Shhh, don’t tell the doctor you have gap cover
Specialists are driving up your premiums
Many gap cover policyholders are facing steep premium increases, despite new limits on payouts you can receive when your medical scheme benefits fail to match what doctors and other healthcare providers charge.
Increases of between 9% and 100% follow two years of high claims that gap cover providers attribute to increased awareness, particularly among doctors, that medical scheme members have this cover.
Many older policyholders, however, may face harsher increases as insurers implement new terms following the promulgation of demarcation regulations under the longand short-term insurance acts. These regulations took effect on April 1 and allow for latejoiner penalties for those who take out gap cover late in life.
New gap cover policies had to comply with the demarcation regulations from April, but existing policies must comply when cover is renewed. In most cases, this is from January.
The regulations, aimed at ensuring that gap cover policies do not undermine crosssubsidisation in medical schemes, limit insurers to offering you benefits that do not exceed R150 000 per person per year.
The regulations also restrict the way that insurers can underwrite gap cover policies — denying them the ability to refuse you cover, to implement all but standard waiting periods or to price these policies individually based on your age or health. The only exception is that those taking out cover late in life can be made to pay more.
Among bigger providers, Stratum has put through an average increase for employerbased policyholder groups of 11%, Guardrisk’s Admed of 9.4% and Turnberry 9%, reports Alexander Forbes Healthcare.
Soaring increases
However, Victor Crouser, Alexander Forbes’ healthcare coastal head, says that one employer group had a 100% increase in its gap cover premiums.
Mike Settas, director of Kaelo Xelus, says the average overall premium increase on Xelus policies for next year is 13%.
Peter Hyman, general sales and marketing manager at African Unity, which took over policies from PSG, says individual policyholders are facing increases of up to 20%. Employees who enjoy cover through their employers will pay 12.5% more next year.
If your employer offers a group gap-cover policy, the rate will generally be competitive and brokers’ servicing groups have greater influence to get claims paid, Crouser says.
Individuals often wait until they know they need the cover before joining, which increases claims and premiums.
Tiago de Carvalho, the CEO of Ambledown Financial Services, which underwrites gap cover from Stratum, Cura and Ambledown itself, says Ambledown’s claims increased by 38% last year; many other insurers had similar increases. He says specialists are driving claims by asking scheme members if they have gap cover.
Gap cover providers at risk
Joanne Gloag, executive for Admed, the policies offered by Guardrisk, says service providers are targeting their billing depending on whether or not you have gap cover. She says you are not obliged to tell your specialist that you have gap cover.
De Carvalho says some 300 out of every 1 000 gap cover policyholders are admitted to hospital each year, which shows that there is some anti-selection going on.
Settas says the demarcation regulations are also exposing gap cover providers to the risk of high claims as they are obliged to offer cover to anyone who applies.
Underwriting is now limited — insurers cannot apply exclusions to you individually, only to the policyholder group.
The maximum waiting period that can be imposed is 12 months, and only then for a medical condition that existed in the 12 months prior to joining.
Late joiners
“Some gap insurers have been undercutting premiums to gain market share. This has resulted in underwriting losses for these insurers, some of whom have seen major financial losses . . . Insurers in such a position will need to dramatically increase policyholder premiums to restore solvency levels or, far worse, may find themselves in a position where they may not be able to honour claims,” Settas says.
Under the regulations, providers can charge you higher premiums than other policyholders if you first take out gap cover when you are over a certain age. No age has been specified, so each insurer is setting their own age bands, Settas says.
He says Xelus will apply a 70% loading to the premiums of policyholders who take out cover after the age of 60. Turnberry has a 40% loading on its premiums that cover a family or couple over 65. Admed has a loading of either 31% or 91% for people who take out cover after the age of 65 years, while Stratum has a loading of between 33% and 100% if you entered after the age of 65.
Some gap cover providers are applying new late-joiner penalties to new policyholders only, but others are adjusting existing policyholders’ premiums depending on the age at which they first took out gap cover.
One 71-year-old Money reader says he was paying R225 a month on his Stratum gap cover policy and is being asked to pay R175 more a month from next year.
Insurers in such a position may not be able to honour claims Mike Settas Director of Kaelo Xelus