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Who Pays the Difference?

15 October 2021

To protect your finances in a medical emergency, gap cover can be as important as medical cover. Gap cover could be considered a top-up medical insurance designed to pay the difference (the gap) between what a private doctor charges and what your medical scheme pays.

Good healthcare is not always easily obtainable and quickly becomes a costly experience. Many people who have health cover policies sometimes expect to have more cover than their policy includes. They are saddled with high shortfall bills; they land up paying the difference between the medical cover rate and the cost of the specialist.

Having medical aid in place doesn’t mean that you will be fully covered for all treatments. This is because, every year, medical aid providers establish a base rate that can be charged for all procedures, and your medical aid plan will pay a percentage of this rate.

A good plan can pay up to 300%, but many specialists or private hospitals charge more than 300%, often resulting in a shortfall that needs to be covered. For example, if a surgeon charges 350% of the base rate and your medical aid covers 300%, you will end up with an additional 50% that needs to be paid.

What is gap cover?

Although small amounts can be manageable if a non-urgent issue arises, an accident or the sudden onset of an illness can leave you with no time to save, and you can be left needing to cover a hefty shortfall. Gap cover pays the difference so that you don’t have to.

You can only take out gap cover if you already have medical aid, but only one policy is usually required to cover a member and their dependants (as long as they are all on the same scheme with the same options). It can, therefore, work out very affordable if you have several dependants.

What is covered?

Although premiums can still be relatively cheap and benefits can be extensive, times are changing when it comes to gap cover, so it’s important to be aware of exactly what is covered. Over the years, the media have reported that gap cover insurers have needed to curtail their expenditure to remain financially viable in the face of increasing private healthcare costs. After all, insurance schemes are run for profit, and gap cover is an insurance product that complies with the regulations of the Short-term and Long-term Insurance Acts, rather than those of the Medical Schemes Act of 1998.

Gap cover used to pay the difference between what your medical scheme paid and your total medical bill, which meant that even if you had the cheapest hospital plan, you would be covered in full if you had gap cover.

However, this also meant that the largest share of medical costs often fell on the shoulders of gap cover providers, instead of medical schemes. Gap cover providers have been known to carry up to 80% of costs, and such heavy shortfalls have meant that full gap cover payment is no longer often sustainable in the long term.

Consequently, many gap cover providers have introduced new calculations as to how much of the co-payment they will cover, through a match-pay system based on your medical scheme.

Given all the exclusions and new calculations, it is important that you have a detailed understanding of what your medical aid covers and how your gap cover will work in conjunction with this. If you have any health concerns, the last thing you need to worry about is whether you can afford to receive the appropriate help, so it’s advisable to be as extensively covered as possible when it comes to medical treatment in South Africa. Don’t hesitate to arrange a meeting if you wish to discuss whether you can afford to put (or not put) your family on a gap cover plan.

Sanlam Life Insurance is a licensed financial service provider.
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