SA government backs down on medical gap cover

THE government has relented in its attempt to outlaw gap cover, but health insurers’ turf war with the medical scheme regulator rages on.

Last week, the Treasury released new regulations permitting insurers to sell gap cover and hospital cash plans, dealing a blow to the Council for Medical Schemes, which wants gap cover banned.

Gap cover is an insurance product taken to cover or ameliorate the shortfall between a medical scheme payout and a hospital bill, while a hospital cash plan pays a lump sum when a policy holder is admitted to hospital. These products have significantly grown in the past few years.

The council, which regulates medical schemes, has argued that their rapid growth threatens medical schemes’ sustainability.

Medical schemes operate on an open enrolment and cross-subsidisation model, while insurers tend to lower their risk by offering cover to the healthy and the young, leaving the old and sickly to burden the struggling medical aids, which are not allowed to turn anyone away.

Another difference is that medical aid premiums are community-rated, while insurance premiums are determined on an individual’s risk or claims.

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