What gap cover pays and what it does not

Gap cover is an insurance policy that pays a sum of money towards the difference, or part of the difference, between what a health service cost and what your medical scheme paid. The Demarcation Regulations call it "medical expense shortfall" cover. It is not a medical scheme and does not replace one.

Olvian is a lead-referral service, not an insurer, broker or adviser. A licensed provider that pays Olvian a fee may call you back. This guide explains what the regulations say, so you can ask that provider the right questions.

What does gap cover actually pay for?

The Regulations under the Short-term Insurance Act, as published on 23 December 2016 (Government Gazette 40515), identify gap cover as category 1 in the table in regulation 7.2(1). The contract description reads:

• a contract in which a person, for a premium, undertakes to provide policy benefits if a health event named in the contract as a risk event occurs; and
• the purpose of which is to cover the difference, or a part of the difference, between the total costs or expenses of a relevant health service and the amount a person's medical scheme paid towards such costs.

The "requirements relating to policy benefits" say the benefits are one or more sums of money. National Treasury's media statement of 23 December 2016 puts it plainly: these policies "cover the shortfall between medical scheme benefits and the rates that private medical service providers may charge".

Three practical things follow from that wording.

• A scheme payment comes first. The benefit is measured against what the scheme paid. If the scheme has paid nothing, there is no shortfall to measure.
• A named event is needed. The benefit is triggered by a health event the contract names as a risk event. Which events a policy names is for that policy to say.
• It may be the whole difference or only part of it. The regulation says "the difference or a part of the difference". The policy schedule shows how much of the shortfall it pays.

What does gap cover not pay for?

The Regulations do not hand out a standard list of exclusions. What they require is that the contract says, in clear and easily understood language, which events trigger benefits "and the circumstances (if any) in which those benefits are not to be provided" (regulation 7.4(2)(b)). The exclusions are therefore in the policy document.

What the regulation text does tell you is what gap cover is not:

• It is not a medical scheme. Regulation 7.5(1)(c) requires marketing to display this statement in clear, legible print in a prominent position: "This is not a medical scheme and the cover is not the same as that of a medical scheme. This policy is not a substitute for medical scheme membership."
• It is not unlimited. Regulation 7.2(1) caps the benefits in aggregate per insured person per year. Our guide on the Demarcation Regulations explains the cap.

Typical points where policies differ, and which the policy schedule will settle, include procedures a scheme sub-limits, co-payments, cancer treatment and internal prosthetics. We do not list what a policy "usually" pays, because the regulation leaves it to the contract.

Does gap cover pay for everyday costs such as GP visits?

The regulation is aimed at the shortfall on a health service and a named health event. Whether a particular policy names everyday visits as an event is a question for the policy wording, and the contract must spell out the events and the exclusions. National Treasury's statement describes the product in terms of the gap between scheme benefits and provider charges, not as a way of paying day-to-day bills.

The contrast is with primary healthcare insurance, which provides limited medical service benefits such as GP visits, medication and dentistry. The Treasury statement says the Regulations do not allow insurers to continue to provide those policies.

Do I need a medical aid to take gap cover?

The wording points that way. The benefit is defined against "the amount a person's medical scheme paid", so there needs to be a scheme payment for the benefit to be measured against.

Regulation 7.4(1) says a contract in categories 2 to 5 "may not provide that the policyholder or insured person must be a member of a medical scheme". Gap cover is category 1, so the rule that bars that requirement does not apply to it. A policy may therefore require scheme membership. What a particular policy requires is in the policy.

Can I be refused or charged more because of my health or age?

Parts of regulation 7.3 apply to gap cover and are worth knowing.

• Underwriting. A gap cover contract must be underwritten on a group basis and must not discriminate against a policyholder or potential policyholder on grounds including race, age, gender, marital status, ethnic or social origin, sexual orientation, pregnancy, disability, state of health or similar grounds (regulation 7.3(2)).
• Refusal. An insurer may not refuse to enter into the contract unless the potential policyholder has previously committed a fraudulent act related to insurance (regulation 7.3(3)).
• An age exception. An insurer may require a policyholder who enters after a specific age to pay a higher premium than one who entered younger, provided the same higher premium is payable by all policyholders entering a product line after that age (regulation 7.3(4)).
• Waiting periods. A contract may have a general waiting period of up to three months and a condition-specific waiting period of up to 12 months (regulation 7.3(5)). The Regulations define the condition-specific one by reference to a condition for which medical advice, diagnosis, care or treatment was recommended or received in the 12 months before the policy was entered into.

Our guide to gap cover and hospital cash plans covers how the two products differ in what they pay.

Is gap cover legal, and who supervises it?

Yes, within conditions. The Treasury statement explains that the Regulations "allow insurers to continue to provide Medical Expense Shortfall policies (Gap cover plans) ... in a manner that complements medical schemes, subject to strict underwriting and marketing conditions". It adds that the amended definition of the "business of a medical scheme" took effect on 1 April 2017, and that health insurance products inside it are prohibited unless the Regulations explicitly exempt them.

Regulation 7.6 requires an insurer to give the Registrar and the Registrar of Medical Schemes a summary of a new product line's benefits, terms and marketing material at least one month before offering it. The Registrar can object and instruct the insurer to amend or stop marketing it.

What should I ask the provider who calls me?

Olvian does not advise on whether anyone needs gap cover or how much. These are factual questions the licensed provider can answer from the policy.

1. Which health events does the policy name, and which circumstances are excluded?
2. Does it pay the whole difference or only part, and is there a limit per event and per year?
3. Does it pay procedures my scheme sub-limits, co-payments or cancer treatment?
4. Who receives the money: me or the provider?
5. What waiting periods apply to me, and does the 12-month condition-specific one apply?
6. Does the policy need me to be on a medical scheme, and what if I change schemes?
7. How do I complain if a claim is refused?

Sources

• Regulations under the Short-term Insurance Act, 1998, Part 7 (Demarcation Regulations), Government Gazette 40515, 23 December 2016: regulations 7.2, 7.3, 7.4 and 7.5. https://archive.treasury.gov.za/legislation/regulations/FinalDemarc2016/GG_ST%20Demarcation%20Regs.pdf
• National Treasury, media statement "Health insurance policies to complement medical schemes through an enabling regulatory framework", 23 December 2016. https://archive.treasury.gov.za/legislation/regulations/FinalDemarc2016/2016122301%20-%20Demarcation%20press%20statement.pdf

The text above is the December 2016 gazette. Amounts in the Regulations escalate each year under regulation 7.2(2), so check the current text before relying on a figure.