Illustration: Colin Daniel
Illustration: Colin Daniel

Will medical insurance survive?

By Laura du Preez Time of article published Jul 20, 2012

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This article was first published in the second-quarter 2012 edition of Personal Finance magazine

Over the past few years, as medical schemes have increasingly limited their benefits in an ongoing struggle to contain the cost of private health care and to keep your contributions affordable, insurers have moved to close the gaps with policies that offer additional cover.

Recently, these policies have become increasingly popular and employers have even taken to offering them to employees on a group basis in an effort to minimise shortfalls in cover for their staff.

However, the publication early in March of draft regulations under the Insurance Laws Amendment Act and a proposed amendment to the definition of a medical scheme in the Medical Schemes Act threatens to upset the status quo.

The regulations, together with the amendment to the Medical Schemes Act, propose to ban gap cover and top-up cover products that may supplement your medical scheme benefits. They will also limit policies that pay out cash sums on hospitalisation to paying benefits based on your loss of income and contingency expenses rather than your medical expenses.

The regulations are in draft form for comment, and could therefore still change. The amendment to the Medical Schemes Act, which is contained in the General Financial Laws Amendment Bill, will need to be approved by Parliament. The regulations don’t need parliamentary approval, but some insurers have indicated they will consider legal challenges if the regulations go ahead in their proposed form.

The aim of the regulations is to ensure that the cross-subsidisation of the old and sick by the young and healthy within medical schemes is not undermined by health insurance products.

Those involved in drafting the regulations – the National Treasury, the Financial Services Board, the Council for Medical Schemes and the Department of Health – have taken a view on which products undermine schemes, but insurers do not agree with all their views.

Evidence of the impact of insurance products on schemes has yet to be published.

The biggest arguments are likely to centre on the products that augment medical scheme cover – namely, gap cover and top-up cover.

But the failure of schemes to provide healthcare cover that is affordable to lower-income earners is also likely to be an issue raised in the defence of products that seek to offer lower-cost alternatives.

If you use any of these products or are considering using any of them, you will need to keep an eye on the unfolding developments over the course of the next year, and possibly longer.

Your policies remain valid until the regulations are finalised, and even after that there may be a legal challenge that will extend the life of your cover.

Or the policies may be withdrawn – probably after a notice period – leaving you exposed to gaps in your cover for healthcare expenses.

In “10 gaps in your medical scheme cover” (Personal Finance, fourth quarter 2011), we outlined some of the gaps you may find in your medical scheme cover and the ways in which you can minimise these by knowing your scheme and its rules.

This article deals with the types of cover you might currently enjoy under an insurance policy and how these may change in future.

Depending on the changes that finally come about, you may need to reconsider your medical scheme cover and how you use it.


One of the gaps medical scheme members typically find in their cover is the one that arises between what the scheme pays and what specialists charge – typically for procedures in hospital.

Tariff gap cover policies, sold by short-term insurers, aim to make up these shortfalls. The policies are sold only to members of medical schemes.

The gap between the rates at what schemes pay and the rates doctors charge has widened in recent years as a result of a shortage of specialists in South Africa and the dispute over and subsequent striking down of the guideline tariffs for medical services, known as the Reference Price List (RPL).

This, together with the Guardrisk court case (see “The struggle over health insurance”, below) has escalated the sale of tariff gap cover policies by healthcare advisers to medical scheme members.

Guardrisk, the biggest provider of gap cover policies – some 85 000 of an estimated 250 000 – says the number of these policies has more than doubled since 2006.

A survey by Alexander Forbes Health last year found that 58 percent of 150 companies it surveyed offered their staff a direct debit from their salary for a gap cover product.

Michael Settas, the director of gap cover provider Xelus, says typically you can buy gap cover policies for between R60 and R120 per month per family, depending on the cover you need.

Tariff gap cover products are focused on gaps in medical services performed in hospital but may include cover for some expensive medical procedures that were previously done in hospital but are now done in doctors’ rooms or other facilities to avoid the high costs of hospital admission.

These out-of-hospital procedures should be listed in the policy and may include cancer treatments, renal dialysis, sinus surgery, the insertion of grommets, tonsillectomies, prostate biopsies, hernia repairs, various scopes and even home births.

Initially, tariff gap products paid out the difference between your scheme benefits, as based on the guideline RPL tariffs, and 300 percent of the RPL. Three hundred percent of the RPL was the highest ethical tariff set by the Health Professions Council of South Africa (HPCSA), and doctors who wanted to charge more than this had to get your written consent.

