Insurance

The insurance you (still) don’t want, but (still) absolutely need

Changes to Gap Cover

In our very first article on Gap cover, we drew your attention to the legal differences between Gap cover and medical aids. We purposefully didn’t delve into too much of the complexity around this, but we did hint that the industry was not on ‘settled’ ground.

Gap cover is underwritten by short term insurance companies whilst medical schemes are registered with the Council for Medical Schemes. There is a turf war between the two and it’s still raging. Medical aids will list many actuarial reasons why gap cover policies should not exist, while the short term insurers have their own set of reasons why their product has a legitimate place in the market.

The changes that everyone was one day expecting have come to a head, and we’re updating you on the relevant changes and what it means for your Gap cover now.

The big dogs got involved

National Treasury have introduced new regulations to provide some clarity on health care products to further differentiate the differences between a medical scheme product (your medical aid), and a health insurance (Gap cover).

What are the changes for Gap cover?

Gap cover policies can now only pay out a maximum of R150, 000 per year, per client. The changes are said to have been introduced to try and prevent medical professionals from levying high fees, taking advantage of patients’ ability to pay – knowing that they are covered under a Gap cover policy.

The thinking is that if you the patient, have limited recourse to your Gap cover, the specialists who charge you exorbitant fees, will feel obliged or pressured into charging you less. So they’re making the business of putting pressure on medical professionals your job. The accompanying theory is that specialists will lower prices to attract business.

This all sounds idyllic but we’re doubtful if this is going to have the desired effect.

We’ll be happy to admit if we’re wrong, but going by our latest example as to what your gap might in fact be, we’re struggling to see a client would reach their R150, 000 annual cap in a hurry.

Remember that hospitals are generally charging medical scheme rates, so those are still being paid. This is really about the medical professionals, surgeons, etc who charge you a fee. To burn through R150, 000 in a year would be a tall ask. Unless you’re unlucky enough to need a lung transplant, open heart surgery, and have a baby in the year, we think you’ll be okay.

We’d also be surprised if medical specialists suddenly became price-takers, effectively haggling with their patients on fees. Most of them are so busy, patients take it, or leave it.

Any other changes?

Medical aid members over the age of 65 can now enter into any Gap policy. Previously, some providers limited the age at which a member could join.

When does it kick in?

The changes will apply to all Gap cover policies entered into on or after 1 April 2017, and existing policies will need to amend their terms and benefits from 1 January 2018.

Conclusion

  • Gap cover is still great
  • If you’re old, they can’t turn you away
  • You’re unlucky to reach your Gap policy annual cap
  • Don’t expect to pay less for the services of a medical professional going forward
  • Gap cover premiums may go up or down. Older people add more risk and could mean higher premiums, whereas benefit caps, means Gap covers forking out less, meaning lower premiums.

The Editors

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