa, many members think that by downgrading their option, and taking Gap cover, they will be paying less but getting more.  However, the old maxim of “you get what you pay for” is still true.  When downgrading your option, you might be sacrificing additional benefits not related to the in-hospital cover.

While there definitely is a place in the market for Gap cover, you should only downgrade your medical scheme option after obtaining advice from a qualified financial advisor, who is accredited to give advice on your specific circumstances.