Since both the HPCSA’s ethical rate and the RPL no longer exist and schemes have developed their own rates, gap cover products now typically offer to pay the difference between what your medical scheme pays and what a practitioner charges, up to certain limits.

You need to be aware of these limits.

Chris McCallum, a director of ZestLife, which distributes Guardrisk’s policies, says most policies, including Guardrisk, limit the practitioner’s charge to four times the scheme rate. Complimed and one or two other products pay the gap up to five times the scheme rate.

In determining the base rate for the gap, however, Guardrisk has taken a different approach. Richard Eales, the executive in charge of corporate risk solutions at Guardrisk, says on its Admed policies Guardrisk pays out the difference between what your specialist charges and the rate laid down in the 2006 RPL (the last one produced by the Council for Medical Schemes) adjusted for medical inflation, regardless of what your scheme actually pays the specialist.

Most gap cover products have annual limits on the benefits paid and some products have limits per event or per individual per year.

Most are sold with a limit on cover of either R1 million or R2 million per family per year, which can be misleadingly high, because claims are often capped by the limit per event or per individual, which is typically much lower and ranges from R100 000 to R200 000.

While such a limit may be sufficient to cover an isolated procedure, a motor vehicle accident could be regarded as one event, depending on the wording of the policy.

The individual limit is likely to be more important than the total limit because you are unlikely to hit the overall limit unless you have a big family, all of whom are injured, for example, in a car accident.

Settas says some insurers offer gap cover without the lower sub-limits.

When you weigh up the pros and cons of this kind of cover, also consider the size of the claims that gap cover insurers typically pay per policyholder.

Complimed director Peter Hyman says the highest claim on Complimed’s tariff gap cover was in excess of R70 000. The average Complimed claim is R3 500, he says.

Eales says that in the 12 years that Guardrisk has been offering its Admed policies it has only once hit the individual limit, now at R200 000. The highest claim it paid was R335 000, when a policyholder’s triplets were born prematurely.

Typically, if your medical scheme has exclusions, your tariff gap cover policy will have the same exclusions.

Most gap policies exclude cover for claims that arise from the likes of self-inflicted injuries, suicide attempts, cosmetic surgery, taking narcotics, depression, mental illness, dementia and stress-related conditions.

Participating in hazardous sports, military or police duty, aviation other than as a passenger, or any race or speed test is also typically excluded.

Some gap cover providers exclude cover for the prescribed minimum benefits (PMBs).

Your scheme is obliged to cover the diagnosis, treatment and care of PMB conditions in full. However, schemes can contract with certain providers and insist you use those providers for the PMBs. If you do not use these designated providers, you may be liable for part of the bill.

Some gap cover policies will pay the shortfall on PMB claims while others exclude these claims.

McCallum says some products also exclude cover for in-hospital dentistry, for repeat claims for a particular condition, for infertility treatment, for hormone treatment and for treatment for HIV or Aids.

Most gap cover providers apply a three-month general waiting period, and many also exclude pre-existing conditions, including pregnancy, for 12 months.

Guardrisk, however, applies waiting periods only to specific procedures and elective surgery, McCallum says. The pre-existing condition waiting periods may be waived if your employer makes gap cover compulsory for you as an employee.

Gap cover policies generally provide cover for yourself and your spouse and children, but adult dependants are often excluded, McCallum says.

He says some products also limit cover to three children.

The future

In the draft regulations published in March, the government made it clear it wants to see tariff gap cover policies banned.

If, after the comment period, the regulations are published in a final form that resembles the draft, it is likely the insurers will challenge the regulations in court. This could delay their finalisation.

Legal arguments about applying the regulations to products launched before the 2008 Insurance Laws Amendment Act, in terms of which the draft demarcation regulations are published, may also be used to keep policies active.

However, should these challenges fail and the regulations are finalised as proposed, insurers will not be able to renew existing gap cover policies when their terms expire.

Some insurers – Guardrisk, for example – say their policies are annual but paid monthly, while others, such as Stratum, renew their policies monthly as and when premiums are paid.

If your policy is an annual one, you will be able to continue with it until the end of the year in which the regulations are finalised, while insurers whose policies are renewable monthly are likely to be given a period in which to wind these down.

