The South African National Treasury released a statement in mid-October indicating that gap cover and hospital plans will be allowed to remain in medical aid schemes, despite previous indications to the contrary. However, it has been proposed that risk rating based on age and state of health no longer be allowed in gap cover calculations.

According to the release, gap cover and hospital plans should complement a medical aid scheme’s underlying principle – that contributions from the young and healthy support the needs of the old and sick.

South African National TreasuryThe terms on which hospital plans and gap cover will be allowed still need to be ironed out. National Treasury Deputy Director-General, Mr Ismail Momoniat, has also acknowledged confusion in differentiating between medical aid schemes and health insurance policies.

What are hospital plans and gap cover?

A hospital plan gives you a certain amount of cash for every day that you spend in a network hospital. It may be used by anyone, regardless of whether they belong to a medical scheme.

Gap cover is an add-on service sold to medical aid members. It’s used to cover the difference between what you’re charged by network healthcare providers and what your scheme pays out for their services.

What problem are legislators trying to address?

Young, healthy medical aid members pay lower medical aid contributions than older members, and are typically financially stable enough to pay for additional gap cover. Old or sick members, however, may be denied gap cover altogether or charged extremely high premiums for it – premiums that many can’t afford.

Amended definition of medical schemes

Parliament’s standing committee has approved an amendment to the Medical Schemes Act, found in the Financial Services Law General Amendment Bill. The amendment is designed to clarify the definition of a medical scheme.

Under the amendment, the majority of health insurance policies will be regarded as doing the work of medical aid schemes. Accordingly, they’ll have to be registered as medical aid schemes under the Medical Schemes Act.

Implementation

A second draft of the proposed amendments is due to be published before the end of 2013. The Treasury’s aim is to finalise the amendments by mid-2014 and have them take effect in 2015, which is when other changes to health insurance regulations come into practice.