GAP cover – what is it and why is it so important?

Janette Rooney helps us understand when and why GAP cover is needed.

GAP cover is equally as important as having a medical aid and the two products although purchased separately, go hand in hand. So, what is GAP cover? It is a cost-effective hospital shortfall insurance product that you can purchase together with your medical aid or thereafter.

Medical aid costs continue to rise above that of the consumer price index (CPI). There are various valid reasons in SA, such as the cost of technological and medical advancements and the rand exchange rate, to name a few.

However, the average South African is struggling to afford these rising costs. In some instances, clients are paying more for their medical aid than they are paying for their bond or rent, with medical aid being one of the highest costs to the average household expenditure. Due to this, there is a trend where clients are downgrading to more cost-effective plans to afford some type of cover.   

Ramifications of downgrading 

If you downgrade to a medical aid plan that covers you at 100% of their rates, this sounds like you are covered in full. What does the 100% of the scheme rate mean? 

In SA, doctors don’t have to charge in accordance with the medical aid rates. Depending on the medical aid and what rate your plan is paying, you could be seriously out of pocket in this regard. For example, if you’re admitted to hospital for an operation and the doctor charges R95 000 for the procedure and the 100% of the medical aid rate is R20 000, there is a shortfall of R75 000.  Without GAP cover, you would be liable for the R75 000 shortfall to the doctor.  

Even if you are on the highest medical aid plan, there is a chance that the doctor can charge over the medical aid rates. A lot of medical aid plans cover 200% and, in the previous example, this doubles the medical aid rate from R20 000 to R40 000, still leaving a significant shortfall of R55 000. 

If you are thinking of downgrading your medical aid plan or are not sure how you are currently covered, contact your financial advisor to discuss the ramifications and consider adding GAP cover. What your medical aid plan covers and how you are covered, will determine the type of GAP cover product that you may need to consider.  

Cancer treatment

One of the highest cost areas to most medical aid schemes is cancer treatment. Again, depending on your medical aid scheme and chosen plan, the cover for cancer differs. For example, some medical aid schemes cover cancer up to an annual limit, where once the limit is reached, you are liable to cover any further treatment above the set limit. This could result in clients either not continuing with treatment or having large out of pocket expenses.

If your medical aid plan limits cancer cover to R350 000 a year and your cancer treatment costing comes to R500 000, you would be liable for the R150 000 difference. 

Some medical aids have a co-payment once a limit is reached. In this instance, if your medical aid has a limit of R200 000 with a 20% co-payment once the R200 000 limit is reached, at face value, you may think the medical aid with the R350 000 limit is providing you with more cover, but this isn’t the case.

Using the same example of the R500 000 treatment plan, you are liable for 20% of the treatment above the R200 000. Twenty percent of the R300 000 = R60 000 out of pocket versus R150 000.

Again, it’s important to understand exactly how your medical aid plan covers cancer and then deciding what GAP cover product to consider and if the product needs to include some cancer shortfall cover.  

In-hospital shortfalls

There are other in-hospital shortfalls that clients can experience, such as co-payments for certain procedures, or for utilising non-network providers. Do you know if your medical aid has any co-payments and should a GAP cover product that you consider include these?   

There are various GAP cover product providers who offer various products, from entry level products that cover for the in-hospital shortfalls to those that include cover toward cancer shortfall. 

It’s important to discuss the cover that is right for you with your financial advisor, based on you and your family’s needs, budget and, most importantly, what your medical aid plan covers.

Take note

Please remember that with most insurance products there could be waiting and exclusion periods. With GAP cover products, there are also various waiting and exclusion periods. When you join, you could have a three-month general waiting period where no cover is provided for the first three months of cover. Several GAP cover product providers will, however, provide accidental cover during this waiting period. It’s important to understand this upfront. There could also be between six to 10-month waiting period for certain defined procedures, such as pregnancy, scopes, and scans. Lastly a 12-month exclusion on pre-existing conditions. 

This article does not constitute financial advice. 

Header image by Freepik