You may then want to consider upgrading your medical scheme option or medical scheme cover, but you should be aware that most schemes allow option changes only at the end of the year (see “Do a cost-benefit analysis”, below).

Insurers faced with policies being closed down are likely to adapt their products to conform with the new regulations.

Although National Treasury says its intention is to ensure that insurance policy benefits are not based on the cost of medical treatment, Settas says insurers will consider replacing gap cover policies with ones that pay out predetermined amounts for in-hospital procedures.

The predetermined amount could be higher or lower than your actual gap, so you will have less certainty than you do with existing gap cover products, Settas says.

He says these policies will have to pay out regardless of whether or not there is a gap between what your medical scheme pays and what your doctor charges. This will make these policies less efficient, he says, and will increase the cost for you.


Most medical scheme options offer unlimited private hospital cover, which means most of your hospital bills should be covered. However, there are exceptions.

You may face a gap in your cover if your hospital bills exceed either an overall annual limit or a sub-limit on benefits for the procedure you have done. Alternatively, your scheme may impose a co-payment or deductible for a specific procedure.

Settas says most medical scheme options now have co-payments for expensive diagnostic procedures such as scopes and scans.

To cover these gaps, insurers offer medical scheme members what has become known as top-up cover policies or top-up benefits that can be added to gap cover policies.

You should check exactly what gaps are being covered, because they differ from provider to provider, and whether there is indeed a shortfall in your medical scheme benefits.

Top-up policies usually also have an annual limit – for example, Complimed’s Self Payment Protector has a R30 000 per individual per year limit, Hyman says.

You may also have a payment gap if your scheme has a list of hospitals you should use and you use a different hospital (other than in an emergency), or if your scheme pays for you to be in a general ward and you choose a private ward. These kinds of gaps are typically not covered by gap or top-up insurance products – you can avoid them only by following the scheme rules.

Top-up cover for oncology

Many medical schemes now limit cancer benefits to control their costs in the face of the increasing incidence of cancer and the higher cost of recently developed treatments.

For example, Discovery Health Medical Scheme, the country’s largest medical scheme, limits fully paid oncology benefits to either R200 000 or R400 000 a year on its popular options. Thereafter, oncology claims incur a 20-percent co-payment.

Some insurers have responded to these limits or co-payments on oncology benefits by offering top-up policies or benefits to cover these gaps, which are not covered by a tariff gap cover policy.

You may not qualify for these policies or benefits for a cancer you have had before. Complimed and Stratum both have an exclusion on any previously diagnosed cancer.

The future

The draft regulations seek to close down these top-up policies or benefits. As is the case with gap cover, the regulations could change, and if they don’t there could be legal challenges.

Only when the future of these policies or benefits is clearer will you be able to consider your options, but should these policies no longer be available, you will probably have to reconsider your medical scheme cover and its sub-limits and co-payments.

If you cannot afford to upgrade your cover, you may need to consider setting aside your own savings for limitations in your medical cover.


Hospital cash plan policies pay out a cash benefit for each day you are in hospital regardless of your illness or treatment. Recently they have been offered to employer groups at discounted rates.

These insurance policies are priced from R28 a month, and the benefits paid out range from R200 to R5 000 a day in hospital.

Sometimes they offer more for your first few days in hospital – for example, your first three days – and less for days thereafter.

They may be offered with cash-back benefits for people who do not claim on them.

Janine Morrissey, senior business development manager at Alexander Forbes Direct, which helps South African employers to develop packages for their employees, says some companies have been encouraging their employees to use hospital plans as a kind of gap cover – to assist in managing those medical costs that their existing cover does not meet.

However, sometimes these products have been sold to employees or individuals as a replacement for medical scheme cover. In some cases, hospital cash plans are sold together with plans covering day-to-day medical expenses.

Day1Health, for example, provides a “Pre-paid preventative healthcare service” that offers unlimited general practitioner (GP) consultations with some 750 GPs in its network, dentistry, medication, optometry, one specialist visit a year and basic pathology and radiology for R226 a month for a single person.

This cover can be combined with a hospital cash plan, lump-sum dread disease cover, cover for healthcare expenses and disability following accidents, and a funeral benefit underwritten by Sanlam.

Richard Blackman, chief executive officer of Day1Health, says Day1Health provides for people who earn less than R7 000 a month who cannot afford to belong to a medical scheme.

If you use a hospital cash plan, you should be aware that they have serious limitations.

