Gap cover necessary because gaps are widening, say healthcare brokers
Providers of gap-cover products say the shortfalls that their policies are designed to cover are widening, and medical scheme brokers are unanimous that riskaverse medical scheme members need this insurance.
Micheal Settas, the managing director of Xelus Specialised Risk Solutions, says medical schemes are covering less and members are paying more out of pocket each year.
Xelus policyholders’ out-of-pocket payments have been growing at about 12 to 15 percent each year, he says.
Settas says the problem is that medical schemes do not increase their benefit limits or reimbursement rates by as much as they increase your contributions or as much as specialists increase their fees.
He says
if a scheme increases contributions by 10 percent, but increases its payments to specialists by only 6.5 percent, you potentially face a much higher out-of-pocket payment.
For example, assume a specialist charges R1 000 for a service and a scheme reimburses R600. If the specialist increases his or her fees by 10 percent and the scheme increases its benefit or reimbursement rate by only 6.5 percent, your out-of-pocket payment of R400 will increase by 15.3 percent to R461.
Settas analysed a basket of 10 out-ofhospital claims over 10 years and found that medical scheme cover for these claims had dropped from 71 percent to 53 percent, while members’ out-of-pocket payments had risen from 29 percent to 47 percent.
Anthea Towert, the head of scheme consulting at Alexander Forbes, says although there is a concern that certain insurance products have the potential to undermine medical schemes, Alexander Forbes is of the view that gap cover has a very meaningful role to play in protecting you financially. This is because the problem of the shortage of healthcare specialists and, as a result, the high tariffs charged by these specialists, remains unresolved.
Towert says although more medical schemes are attempting to address the problem of specialists who charge more than the scheme’s rate, by contracting these doctors into a preferred provider network, the problem will remain as long as specialist skills, such as for ear, nose and throat conditions and anaesthesiology, are in short supply.
NETWORKS DON’T ALWAYS WORK
Victor Crouser, the head of coastal at Alexander Forbes Healthcare, says he strongly believes that gap cover is necessary. Many people join medical scheme options that require them to use healthcare providers who belong to networks because they are cheaper, but the members do not adhere to the rules about using networks.
Tiago de Carvalho, the managing director of Ambledown, which underwrites gap-cover policies, says it is very difficult to get every member of the team of specialists who treats you in hospital to charge at scheme rates.
He says 40 percent of the claims on policies underwritten by Ambledown are for anaesthetists.
Richard Eales, the executive director at Guardrisk Insurance, says Guardrisk has been receiving higher-than-expected claims from orthopaedic surgeons and oncologists. He says the most common cancer claims are for skin cancer. Breast cancer claims are also high, because many schemes will pay for reconstructive surgery for one breast only. And the prevalence of prostate cancer has also increased.
Peter Hyman, a director at Complimed, says specialists have a growing propensity to charge 400 percent of medical scheme rates, while claims at 500 percent of medical scheme rates are becoming more common.
Many schemes reimburse specialists at the scheme’s rate, 150 percent of their rate or 200 percent of their rate.
Medical scheme rates are typically based on guideline tariffs that were in operation until 2006, adjusted for inflation. Only very expensive options still pay rates at what was once the highest rate of 300 percent or more.
Toska Kouskos, the national director at NMG Health Care, says it is worth taking out gap cover when you consider the value you receive and your exposure to financial risk when your scheme does not pay a specialist’s rates.