The uncomfortable truth about out-of-pocket hospital expenses

NMG Benefits
22 August 2022
min read

In an attempt to contain costs, medical schemes develop hospital shortfalls in the form of co-payments and deductibles. Other shortfalls also arise because there is no forced regulation on provider charges.  Medical schemes may only cover up to a certain rand value leaving members to pay the additional costs out of their own pocket. These amounts are never defined clearly upfront, leaving members with unexpected post-procedure bills that they are not prepared for. These expenses could very easily cripple a family financially, especially if they are already battling to live within their means.

Gap cover explained

Gap cover is a short-term insurance product which can be purchased separately from your medical scheme and is an effective way to ensure that you are covered for certain unforeseen hospital shortfalls. It doesn’t replace comprehensive medical cover, it complements it. The good news is that gap cover is affordable, and it could save you (or your employees) thousands of rands that were never budgeted for. Feldman, Head of Healthcare for NMG, warns, “Gap cover should no longer be seen as a luxury. It is a necessity. It is vitally important to make sure your family, or, as an employer, your employees, are not left financially destitute in a medical emergency.”

Medical schemes are under pressure

In a highly regulated healthcare environment, medical schemes are constantly under pressure to maintain low increases in premiums, while trying to sustain their existing benefits. Gary Feldman, explains, “Regulations enforcing prescribed minimum benefits, access for all irrespective of age or illness and the requirement to retain high reserve levels are just three examples of what is driving the cost of benefits offered by medical schemes up.”

Removing the reference price listing added more pressure

A decision was made by the North Gauteng High Court in July 2010 to remove the reference price listing for doctors’ fees. Since then, healthcare costs have been under even more pressure in South Africa. Feldman continues, “Gap cover providers have developed their own product-specific tariff structure to determine benefit payments or consider providing rate coverage up to a multiple of the scheme-specific tariff structure going forward. This means that if medical practitioners charge more than the medical scheme rate for procedures performed in-hospital, the shortfall will be for the member’s account. This is where gap cover comes in.”

The Demarcation Regulations tabled in Parliament in 2016

The intention of these regulations is to ensure that the design and marketing of health insurance policies (gap cover and hospital cash plans) do not undermine a sustainable medical scheme industry, while at the same time serving the needs of those who require additional protection against health-related risks. Feldman added, “The regulations want to make sure that insurance policies don’t discriminate against any person on the grounds of age, gender, and other criteria. They also want to make sure that there are product standards that limit policy benefits.”

The regulations aim to stop certain health insurance products (which provide similar benefits to medical schemes) from causing harm to the medical schemes environment by attracting younger and generally healthy members out of medical schemes. A clear demarcation between health policies and medical schemes is, therefore, necessary to support and enhance the objectives and purpose of the Medical Schemes Act.

The Act entrenches the principles of community rating, open enrolment and cross-subsidisation within medical schemes. Under these regulations, gap cover is affected as follows:

  • It may continue in a way that complements medical schemes, subject to strict underwriting and marketing conditions.
  • It can make multiple pay-outs to a maximum of R177 800 per insured per year.
  • From 1 January 2018, new rules will include open enrolment and community rating. This means that no applicant can be denied cover and that all members of the same product will pay the same premium.
  • Insurers will have to invest in creative risk management initiatives to effectively reduce the inherent risks that come with open enrolment and community rating.

Who can buy gap cover?

If you are not a member of a medical aid, you can’t get gap cover. Even though this cover is separate from your medical aid, you must be a member of a scheme. It can be purchased at any time, through any provider of your choice. Not all providers offer the same benefits, so it would be in your best interests to speak to a healthcare consultant so that you get the right provider for your unique personal circumstances.

Gap cover is available to employer groups for their employees

As an employer, you need independent, unbiased, tailored strategic advice on gap cover that best suits your employees’ needs. Feldman said, “Remember that gap cover does not need to be compulsory for all employees. You can offer it to your employees, let them know how important it is and they can choose to take it as part of their total cost to company.”

In conclusion, Feldman says, “Gap cover has been around for many years. With changes in the medical scheme environment, new legislation, and a financially strained South Africa, it has grown steadily in popularity. Gap cover offers individuals and employers the kind of peace of mind that can no longer be ignored.”


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