Gap Cover Makes Up for Medical Scheme Inadequacies
March 30, 2015
Gap cover is for people who don’t get the difference between medical insurance and health insurance. And the shortfall that happens when they don’t cover all your medical / specialist expenses.
There is certainly no regulation which governs the high fees which exist in the private medical industry.
However, as a member of a medical aid scheme, you can no longer trust that you have full hospital cover.
And that’s where gap cover fits in.
Apply for one FREE medical gap cover quote by completing and then sending the form
on this page. Medical aid members only
Medical Scheme Inadequacies? But You Pay your Premiums Every Month
The medical scheme benefits accord with the Medical Scheme Tariffs (MST). Private doctors can charge far more than the MST, and in fact, some specialists have no qualms with charging 5x more than the MST.
These exorbitant charges cause a gap which you will have to pay. So as to avoid these unexpected medical expenses, medical gap cover takes care of this.
Health Minister, Dr Aaron Motsoaledi has stated that ‘profit-maximising specialists and hospitals can exert their dominance through price increases and price discrimination with relative impunity, and currently, have no need to compete on either price or quality to attract patients.
Unfortunately, it is this kind of behaviour in the medical industry which has meant a rising interest in health insurance cover, particularly hospital cash plans and gap cover products.
What exactly is a Health Insurance Policy?
Health Insurance policies are binding contracts. Insurance companies issue them, and the Long, or Short Term Insurance Act dictates the terms of their sale.
The individual will pay a particular premium based on their health status and age. Then, when the policyholder becomes ill, the policy will pay for certain benefits.
Certain exclusions apply to the policy, and this deters some individuals from buying the plan.
Why Demarcation Regulations Exist
The Regulations separate health insurance products from medical schemes. Regulators suspected that health insurers are targeting healthy, young individuals from the medical schemes’ risk pool.
Taking these healthy individuals away from a medical scheme leaves the medical aid with older, sicklier members. So this reduces the benefits of cross-subsidisation which usually helps with affordability.
The health insurance market and draft demarcation regulations add to the uncertain future of the medical scheme industry in South Africa. The aim of the regulations is to separate health insurance products from medical schemes.
The guidelines clarify what medical schemes do as set out in the Medical Schemes Act. The Regulations aim to change the practices that insurers apply to their health insurance products so that the principles of medical schemes apply in the health insurance environment.
Insurance Products for those who Can’t Afford Medical Scheme Cover
The second draft demarcation regulations, released in April 2014, acknowledge the role of health insurance in the South African market. The target market for these health insurance products are those people who can’t afford medical scheme cover.
Insurers sell the health insurance products alongside medical schemes, not in place of them. That will impact the health insurance and medical scheme industry in some ways –
- the market will be regulated more stringently, and the need for innovation will increase
- on the other hand tightened regulation could reduce innovation and result in simpler products
- the insurance products and the gap cover are likely to threaten the medical scheme’s sustainability
- the increased reporting requirement will keep policyholders better informed about the difference between the products
Gap Cover Makes It Better Again
If the regulations are implemented as they are, the design of medical aid schemes will be such that they don’t offer members life-long cover. So members will have to top up with health insurance products to fill this gap.
The Government announced that the final regulations on the demarcation between medical Schemes of South Africa and health insurance policies would only be released later in 2016.
And the Government went on to say that existing health insurance policies will be expected to co-operate with the final regulations requirements upon renewal of the health insurance contract.
Apply for one FREE medical gap cover quote by completing and sending
the form on this page. Medical aid members only
All info was correct at time of publishing