Gap cover 101: in-hospital shortfalls, not day-to-day bills

Medical schemes offer members pooled benefits where the funds belong to the scheme members under a non-profit structure. South Africa, which is one of the most unequal countries in the world when it comes to income, has 71 schemes (16 open, 55 restricted) serving more than 9.1 million beneficiaries.

Medical scheme savings and self-payment accounts are intended for use to pay for day-to-day medical expenses. When the savings are depleted, the member becomes personally liable for further expenses.

Michael Emery, the marketing executive at Ambledown Financial Services, however, notes there is a common misconception that gap cover will cover any self-payment gap. 

“Gap cover is only applicable for in-hospital treatment or procedures and certain specified out-patient procedures,” he clarifies.

Brian Harris, the director of operations at Turnberry Management Risk Solutions, points out that although medical schemes operate within set guidelines, covering services according to rates determined by the scheme, many specialists charge significantly more than these rates — up to 500% of the medical scheme rate, depending on the doctor and the procedure. 

“This is especially true in high-demand disciplines like oncology, orthopaedics and neurosurgery. Most medical aid plans will cover 100% or 200% of the scheme rate, depending on the plan. This creates significant shortfalls, and the patient is responsible for the unpaid balance,” he said.

The shortfalls are becoming increasingly common. Medical inflation is rising much faster than the consumer price index, which means that the cost of medical procedures is increasing faster than people’s salaries.

Martin Rimmer, the chief executive of Sirago Underwriting Managers, says medical schemes — constrained by affordability, access, ageing membership populations, and where private healthcare already consumes up to 20% of household income — are systematically reducing benefits and transferring more risk onto the member, rather than increasing premiums to match out-of­-control healthcare provider cost inflation.

Age demographics

Contrary to expectations, healthcare crises aren’t limited to older populations.

“The under-49 age group constitutes 23% of all large loss claims, dispelling notions that major health expenses only affect older demographics, and which highlights the risk transfer challenges faced and imposed by medical schemes,” Rimmer points out.

A big part of the issue is that healthcare provider costs have consistently outpaced inflation by more than double for years, yet unlike pharmaceuticals, there’s no pricing regulation on healthcare provider tariffs.

Harris says some of the most common medical treatments that result in significant medical expense shortfalls include surgical procedures such as orthopaedic, gynaecological or ENT surgeries; diagnostic scopes like gastroscopies and colonoscopies; cancer treatments; and emergency admissions.

“Most of the time, these are not one-off medical disasters but ongoing issues that result in hundreds of thousands of rands in out-of-pocket expenses that, without gap cover, patients would be liable for out of pocket,” he says.

For example, one Turnberry client faced R678,000 in shortfalls while receiving treatment for a malignant ureter tumour, spanning a total of 44 claims, all of which were covered by their gap cover policy.

“It’s important to note that these claims occurred over a four-year period and remained within the Overall Annual Limit, which sets a cap on the total amount that can be paid out each year. This highlights how gap cover, when used consistently and within policy limits, can offer long-term financial relief for ongoing medical needs,” Harris said. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.