How the New Demarcation of Hospital Policies and Gap Cover Will Affect You

    The government is introducing regulations for the new demarcation of hospital cash back plans and gap cover. And it is banning primary care policies outright.

    Background to the New Demarcation

    Hospital cash-back plans and Gap Cover do not fall under the Medical Schemes Act. Rather they fall under The Short Term Insurance Act that regulates insurance companies.

    The protection of the consumer and a greater understanding of medical cover is the aim of these amendments. However, the changes have the greatest impact on the consumer.

    Important Changes

    New Demarcation

    Martin Rimmer, CEO of Sirago

    Martin Rimmer CEO of Sirago Underwriting Managers says “What is of critical importance to the prospective consumer, current policyholder and the broker is that they understand the impact of these new demarcation changes on their cover.  Legislation changes are written in legal jargon and not in a manner that consumers may easily understand. When in doubt, always consult with an accredited broker for “peace of mind.”

    The new demarcation document came out in December 2016 after many years of debate. It affects three particular insurance policy categories in the Short Term Insurance (STI) industry. These are:

    • Gap Cover
    • Hospital Cash Back Plans
    • Primary Care Cover

     
     
    If you are a current policyholder of these latter two products, the demarcation takes effect on 1st January 2018. That is, as long as your policy does not lapse or you cancel it before this date. This is as a result of a concession to allow product suppliers to make amendments over this period.

    New Deals from April 2017

    However, if you are intending to buy a policy after the 1st April 2017, the benefits will be fewer. This means the following:

    • Hospital Cash Back Benefits – These are limited to a maximum payment of R3 000 per day while hospitalised. The maximum overall limit is R20 000 per beneficiary per annum. The impact of this change is significant. The average cost of a hospital bed, before theatre costs, averages between R4800 and R6000 per day.

     
     
    As you can see, consumers are going to be significantly out of pocket if they go to hospital. Currently, these products provide far richer benefits where the consumer is not, or at all, affected financially in the event of admission to a hospital.

    An Example

    As a practical example – Tim has a Health Insurance Plan that covers basic primary care and hospitalisation benefit. He does not have medical aid. Tim gets bronchitis and goes to the doctor to get antibiotics.  Currently (until 31 December 2017) Tim can claim the doctor’s appointment and the acute medicine from his medical insurance plan. However, Tim’s brother Frank, who joins on 1st April 2017, or later this year, will not be able to have access to the same primary care benefits that his brother Tim. Not unless his product supplier accredits their product with the Council of Medical Schemes.

    If Tim’s brother Frank buys the product that advertises the availability of Primary Care benefits, he needs to investigate if his supplier has accreditation and may offer this particular structure within the legislative framework

    • Primary Care Benefits – The government has outlawed these policies unless the Council for Medical Schemes accredits them in terms of the new legislative framework. The reality of this is that there is currently no active framework which means consumers are left high and dry during this transition period, with no regulatory body providing a platform of engagement for policyholders or product suppliers to subscribe to.

     

    Another Example

    Here is a different example, if Frank fell off a ladder, an ambulance cannot be dispatched to get him to the hospital. Frank as an individual will receive an ambulance bill. A short term insurance hospital plan will now only kick in once you are hospitalised, whereas before they could assist in this regard as Franks policy was only incepted after 1st April 2017.

    • Gap Cover– Consumers that are holders of Gap Cover policies will continue to enjoy the approved benefits that appear in the Policy Wording for the balance of 2017. However, if any prospective consumer intends to buy a Gap Cover policy after the 1st April 2017, there will be a limit of R150 000 overall annual limit per beneficiary per annum on the policy. And the benefits may not contain any Primary Care benefits as defined: GP Visits, specialist consultations, optometry, dentistry, radiology, pathology, acute and chronic medicines and emergency medical services.

     
     
    Low-income households who cannot afford to have basic medical aid are the ultimate losers in this equation. And their right to choose to have the most basic benefits are eroding as previously a short term insurance hospital plan would have covered them adequately.

    However, there is light at the end of the tunnel. There is provision for short-term insurance product providers to accredit themselves and their products with the council of medical schemes.

    We believe that there will be alternatives for current and prospective policyholders to consider, but these options remain vague and incomplete at this stage

    *Article supplied by Sirago