Nicolette Dirk, finance writer, justmoney.co.za
The current state of public healthcare facilities in South Africa and growing pressure on consumer wallets has reinforced the fact that private healthcare insurance is an important consideration.
But medical cover is expensive too and it goes up every year. Last month consumers were knocked when seven open medical schemes announced average contribution increases of between 6.4 percent and 10.6 percent for next year.
Can gap cover help?
The need to incorporate medical gap cover has increased in recent years as medical specialist fees far outpace medical aid tariffs.
This is according to Gavin Griffin, business unit head of Aon Hewitt’s healthcare division.
“Although the core employee benefits such as private medical cover remain an essential part of the overall compensation package, there has been a strong drive towards improving efficiency and measuring the benefit richness of medical scheme offerings against the actual premiums charged,” said Griffin.
He added that this is especially important when an employee is opting to downgrade their medical scheme cover and takes out supplemental gap cover. Potentially, any reduction in their medical scheme benefits as a result of the downgrade may not necessarily be covered by the gap cover policy. “An employee electing to enrol in a medical gap policy must be covered under the employer’s underlying medical aid plan,” said Griffin – is this true? Don’t you have a choice of shopping around?
What does gap insurance cover?
Gap insurance covers the potential shortfall that arises from specialist charges for in-hospital procedures - specialists often charge up to 400% of the benefits offered by medical aid. So if the company medical scheme only pays out at 100% of tariff, the employee will then be liable for the shortfall of the other 300% out of their own pocket.
This can amount to thousands of Rands and leave the employee in a serious financial predicament. Even where employers are offering comprehensive medical aid cover for their employees, they could still be left with hefty shortfalls.
“Often people only find out about the shortfalls in their cover when it’s too late,” added Griffin.
Make sure you are fully covered
Michael Settas, managing director of Xelus, a gap cover provider, said medical aid cover can cost South Africans up to 20% of their monthly pay packets, even with a 50% monthly contribution from the employer.
Research showed that taxes, medical insurance, pensions and garnishee orders are the four biggest deductions from disposable salaries. They are followed by UIF and other statutory deductions, as well as loans (deducted at bank level), in some cases.
Settas said South Africa’s private healthcare sector is characterised by an under-supply of medical specialists contrasted against medical schemes that are struggling to keep these specialist costs under control.
“The simple truth is that few medical schemes provide fully comprehensive cover for in-patient specialist care. This means that without supplementary cover, members potentially face large shortfalls between their medical scheme benefits and the actual costs incurred for surgery or other in-hospital treatment,” said Settas.
These shortfalls occur in several ways:
• Surgeons and anesthetists charge more than your medical scheme benefit;
• Medical schemes apply co-payments or deductibles on certain procedures;
• Certain expensive in-hospital items have annual sub-limits, for example the prosthetic device used in a joint replacement.
Griffin added that given the fact that many South Africans have high levels of debt and credit-worthiness issues, it's now a moot point whether employers can sustain the pace of increased workplace demands without more support for financially strapped employees.
“By adding supplementary products such as gap cover to the host of other employee benefits such as retirement and healthcare, employers get to help remove or at least mitigate employees’ anxieties about protecting their families in a health crisis, and at much lower premiums and better benefits than they could obtain on their own,” said Griffin.