Morrissey says hospital cash plans often have quite an extensive list of exclusions and they are no replacement for a medical scheme.

The products are designed for hospital stays with low procedure costs, and problems arise when you need high-level care or expensive procedures.

Mark Bishop, head of business services at Netcare, South Africa’s largest private hospital group, says Netcare’s experience has been that even policies that pay the highest fixed amount per day in hospital are not sufficient to cover the costs of your being admitted to an intensive care unit, for example.

These policies are often wrongly sold on the basis that they will guarantee your admission to a private hospital, but Bishop says Netcare hospitals do not accept patients with these policies on a credit basis.

Instead, patients with only insurance cover are treated as private patients who must pay the anticipated bill in advance, he says.

Bishop says Netcare has often found that patients’ insurance policies have lapsed or they do not pay out because of pre-existing conditions.

Many policies have very low overall limits of, for example, R50 000, whereas anything less than R200 000 is inadequate for multiple trauma injuries following a major accident, Bishop says.

How medical scheme hospital plans differ

It is easy to confuse insurers’ hospital cash plans with the hospital plans offered by registered medical schemes. There is a big difference in the cover you enjoy under the two different offerings.

Medical scheme hospital plans indemnify you against the costs of hospitalisation, typically in a private hospital. There may be some limits to the cover – for example, you may be covered for specialists' services only up to the scheme rate and there may be co-payments on certain procedures – but medical scheme hospital plans must pay your actual hospital bills, regardless of the cost.

Medical scheme hospital plans are also obliged to pay for the PMBs in full. The PMBs cover all medical emergencies, 270 conditions that, if left untreated would have a serious impact on your health, and 27 common chronic conditions.

As a result, medical scheme hospital plans also cover certain out-of-hospital expenses.

The future

If the draft regulations are promulgated as proposed, hospital cash plans will be allowed to continue but under certain strict conditions. These are that the benefits must be based on replacing your income and may not exceed 70 percent of your “net income per day” for each day you are in hospital.

If you are using a hospital cash plan in place of a medical scheme, and should the cash plan have to restructure its benefits to come in line with the regulations, you will have to reconsider your healthcare cover.

Switching to a medical scheme will probably be a good thing, as you are likely to enjoy better cover. But switching to a scheme could cost you more and you may be subject to waiting periods and late-joiner penalties.

If you have a hospital cash plan to help you manage medical costs not covered by your scheme, and the draft regulations are implemented, you may need to consider the changes to your policy benefits and whether they still suit your needs. If not, you should consider upgrading your medical scheme cover or saving what you were spending on premiums for future healthcare expenses.

If you don’t have any income protection, such a policy may be a good idea, but rather than just getting cover for when you are in hospital, you may want to consider cover for all the eventualities that could result in a loss of income.


Medical scheme cover for dental health check-ups and standard dental procedures such as fillings, extractions, root canal treatments and crowns are frequently subject to the balance in your medical savings account.

If you have exhausted your savings account, you may find a hole not only in your tooth but also in your pocket.

To fill this gap, insurers offer dental insurance. For example, dental claims administrator and insurer Denis has a standard policy covering fillings, extractions, root canal treatments, crowns and surgery after an accident for R64 a month for a member, R52 for an adult dependant and R26.50 for each child.

The future

The draft regulations published in March seek to close down these products.

If this happens, and if your medical savings account is insufficient for your day-to-day needs including your dental check-ups and procedures, you may need to consider a higher option with greater benefits and possibly an above-threshold benefit.

Alternatively, you may need to set aside your own savings for these needs.

Check what benefits your scheme provides for dental surgery and remember that some dental surgery, such as that for a fractured jaw or in the case of cancer, is covered by the PMBs.


Dread disease, severe illness or critical illness assurance is aimed at providing you with cover against the cost of surviving a dread disease, such as cancer, a heart attack or a stroke.

The generally longer lives we are enjoying mean we have a greater chance of contracting and surviving a dread disease.

Life assurers estimate that, on average, medical bills account for only one-third of the expenses you are likely to incur as a result of a severe illness. Costs may arise from the need to adapt your home; the purchase of expensive equipment; the adaptation of your vehicle; or the cost of employing someone to care for children.

Settas says that because the costs of treating dread disease, notably cancer, have risen so dramatically in recent years, the benefits of a dread disease policy need to be considered as a way in which you can cover not only your non-medical expenses but also direct medical expenses not covered by your scheme in full, such as alternative treatments or long-term rehabilitation.

