By Abdul Milazi, Sunday Times
The recent Supreme Court judgment, giving insurance company Guardrisk the go-ahead to offer Admed a gap-cover product that covers the shortfall between medical aid rates and actual health costs, was hailed as a victory for consumers.
Last week's judgment follows a lawsuit, lodged by the Council for Medical Schemes, which took issue with Guardrisk's Admed product, claiming that the company was encroaching on the business of medical schemes as defined by the Medical Schemes Act.
The Supreme Court ruled that the gap insurance did not fall within the scope of the Act.
Anita de Jongh, communications manager at leading corporate healthcare consultancy Optivest Health Services, said the perception, when looking at hospital benefits paid by medical schemes, was that they would cover 100% of members' accounts.
"The reality is that the members, in most cases, experience a shortfall between what the medical scheme pays for a certain hospital procedure and the actual cost charged by the service provider.
"The reason is that the service providers are entitled to charge more than this rate," she said.
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In the case of hospitalisation, the size of the shortfall could spell financial ruin for many South African families.
She said gap-cover products should be regarded as a positive "add-on" to medical aids.
De Jongh said: "Some hospital and comprehensive medical plans only cover 100% or 200% of the National Health Reference Price List (NHRPL) rate for hospitalisation, while the actual costs could be more than 300%. These products can cover this shortfall."
She added that the cost for some gap-cover products could amount to as little as R78 a month per family.
Herman Schoeman, managing director of Guardrisk, said: "The (Supreme Court) ruling provides peace of mind for our clients, who can continue to rest assured that they remain covered for the shortfall between doctors' in-hospital charges and medical aid rates."
He said regardless of which cover option people chose on a medical scheme, the reality was that they might need to fund the difference between what their medical aid pays and the cost of treatment.
Schoeman said that about 55000 families had purchased gap cover from Guardrisk so far.
"Had the ruling gone the other way, it would have impacted significantly upon the entire short-term insurance industry.
"However, it is important to note that this ruling specifically relates to Guardrisk and its product range. It should not, in any way, be construed as a general industry standard, and individual insurers will have to examine their own products to measure their validity," said Schoeman.
He said Guardrisk's Admed gap-cover products did not encourage people to take cheaper options in their medical schemes. It also did not offer the lower end of the market an alternative to medical cover.
"Simply put, Guardrisk's gap-cover insurance in no way threatens, competes with or compromises medical schemes. In fact, since you need to be a member of a medical aid to buy the Admed gap cover, it actually encourages the purchase of medical aid," said Schoeman.
De Jongh pointed out that signing up for the option within your medical scheme, that covers 300% of the NHRPL rate, would definitely cost more than purchasing gap-cover insurance.