VERSUS MEDICAL SCHEMES
MOMENTUM HEALTH’S product development actuary, Hannes Boshoff, highlights important facts on this debate:
Boshoff says that medical schemes are generally highly regulated, meaning that consumers are well protected, but that is not the case with medical gap cover. “Under the medical scheme’s act, members are protected against price risk, access to providers as well as what is covered. The gap insurance legislation does not address any of this, and people must be very careful before purchasing gap cover.”
Some gap providers don’t cover prescribed minimum benefits, which the schemes are legally required to cover, he says. “Many of the bigger schemes have networks in place, where members are fully covered when utilising these providers for such benefits. Should a member make use of professionals outside this network, then gap cover does not pay. Depending on the schemes and option struc- ture, typically between 60% and 70% of money is spent on prescribed minimum benefits, so the actual value of a gap product can be significantly different, depending on which medical scheme and option you buy it with.”
Boshoff is of the opinion that, in general, gap products are harmful to medical schemes since they compete against the higher-value options without being subject to the same strict rules as medical schemes. “This impact is gradual and is becoming more accentuated as the popularity of gap products increase. This is not in the best interest of the consumers of medical schemes, but for some individuals, gap cover would make sense nevertheless,” he says.
The insurers that offer gap cover products are often partly owned by brokers trying to sell them, meaning the broker has a significantly higher interest in a consumer buying the product than just the commission earned and may also share in the profits.