National Treasury is set to change the regulations regarding gap cover, but some insurers may already change their gap cover policies in line with the regulations before they are even finalised warn healthcare commentators.
The changes follow the second draft of the demarcation regulations under the Short Term Insurance and the Long Term Insurance Acts which was published by National Treasury. The second draft was an attempt to separate clearly what the difference between a medical scheme is from that of health insurance.
The first draft initially proposed banning gap cover altogether. A compromise was struck in the second draft, which allowed for gap cover policies provided that they were monitored by the Financial Services Board (FSB).
Gap cover policies cover the difference between what medical professionals charge and what medical aid will cover. Heidi Kruger, from the Board of Healthcare Funders, said that "from the companies I have spoken to, it would seem that dental claims are most common. Childbirth is also one of the most common [gap cover] claims."
Second draft amendments
Concerns were initially raised because it was though that certain health insurance products are infringing on the role and function of a medical schemes. "The revised second draft regulations acknowledges that while health insurance products have a role in the market place, these products must operate within a framework whereby they complement medical schemes and support the social solidarity principle embodied in medical schemes," said National Treasury.
"This relates to the provision of benefits similar to those of medical schemes that can cause harm to the medical schemes environment by attracting younger and generally healthy members out of medical schemes as the insurance products are generally cheaper than medical scheme benefit options that cover day-to-day and hospital benefits," said Dries La Grange, CEO of Bestmed in a statement.
The second draft states that there would be an annual limit to the gap cover per individual. "The R50 000 per annum per individual benefit limit on gap cover policies was also informed by public submissions received. The submissions indicated that a gap-cover benefit of R50 000 covers the top two events for which gap-cover policies pay out," said Treasury.
However, Heidi Kruger, from the Board of Healthcare Funders, believes that this R50 000 limit will not have a negative effect on most people.
"One of the gap cover companies that I spoke to felt that there was no sense in capping the amount at R50 000 as it would make little difference in the premiums. However, it would make a significant difference for someone who was faced with a co-payment of R120 000 who would have to still pay R70 000 out of pocket," said Kruger.
Difference between health insurance a medical aid
"A health insurance policy is issued by an insurer to a policyholder in terms of the Long-term Insurance Act, No. 52 of 1998 (LTIA) or Short-term Insurance Act, No. 53 of 1998 (STIA) and is subject to regulatory oversight by the FSB," explained Treasury.
A health insurance policy holder will pay a certain premium – related to their age, health status and income – in return for benefits when they are ill or injured. However, a health insurance policy only offers some cover, and is also conditional.
"Specific types of exclusions and conditions may also be built into a policy, which can have the effect of limiting who the policy can be sold to, or excluding certain circumstances under which the policyholder can claim under the policy," said Treasury.
A medical scheme can however be taken out by anyone regardless of their age of health status, and depending on the medical aid scheme can offer full cover.
"It is important to note that the fundamental difference between a medical aid and health insurance products is that your medical aid is an insurance against sickness conditions irrespective of cost as these are linked to scheme tariffs whereas insurance healthcare products pay a fixed lump sum irrespective of the service levied by hospitals, specialists and other providers of healthcare services," said La Grange.