WHAT TYPES OF POLICIES ARE CAUSING CONCERN?

Typical health insurance products are gap cover policies, hospital cash plans, and hospital cash plans that are combined with some primary healthcare benefits.

Hospital cash plans pay a stated amount per day for which you are hospitalised, while gap cover products are sold in conjunction with medical schemes and pay the difference between what a specialist charges and what a scheme reimburses you for the specialist’s services.

In the absence of any guideline tariffs for medical services, this gap has been widening, and one gap cover provider recently reported that one medical scheme member was faced with a R100 000 gap after her daughter had spinal surgery.

Health insurance products do not conform to the Medical Schemes Act as they do not guarantee you certain minimum benefits, and product providers can charge you according to your age and state of health.

Health insurers can also decline your cover and to cancel your cover after you have taken it out.

Some have age-based contributions and do not offer cover to people over the age of 65, and this makes it easy for them to charge lower premiums than those for medical scheme cover.

Also, if policyholders claim too many times, cover can be cancelled.

Health insurance products can pay much higher rates of commission to salespeople than medical schemes, and the benefits of the policies are supposed to be paid to you rather than the provider of the medical service. in direction, Childs says. The reforms are necessary, he says, to ensure that schemes can be sustainable while meeting the need for social protection from healthcare costs.

Childs says there is a lot of activity in the health insurance market because the profit margins on these products are attractive.

He says the short-term insurance industry is increasingly developing hybrid products that combine an insurance policy with a product that pays a provider of, for example, primary healthcare, dentistry or optometry.

Brokers are then approaching employers and offering to give them cheaper solutions to cover the healthcare needs of their blue collar workers.

Childs says these hybrid products have significant potential to undermine medical schemes, because it is difficult for schemes to design sustainable options for lowincome earners.

Childs says hospital cash plans and gap cover products are governed by the Short and Long Term Insurance Acts, but other products that pay healthcare providers, such as those offering dental and optometry benefits, do not have to hold any capital in order to meet their liabilities to you. These products are in a regulatory vacuum, he says.

Childs says that in some cases, where schemes only have options that pay specialists at a particular tariff and no options that cover higher tariffs, it is argued that gap cover can enrich the scheme’s benefits.

But in cases where a scheme has a higher option that pays specialists at a higher rate, gap cover policies can cannibalise the higher option, because members will buy down to a lower option and top up with gap cover, Childs says.