However, Nicky van der Nest, Liberty Life’s divisional director of risk products, says dread disease policies are not designed to pay for any additional medical expenses and do not cover all diseases.

Van der Nest is concerned that, should the draft regulations be implemented, dread disease cover may be bought to top up the difference between medical scheme payments and the actual cost of treatment.

He says this in turn will probably lead to claims about the mis-selling of these policies and potentially a revision of the exemptions dread disease cover enjoys under the relevant acts.

You should also be aware that many life assurers now make partial payments of the sum insured on a dread disease policy, depending on the level of severity of your condition.

If you consider a dread disease policy, check what the policy will pay out for each of the four different severity levels of the four main illnesses: stroke, cancer, heart attack and coronary artery bypass grafts.

Life assurers are expected to disclose these levels.

You also need to consider whether your policy is an accelerated benefit on a life policy or a standalone policy. In the case of the former, a dread disease claim will reduce your life cover, whereas if you have a dread disease policy and a separate life policy, your life cover will be unaffected by any claim on the dread disease policy. Accelerated benefits are typically cheaper than standalone policies.

You should also check whether the policy offers cover for any other illnesses besides the commonly listed ones. Some policies cover all major body systems, so, for example, you can be covered for any chronic neurological disorder rather than just for strokes, comas and multiple sclerosis.

The future

If the draft regulations are promulgated as proposed, dread disease products will be regarded as health policies, but they will enjoy an exemption under the relevant insurance Act.

However, insurers will have to submit details of the products to the relevant registrar of insurance at the Financial Services Board and the Registrar of Medical Schemes.

Should the registrars agree that these products undermine medical schemes, they could be closed down. However, until now dread disease products have not been in the sights of the Department of Health or the Council for Medical Schemes and are not likely now to be regarded as policies that undermine schemes.


Your medical scheme may offer limited benefits that cover some of the costs of frail care, but these are likely to be limited to particular health events, such as rehabilitation after a fractured hip, or severe illnesses, such as terminal cancer.

However, if you become frail and incapable of living independently as a result of age, you are unlikely to enjoy medical scheme cover for home-based care or care in a facility.

Some life assurers offer a monthly income benefit should you suffer an impairment after the age of 65. This may be a benefit on a life, disability and/or income protection policy and it provides cover against the costs of frail care.

The future

In terms of the draft regulations, a policy that covers “custodial care (assistance with activities of daily living)” would be regarded as exempt from the Medical Schemes Act.

In an explanatory document released with the draft regulations, National Treasury says that given the pressures on the public and private healthcare sectors, products that provide cover for frail care expenses, together with those providing cover for HIV/Aids, were identified as exceptions in the regulations.

This move could stimulate the development of policies with cover for frail care expenses.


The government has committed itself to introducing National Health Insurance (NHI) in South Africa and produced a green paper on the proposed system last year. This will be compulsory cover to which all those who can afford it will have to contribute, probably through a tax based on income.

Some NHI pilot projects will start this year, but the government expects that it will take 14 years to implement NHI fully.

Two important aspects of the plan still lacking are the package of health benefits that will be provided and the cost to consumers.

The green paper suggests that the NHI system will offer you a comprehensive package of healthcare services, but the detail is still lacking. The plan is that healthcare services will be provided by both public and private providers who are accredited and agree to apply with certain standards of quality and to be paid at tariffs negotiated by the government.

The green paper states that medical schemes will not be closed down but you will not be able to opt out of paying for NHI if you choose to continue to belong to a medical scheme.

As a result, Dr Anban Pillay, the Department of Health’s chief director of health financing and economics, speculated at a briefing to Parliament's health committee on NHI last year that medical schemes would naturally evolve into the role of topping up the benefits offered by the NHI system.

Pillay says it is too early to say that, should schemes evolve into becoming providers of top-up insurance products, whether their benefit offerings would be regulated or not.

Exactly how NHI unfolds could have a significant effect on your healthcare cover and the gaps in it, as well as the policies you may be able to access to top up your medical cover in future.


Fights over the demarcation between the business of a medical scheme and the business of a health insurance policy have been going on for more than a decade since the Medical Schemes Act became effective.

Initially, the long-term insurers were the target. A demarcation agreement signed in 2004 between the life assurers, the Financial Services Board and the Council for Medical Schemes brought an end to many of the disputes about the business of a medical scheme and that of policies based on health events under the Long Term Insurance Act.

