MONEY CLINIC | What exactly is gap cover and why is it important?

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For many South Africans, gap cover remains something of a mystery. Charleen Rix at Sasfin, Westley van Rooijen at Austen Morris Associates and Melody Perotti at Saint Andrews brokers reveal what common concerns are – and what consumers should understand about their role.  

Common questions about gap cover

Gap cover is designed to cover the difference between what the medical scheme pays and the service provider charges for in-hospital procedures/treatment and specified outpatient procedures.

By contrast, the self-payment gap occurs when a medical scheme member exhausts his or her or her medical savings account. "Members sometimes think they can claim from their gap policy for normal day-to-day expenses when they are in the self-payment gap," says Perotti. "Despite having the word 'gap' in common, they are completely unconnected."

Charleen Rix, Head of Healthcare at Sasfin, agrees. "One can't just assume that a gap policy covers everything the medical scheme doesn't," Rix explains. "It's a common misconception that if a medical scheme doesn't cover something, then the gap cover will kick in, whereas, the gap policy only covers the difference between the medical scheme's benefit limit or rate and the payment charged by the service provider, while in hospital and within specified limits."

Westley van Rooijen, Head of Healthcare at Austen Morris Associates, argues that the broker's role is becoming increasingly important. 

"The industry is highly innovative, so one sees new products launching all the time. This is a complex area, so it's very difficult for consumers to understand the intricacies of all these new products," he says. 

"As members of a highly regulated profession, brokers are best positioned to help their clients understand which products best suit their needs, which will change as their life circumstances change."

Perotti says brokers have the insight and tools to help establish a client's medical needs and find the right plan. Dealing with an independent broker is most beneficial because the broker can shop around and find what is best for the client. Van Rooijen adds that medical schemes' plans are designed to meet the needs appropriate to an average South African's life stage. "We often find that a client is on a plan that doesn't suit where they are in their life and don't have the benefits they need." 

Sasfin's Rix agrees, saying that a thorough medical needs analysis is vital in evaluating a client and their family needs and then matching the plan to the client's budget. When considering the budget, it's very important to consider what is covered and not covered. "Paying more for increased benefits could save money during a year when big expenses are anticipated, whereas going for cheaper cover might mean that high expenses are not covered, and the member is seriously out of pocket," she says. "The broker should also help the client assess the sustainability of the medical scheme itself." 

Why do brokers think gap cover is important? 

Clients often believe that their medical costs are covered once they have joined a medical scheme. Nothing could be further from the truth, says Perotti. "The reason why I'm so personally invested in gap cover is that the proverbial 'man on the street' doesn't always understand the medical scheme jargon and when medical schemes talk about claims being paid at 100% or 200%, the understanding is always that basically when in hospital everything is covered. This is not the case regarding the providers – the specialists and anaesthetists can charge whatever they like," she says. Gap cover would cover the shortfall."

Because medical professionals are not regulated in terms of cost, Rix believes that gap cover is no longer a nice to have but a necessity. The lack of regulation in terms of what medical professionals can charge means that the shortfalls faced by medical scheme members is escalating all the time, especially when they are admitted to the hospital.

Perotti adds that many medical schemes have co-payments or deductibles for certain procedures, such as neck and back operations, which can be quite costly. These amounts can be claimed back from the gap cover, she notes. 

"We recently had a client who would have needed to find R70 000 to cover costs related to a hospital stay had he not had a gap policy," says Rix. 

Nevertheless, one should always remember that gap cover is not a substitute for a medical scheme membership but a complement to it. In certain cases, one's gap cover may need to be upgraded in line with the annual benefit and contribution updates to their medical scheme - the two are separate contracts, Rix notes. 

"Given the rate of medical inflation, advances in medical care and the constant stream of new products, it's never been harder to ensure that your medical needs are properly catered for," says Ambledown Financial Services marketing executive Michael Emery. "Consumers would be well advised to stay close to their brokers to get the necessary expert help in working out what their needs are and what combination of medical aid and gap cover will best meet their requirements."

Questions may be edited for brevity and clarity.