Brian Harris, CEO at Turnberry Management Risk Solutions

When it comes to healthcare, affordability is a growing concern for South Africans. Household expenses and the general cost of living continue to increase, medical aid premiums go up every year, and disposable income shrinks. In the face of these challenges, it is natural to look for ways to reduce monthly bills, and one of the first areas people look at is the cost of healthcare. However, when it comes to gap cover, what appears cheaper in the short term may prove far more expensive in the long run. Reducing the monthly fee by a few hundred rand could result in significant medical expense shortfalls in the future, as different gap cover products offer different benefits and limits. It is essential to balance affordability with appropriate levels of cover and value for money, looking not only   at what gap cover costs each month but also at the protection that premium provides.

Cost is not the only factor

When it comes to comparing different gap cover products and providers, it is impossible to look solely at the price. Different gap cover products can vary considerably when it comes to things like how much more than the scheme rate they cover, co-payment and sub-limit payments, oncology benefits, exclusions and waiting periods. Some gap covers also offer additional casualty and emergency benefits and other value-added services.

The reality is that a cheaper policy may be ideal for one client but might leave another significantly exposed to financial risk. This depends on both their medical aid option and their individual or family healthcare needs. The lowest premium is therefore not necessarily poor value, just as the highest-premium option is not automatically the right product for everyone. Gap cover benefits need to be aligned with your needs to ensure that they provide maximum protection for medical expense shortfalls.

When the real cost becomes apparent

In the short term, the monthly saving of a lower premium can be attractive because it is immediate and easily visible. However, the true cost often only becomes apparent at the claims stage, when you discover that a co-payment is not covered, a specialist charges more than your level of cover, or a particular expense falls outside the policy benefits.

The relatively small difference in monthly premiums between different levels of cover can easily be outweighed by shortfalls of tens or even hundreds of thousands of rands. Co-payments today can exceed R40,000 and shortfalls for a single incident or illness can easily be almost R100,000 when you account for specialists charging several times the medical scheme rate.

Shift the focus from price to value

Before making any decisions about changing gap cover, it is important to talk to your broker about affordability and other concerns. Decisions that could affect your financial future should be carefully considered, and brokers need to take a holistic approach that balances client circumstances with budget and financial requirements. This includes factors such as age and life stage, healthcare needs, medical aid scheme and option, family composition and budget. With all of this in mind, your broker should assist you to identify where your medical aid may leave shortfalls and assess which gap cover benefits address those risks.

This needs to include a cost-versus-benefit analysis rather than just comparing different premiums. Examples include how medical aid pays, what specialists typically charge, and what would be covered with various gap cover products and options, as well as what co-payments are often imposed and how different gap cover options will cover them. This in turn helps you make an informed decision about whether the monthly savings from a lower premium are worth the potential additional costs further down the line.

Choosing the right cover for your needs

Affordability will always be an important consideration when it comes to any form of insurance, particularly in the current economic environment. However, choosing gap cover purely on the cost of the premium can end up costing more in the long run if the policy does not adequately cover potential medical expense shortfalls.

Choosing a gap cover product should be based on value, taking into account the premium, the risks you face and your chosen option provides. Your broker should help you to understand the differences in cover, rather than simply comparing the monthly fee. Speak to your broker or financial advisor to review your medical aid and gap cover and ensure you have the most appropriate level of protection for both your budget and your needs.

ENDS