Short-term insurers continued to sell products that the Council for Medical Schemes regarded as undermining the risk pools of medical schemes.

In 2006, the Registrar of Medical Schemes attempted to have the gap cover products sold by Alexander Forbes’s short-term insurance subsidiary, Guardrisk, closed down. The court case initially went in the registrar’s favour, but Guardrisk took it on appeal and, in 2008, won in the Appeal Court. The registrar was denied permission to take the matter to the Constitutional Court.

The court case centred on whether Guardrisk’s policy fell within the definition of the business of a medical scheme in the Medical Schemes Act, and whether it therefore was operating illegally as an unregistered scheme.

The Act defines the business of a medical scheme as, in return for a premium or contribution, undertaking the liability to:

* Obtain a health care service;

* Grant assistance in defraying the costs of health care services; and

* Render a health care service or contracting with a supplier to do so.

The “and” between the three parts of the definition led the Appeal Court judge to decide that Guardrisk was not doing the business of a medical scheme because it did not do all three things listed in the definition.

Soon after the case, the Department of Health tried to change the definition so that any entity doing any one of the things listed in the definition would be doing the business of a medical scheme and would need to comply with the Act.

This amended definition was part of a 2008 draft amendment to the Medical Schemes Act that was tabled in Parliament. However, the bill was withdrawn when the government decided to focus on National Health Insurance.

The attempt to change the Medical Schemes Act, however, resulted in the inclusion of a provision in the Insurance Laws Amendment Act that allows the Minister of Finance, in consultation with the Department of Health and the Council for Medical Schemes, to, by way of regulation, permit certain health insurance policies that may fall within the definition of a medical scheme but do not undermine the viability of medical schemes.

National Treasury set up a working group, which included the Council for Medical Schemes, the Financial Services Board, the insurance industry and the Department of Health, to consider the issues the regulations should address.

The Council for Medical Schemes has noted a proliferation of insurance products since the Guardrisk ruling, and Dr Monwabisi Gantsho, Registrar of Medical Schemes, has described this as “a serious threat” to the sustainability of medical schemes’ risk pools.

After many years, the draft regulations were finally released in March this year, together with a proposal to amend the definition of a medical scheme in the Medical Schemes Act through the General Financial Laws Amendment Bill.

As was the case with the 2008 proposal, this year’s proposal is to amend “and” between the three parts of the definition to “or”.

Should this amendment be approved by Parliament, many policies are likely to fall within the definition of doing the business of a medical scheme.

Certain products will, however, in terms of the draft regulations be defined as health policies and allowed to continue or allowed to continue under strict conditions.

Insurers offering products defined as health policies that were entered into after December 15, 2008 will be forced to submit details of the policies to the relevant registrar of insurance and the Registrar of Medical Schemes.

The registrars will then decide whether the product should enjoy an exemption from the Medical Schemes

Act as provided for in the Short Term and Long Term Insurance Acts.

Those that are regarded as undermining medical schemes will not be defined as health policies and will not be able to continue in their current form after the regulations become effective.


If your health insurance policy is closed down or revised and you need to reconsider your health care cover, you will have to consider not only the difference in costs but the difference in the benefits you receive.

For example, if you are a member of Discovery

Health Medical Scheme’s Coastal Saver option and pay R3 260 a month for yourself, a spouse and two children, you enjoy cover for specialists at 100 percent of the scheme rate.

You may have been advised to increase your cover for specialists to 500 percent of the scheme rate with a gap cover policy that costs R100 a month.

If gap cover policies are closed down, you could consider upgrading to Discovery Health’s Classic Saver option, which reimburses doctors at 200 percent of the scheme rate.

This will cost you R4 272 a month. In total, you will need to find an additional R912 a month for this cover (R1 012 a month more in contributions less the R100 a month for the gap cover policy), or R10 944 a year more.

The Classic Saver option’s higher premiums would give you a slightly higher contributions to your medical savings account and therefore more to spend on day-to-day medical expenses – R3 048 over the year.

If you need additional day-to-day benefits – perhaps you are already spending as much out of your pocket each year – it means the higher option will effectively cost you R7 896 a year more (R10 944 minus R3 048).

You will still have to be careful to find specialists who charge within 200 percent of medical scheme rates or you could be exposed to out-of-pocket payments.

