Gap cover insurance
As health care costs increase, members experience higher out-of-pocket expenses. Over the last two years, 68% of surveyed AMS members reported that they had significant out-of-pocket expenses for in-hospital events and 64% experienced shortfalls for out-of-hospital services.
The insurance market has reacted to member needs and developed short-term insurance products to help fund their shortfalls, known as ‘gap cover’. These products are not medical schemes or medical scheme alternatives. Gap cover products are regulated in terms of either the Short-term or Long-term Insurance Acts. Unlike medical schemes, which are regulated under the Medical Schemes Act, insurance companies are for profit, have shareholders and are allowed to apply underwriting rules.
The most common gap products are medical expense shortfall policies (gap cover plans), which cover the shortfall between scheme benefits and the rates charged by providers.
Non-medical-expense-cover policies (hospital cash plans) pay out a stated benefit upon hospitalisation – usually a set daily amount. This amount is not related to the actual cost of any medical service and aims to cover incidental costs such as loss of income or any shortfall that may be experienced.
Up until 1 April 2017, primary healthcare insurance policies were offered providing limited medical service benefits. The laws published last year now require all new policies to comply with the Medical Schemes Act and by April 2018 non-compliant policies will be discontinued.
How does it work?
AMS pays providers 100% of the Scheme Reimbursement Rate (SRR) if you are a Standard Care Plan member. Members on Managed Care Plan have a Top-Up rate of up to 230% for certain in-hospital services (previously called GAP, but now called ‘Top-Up rate’ to avoid confusion with the insurance products). Your health care provider may charge a rate that satisfies his or her business needs, sometimes as high as 500% or more than the SRR, leaving you with out-of-pocket expenses.
Gap cover products also have limits
Gap cover products usually cover the shortfall up to 200% or 500% of your SRR depending on the product. It might reduce your out-of-pocket expense, but can’t guarantee that you will never have a shortfall. Additionally, since the new laws gap cover policies are now limited to pay out a maximum of only R150 000 per client per year. Gap products do not usually pay for costs that you would expect like medication, home nursing, out-of-hospital dental treatments, and routine medical examinations.
What do other AMS members experience?
Our surveyed members indicated that they paid from R150 up to R2 700 per family per month for gap cover. 43% had not yet used their gap cover, while 83% of those who did found it valuable. About 25% of the surveyed members indicated that they had gap cover, whereas 58% of members would not consider buying it because they didn’t think it was necessary (benefits were considered to be adequate or members considered themselves healthy enough) or because it was unaffordable.
Read the fine print before deciding
There are many aspects to gap insurance products. We recommend you understand your Scheme benefits first, then read the gap product’s fine print very carefully and seek advice from a financial advisor.
While the Scheme is continuously evaluating new cost-saving measures to protect and benefit members, you can take your own measures to avoid co-payments. Always negotiate with your health care provider, get advice from the Call Centre when receiving quotations, use generic medicine and use network health care providers where available.