Mind medical gap cover cap

Government has introduced limits on the amount of gap cover consumers can buy.

Government has introduced limits on the amount of gap cover consumers can buy, noting most shortfalls rarely exceed R30 000.

Anew cap on gap cover policy payouts is reportedly unlikely to affect claims reported by the vast majority of policyholders, industry players say.

The demarcation regulations on health insurance policies, effective April 1 for new policies and January 1 2018 for existing policyholders, impose a R150 000 pay out limit on gap cover.

Cover shortfall

The policy covers any shortfall between medical costs and cover provided by private medical care providers on specified procedures.

Industry players say the gap cover rules are not restrictive as very few gap claims exceed R150 000. Feroza Joosub, head of Sanlam Gap Cover, says the average cost of shortfall claims processed by Sanlam range between R500 and R8 000 per individual.

Michael Settas, director of Kaleo Xelus, says the cap will only affect members requiring very serious medical care.

“We can pay R150 000 and nothing more if a claim happens to exceed that limit,” he said.

To date, the largest claim processed by the company, for cardiac surgery, was R140 000, he said.

Treasury’s 2014 data show between 11 000 to 585 000 lives are covered by gap cover, with a reported claims ratio of between 30% and 82.75%. Treasury, in turn, found that the typical claim value tends to be lower than R30 000. It said less than 1% of claims exceed R50 000 and only a handful exceed R100 000.

Optivest Health Solutions has welcomed the new regulations, saying the cap will play a complimentary role to medical schemes.

“The defined benefit is further in the interest of the member, and more specifically aimed at containing excessive charges by medical professionals for service rendered,” said Marcel du Toit, chief executive of Optivest.

He added that a per-beneficiary approach, especially for collective benefits of a four-member family, was more realistic and practical than the uncapped per-policy-benefit levels offered by some providers, in that it aligned better with the known benefit structure and practices of medical schemes.

However, risk management among gap cover providers was likely to be affected by a new rule which legislates open enrolment, said Joosub.

Open enrolment meant that gap cover providers can no longer prescribe a maximum age of 60 years for coverage.

Safety in numbers

According to Du Toit, differentiated pricing on a per group basis would be for open enrolment and avoid “anti-selective” practices.

Gap cover costs have increased above inflation and general medical care premiums over the past year – around 15%, with some 30%.

Du Toit added that gap cover premium increases, especially over the past two years, have been due to “fast increasing risk pools” and claims experiences of underwriters.