Gap Cover: Protecting your pocket from penalty fees and co-payments on your medical scheme benefit

One of the ways that medical schemes are able to manage the costs of medical scheme contributions is through negotiation with hospital groups, doctor groupings and certain other medical service providers for better tariffs. These groups, in some instances then form part of the medical scheme’s Designated Service Providers (DSP). Medical schemes, on some of the options, will direct their members to DSPs for the diagnosis, care and treatment of both elective and prescribed minimum benefit (PMB) conditions. This is one way that schemes try to keep contributions as affordable as possible for their members, while members benefit by having access to quality, private health care from scheme-approved providers.

As part of these arrangements, medical schemes negotiate access to care for certain conditions in the DSP network. For example, they may negotiate specific reimbursement rates on procedures and items for their members, there may be specific clinical pathways that the scheme requires to ensure optimal care, and they may specify formularies to use (a specific list of medicines) and so on. Medical schemes will direct their members to the DSP networks and encourage them to use these as far as possible.

Failure by a member to not use these DSPs may result in certain significant penalties and co-payments being levied, which the member will need to fund from their own pockets.

The reality is that unless you are on one of the top comprehensive medical scheme options, medical schemes have deductibles and co-payments to keep options more affordable. If you prefer not to be restricted to a DSP network, you have the choice of more comprehensive medical scheme benefit options, however these come at a higher contribution that many people simply cannot afford or justify, particularly if they are healthy and have a low benefit utilisation.

What are co-payments and penalty co-payments?

Co-payments on certain procedures is one of the mechanisms medical schemes use to keep their monthly contributions lower and also to encourage members to make use of the scheme’s designated service provider network. Co-payments can come in the form of an “admission co-pay” for admission to a health facility – usually a hospital – or in the form of a “procedure co-pay” for procedures while in hospital. In certain instances, members could be faced with having to pay both these co-payments prior to admission. This can have a significant impact on cash-flow. It is important to note that it is in the medical scheme member’s interest to ALWAYS obtain pre-authorisation* from their medical scheme prior to any admission to hospital for elective procedures. In the event of an emergency, in theory there should not be any co-payments enforced, but all medical schemes have rules related to emergency admissions. When in doubt, always consult with your accredited intermediary.

In a nutshell, the medical scheme may not cover 100% of the costs of the procedure, and the member will need to self-fund a certain percentage of the bill for the medical service before the admission or medical scheme pays their portion – known as a co-payment. Depending on what benefit option you are on, co-payments can either be a percentage of the cost of your treatment, or a fixed amount specified by your scheme.

It is important to point out that the Medical Schemes Act stipulates that medical schemes may not enforce a co-payment/penalty co-payment if the member had no access to a DSP (due to a 50km proximity); if the required service was not available from the DSP; or if it was for the treatment of an emergency.

When is a penalty co-payment applied?
You may face a penalty co-payment fee, which you will need to pay upfront from your own pocket, if you voluntarily make use of a non-network provider or DSP, such as a hospital if you need surgery. This is often the case if you may want to make use of a doctor or specialist you know and trust and who knows your health history, but your doctor does not contract with or operate from the hospital that is approved by or forms part of your medical scheme benefits. If you voluntarily choose to go with a non-DSP hospital, you will then need to pay a penalty co-payment upon admission.

That’s where gap cover comes in. Depending on which gap option you have, your gap cover will reimburse you for the penalty co-payment that you have to pay upfront for voluntarily making use of non-designated hospital service provider, subject to the terms of your cover. On Sirago’s Ultimate Gap option for example, you will be covered for up to R13 000 per claim (to a max of 3 claims per policy/per annum).

What about Co-payments?

Medical schemes apply co-payments on a wide range of services – from hospital admissions to MRI and CT scans, specialist consultations, pathology and so on. These co-payments typically apply to specialist or elective medical procedures and they differ from one medical scheme and benefit option to another. Co-payments are another mechanism that medical schemes use to make your cover “more affordable”, by reducing the overall monthly premium of the option you have chosen. This does however mean that you will be responsible for a certain amount of self-funding on certain procedures in the form of a co-payment.

Your gap cover – option dependent – will provide protection from such co-payments for specified procedures or tests, scans, hospital admissions and surgical procedures, with the amount covered stipulated in your policy terms and conditions, and subject to the overall annual limit of the chosen gap provider and option. As gap cover is an insurance solution, policy holders would always be required to pay the co-payment upfront to the healthcare provider, and then claim this back afterwards from their gap provider, subject to the limits and terms of the gap policy and option.

Gap cover is an indispensable part of your healthcare financial planning
When choosing a medical scheme or a new product option, it is crucial to unpack and understand all the benefits, whether the DSP network works for your healthcare and proximity needs, what co-payments you will be responsible for, plus all the finer details along with the costs thereof.

In formulating your healthcare funding strategy, it is important to understand what will be covered and equally important, what is excluded and how you can mitigate the gaps in your risk planning in an affordable and effective manner with supplementary products such as gap cover. This is a task with many complexities and moving parts that is best undertaken with the advice and guidance of a professional healthcare intermediary.

The reality is that with a sound healthcare financial plan in place, you’re safe in the knowledge of having made informed decisions that if anything should go wrong, your bases are covered when it comes to any health crisis life may throw at you by having access to the best possible quality, private healthcare, and protection from unforeseen and unaffordable costs.

*Pre-authorisation is not a guarantee of payment. You are always encouraged to fully understand the implications of a voluntary hospital admission prior to the event. In some instances, certain medical schemes and options pay the member directly, which means the member is responsible to sort out the payments directly to the hospital.