Discovery Health does have a network of doctors that charge the scheme’s rate, so you should be able to find a practitioner that charges the right rate, but that practitioner may not be the one who has been recommended to you, or the type of specialist you require may not be available in the network.


National Treasury says insurance products, unlike medical schemes, are priced according to your age and health status.

Insurers have responded by saying premiums for gap and top-up cover products are not determined on the basis of age, health status or income.

Chris McCallum, director of ZestLife, says there are some gap cover providers that require you to complete an underwriting health questionnaire. They then reserve the right to decline cover or charge a higher premium.

However, the majority of products have no underwriting requirements, he says.

Some gap and top-up cover policies have different premium rates for older policyholders who are not signed up as part of a group.

In some cases, you cannot take out a gap cover policy if you are over a particular age – for example, 80 years. Other insurers do not offer cover to policyholders after they reach a particular age, such as 75 – so for existing policyholders cover stops at this maximum age.

Guardrisk has no maximum entry age or age after which cover is not offered. However, as of this year its policies for people over the age of 60 have a five-percent excess – in other words, the policyholder has to pay the first five percent of any claim.

If you are part of an employer group, the premiums may be discounted for the group if the group is regarded as a healthier one, and cover will be offered to all employees regardless of their age.

Medical schemes are obliged to admit you regardless of your age and to charge all members the same contributions regardless of their age. They can, however, apply a late-joiner penalty if you join the scheme after the age of 36 without a certain number of years of previous membership of a scheme.

Insurers tend to exclude pre-existing conditions for the first 12 months. Medical schemes, on the other hand, can exclude a pre-existing condition for 12 months only if a condition-specific waiting period is applied.

If you have not been a member of a medical scheme for more than three months, or if you do not have a continuous period of membership of a scheme for 24 months when you change schemes with less than three months’ break in membership, your scheme can impose this waiting period.

In the case of a member who has a break more than three months between belonging to one scheme and another, the 12-month condition-specific waiting period can apply to the prescribed minimum benefits (PMBs).

If a member has a break of less than three months but has less than two years’ membership when changing schemes, PMB conditions must still be covered.


Short-term insurance policies are typically renewable monthly or annually, and unlike long-term life assurance contracts, generally give you the option to keep them in place for life or until retirement age.

There are also no guarantees on the premium increases, as is the case with long-term insurance. Holders of health policies have in the past found their policy terms changed and even their policies terminated at short notice.

* In 2008, Standard Bank informed its hospital cash plan clients that the policy was no longer viable and gave them 30 days’ notice of the termination of their cover.

A pensioner couple, then aged 64 and 67, and one of them diabetic, who had one of these policies were then faced with joining a medical scheme.

However, since they had no previous membership of a scheme, they faced late-joiner penalties – which can be as high as three-quarters of their contributions – as well as waiting periods, including a 12-month waiting period for treatment for the one spouse’s diabetes.

The couple were offered R1 000 as compensation.

* In September last year, Mutual & Federal informed its clients that its existing hospital cash scheme was closing at the end of the year.

The clients were guaranteed acceptance in a new scheme without pre-existing conditions, but the new scheme involved higher cover and higher premiums.

Phindi Mcelu, Mutual & Federal’s marketing manager, says the hospital cash plan policies were sold by a broker who was no longer in business and so they had to be cancelled.

She says the policy was a month-to-month policy that the policyholder or the insurer can cancel after giving 30 days’ notice.

* A policyholder who had an Old Mutual Flexicare top-up policy for 10 years with no medical scheme cover was shocked to find the policy paid out just over R102 000 when his wife needed radiation and chemotherapy for cancer that cost almost R384 000.

The policyholder complained to Old Mutual’s internal ombudsman that the policy benefits had not kept pace with medical inflation.

Piet Spreeuwenberg, Old Mutual’s client services manager, explained that the policy was not meant to be a replacement for a medical scheme but rather to top-up shortfalls in scheme benefits.

He said the benefits for each procedure were based on a percentage of a sum assured – for example, five percent of a sum assured of R60 000. The sum assured was increased by medical inflation each year but, Spreeuwenberg said, if the sum assured was insufficient to generate a benefit that would cover the shortfall, increases for medical inflation would not help.

He said because there are so many procedures and because they don’t all escalate in line with medical inflation, Old Mutual had decided to award the policyholder an ex gratia payment of R15 000.

Even with this payment, however, the policyholder still has a very severe shortfall between his actual costs and his insured costs.

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