Gap Cover –The insurance you need, even if you don’t want it

Ending up in a state hospital it seems is the worst case scenario, medical aid schemes are supposed to cover the hospital bills though. But do they really? Many people have faced the truth. There is a big gap between the bill you get and what the medical aid pays you. That’s why you need gap cover insurance.

It happens due to the fact that medical practitioners are at liberty to set their own rates. And they don’t follow the guidelines of ‘reasonable’ rates proposed by medical aids.

Scandalous and mundane at the same time.

There is a long-standing debate about what rates doctors should be setting and what medical aids should pay. But we won’t bore you with that.

It is enough to mention that medical practitioners may set whatever fee they see fit. Yes, they can do that. Patients must deal with it or go somewhere else. Medical schemes also only cover a particular price list – their ‘scheme tariff’.

The scheme referred to is the medical scheme you are a member of.  Almost all schemes setting their scheme tariff based on the NHRPL.

The NH…R…what?

NHRPL stands for the National Health Reference Price List. It is a list from the Department of Health. Revisions to it Gap Cover Insuranceare made annually and in collaboration with the medical industry.

There are thousands of ICD-10 codes and tariffs in it. In brief – each of those codes shows a specific disease, service, diagnosis or treatment, as well as the charge amount suggested.

It’s basically a pricelist for fixing you

In most of the cases medical aid schemes will set their scheme tariff at 100% for each of the codes described there. Most would think 100% means the complete amount. But in reality it only means you get ‘one times’ the rate on the scheme tariff for your hospital treatment cost.

The Department of Health may suggest that R1 000 is a fair amount to pay to an orthodontic surgeon for pulling out your aching wisdom tooth. In that case your medical aid will be paying R1 000 to the surgeon.

The catch is that the surgeon may not necessarily agree with the Health Department.

So what happens then is that the bill is 3 or even 4 times more then the scheme’s tariff. And you have to foot the bill on your own.

This explains the sign you have probably seen in your doctor’s office saying that the patient must settle all accountsand later the claim must go to the medical aid.

Many doctors treat patients and then explain to them why they are to pay when the medical aid is “supposed” to cover the cost. The reason is that patients do not know the real benefits offered by medical aids, so they assume they are entitled to full cover.

The shortfall between what doctors charge patients and what medical aid really pays is here to stay. Medical aids have been basing their scheme tariff on the NHRPL for so long. And medical practitioners have been free to price their services in accordance with a free market for awhile.

Gap Cover Insurance Solution

That’s not the end of the world. Leave it to insurance companies to come up with a simple and clever solution to the problem. Gap cover insurance is the name of the product. It does what the name suggests: covers you in those cases where you are left to pay your medical bills.

The strategy is that in an event of a hospital admission and the following medical costs for in-hospital procedures, all costs that you are to pay yourself to the hospital or medical practitioner which are not covered by your medical aid, will be paid by the gap cover insurance.

And since most hospitals charge 100% the NHRPL price for the use of their facilities, medical aids tend to cover them in full. So the majority of the hospitals will not ask you for payment directly, assuming it will be provided by your medical aid.

The realisation of the truth kicks in after your doctor’s visit a few weeks later, during which you receive the dreaded invoice.

Gap Cover Insurance players: in brief

You should have some basic understanding of what your options are when it comes to dealing with the gap.

Insurance companies underwrite gap cover while medical schemes get proper registration with the Council for Medical Schemes. The in-fighting between the two is strong. Medical aid rails off actuarial reasons for why gap cover product needs to be eliminated, and insurers list their set of reasons for why it needs to exist in the market.

Why don’t medical aid schemes simply alter their tariffs to supply 300%? It is a fair question, as then there would be no gap to cover. But it is far more complex then that.

For starters, to be able to issue gap cover an insurance license is required and that is something few medical aid scheme providers have. The second issue then is the sheer cost that medical scheme can underwrite a medical scheme for scheme tariff: it is 3 or 4 times the NHRPL rates and therefore in excess of what short-term insurers supply.

You might have noticed that medical aid providers offer multiple schemes: some are more expensive then others. The more high-end ones may in fact guarantee up to 3 times scheme tariffs, but the premiums are exorbitant!

The premiums can get VERY premium.

We won’t offer names, but one medical aid provider offered a certain scheme, according to which they would pay out scheme rates at 3 times, the premium is in excess of R4 000 on a monthly basis. Alternatively, extensive gap cover offers similar terms for only R260 a month.

While the R4 000 covered just one member, the R260 allowed for three.

Yes, the most high-end medical aid schemes provide the best benefits to their members, as well as savings elements. Having said that, insurance is what you are looking for when it comes to this issue.

It is only a cause of stress – knowing that ending up in a hospital can set you back thousands of Rands, even though you have a medical aid, as it only covers part of the costs.

Avoiding this risk is a natural inclination. People want to be sure that if something were to happen, they wouldn’t have to come up with the money they simply don’t have.

Why choose Gap Cover over more medical aid?

While you are free to take out more comprehensive medical aid which would cover you for up to 3 times the scheme tariffs, the premiums are off-putting for most people. Taking out gap cover insurance instead will allow you to bridge the shortfall at a much lower cost.

One without the other.

To be able to take out gap cover though, you already need to be a member of a medical scheme. Ideal health insurance strategy is combining the two, according to many financial advisors

It is a challenge – having to evaluate the medical aids out there and we won’t get into it now. But know that some people may be better off with specific medical aid schemes.

Every person’s needs are different and if you have a chronic condition, you might need a higher tier medical scheme to offer you everyday benefits. But in case medical cost insurance is your preference, seriously consider a gap policy.

Short-term insurers may offer gap cover, but it is a topic of debate, as the market is so lucrative. There have been suggestions to set a limit on the amount of cover members can benefit from, introducing a monetary threshold, as well as calls to limit the number of events that it is allowed to cover.

The industry is dynamic and the current product offering may be altered in the future, but as of now it is the best option for your financial plan.

Ask for help now.

Gap cover insurance is usually a contract for short-term insurance, so you are to be on the lookout for fine print. As has been mentioned in is not a standalone insurance product and only works in conjunction with your medical aid scheme. Moreover, there are waiting periods imposed, and they are longer for those who require medical care already.

You should consult a financial advisor if you are considering gap cover. There are many providers out there and the products they supply are very different from one another. Which is why a unbiased expert financial consultant would really be of help here – guiding and advising you through the process.

In the upcoming articles we’ll deal with financial advisors and how to find not simply the most qualified one, but how to get the most out of your relationship with them.

The Editors: We have not researched every single scheme out there, so your particular scheme experience may be different.

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All info was correct at time of publishing