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Broadening your employee benefits portfolio with gap cover



Helping employees manage out-of-pocket costs in a health crisis

The current state of public healthcare facilities in South Africa and growing pressure on consumer wallets has reinforced the fact that employee benefits, especially private healthcare insurance, remain an invaluable part of the total compensation package. Regrettably, today medical schemes will no longer cover members for everything, and additional insurances are necessary to limit members’ exposure to exorbitant out of pocket expenses. The need to incorporate medical gap cover has increased exponentially in recent years as medical specialist fees far outpace medical aid tariffs.

“Although the core employee benefits such as private medical cover remain an essential part of the overall compensation package, there has been a strong drive towards ensuring optimal cover and measuring the benefit richness of medical scheme offerings against the actual premiums charged. Supplementary products such as gap cover are being offered to offset employee out-of-pocket medical costs and provide greater financial peace of mind in a health crisis. Medical gap policies are proving invaluable where an employer has moved to a high deductible medical plan, or where the employee has opted to move to a lower benefit option to better manage their costs,” says Jacqui Nel, business unit head of Aon’s Healthcare division.

Medical aid cover can cost South Africans up to 20% of their monthly pay packets even with a 50% monthly contribution from the employer. The point of having private health cover is that it promises the very best quality of care when you really need it, which is not readily available in public facilities. Employees often assume that their medical costs will be fully covered if they are on medical aid but statistics show this is seldom the case.

“The reasons for this is that South Africa’s private healthcare sector is characterised by an under-supply of medical specialists contrasted against medical schemes that are struggling to keep these specialist costs under control. The truth is that few medical schemes provide fully comprehensive cover for in-patient specialist care. This means that without supplementary cover, members potentially face large shortfalls between their medical scheme benefits and the actual costs incurred for surgery or other in-hospital treatment,” explains Jacqui.

“It is essential that employees are thoroughly guided by a professional broker as to what gap cover is and what it is not. Gap cover should not be viewed as replacing medical scheme cover but supplementing certain shortfalls that may occur. Essentially, gap insurance covers the potential shortfall that arises from specialist charges for in-hospital procedures. Specialists often charge up to 400% of the benefits offered by medical aid.

“So, if the employee’s medical scheme only pays out at 100% of tariff, the employee will then be liable for the shortfall of the other 300% out of their own pocket. This can amount to thousands of Rands and leave the employee in a serious financial predicament. Members are mainly at risk when it comes to in-hospital treatment or other serious treatments. Shortfalls of R30-40k are now commonplace whereas even a few years ago such high claims were rare exceptions,” she adds.

For many employees, their first exposure to the concept of financial planning will happen in the workplace through the support and guidance from their HR counsellors and employee benefits programmes. The reality is, unless a company introduces employees to financial planning products such as gap cover, it would never be taken of their own accord. Most consumers have no idea what gap cover is nor do they understand why it is required or the financial benefit.

In this scenario, the employer is the door opener for many employees to a professional advisor or broker to take them through the steps of planning their future financial security. Even for the more financially savvy and well-educated, private medical scheme cover is complex and benefit designs are difficult to understand. Deciphering the industry jargon without the help of a professional broker can be daunting. “Often people only find out about the shortfalls in their cover when it’s too late,” adds Jacqui.

Given the fact that many South Africans have high levels of debt and credit-worthiness issues, it’s now a moot point whether employers can sustain the pace of increased workplace demands without more support for financially strapped employees. The question that HR professionals have to ask is: In today’s fast paced changing business environments, are staff thriving or struggling to cope against a backdrop of increased personal financial pressure where they may not be in proper control of their finances, debt and savings. Given this scenario, it is obvious that being able to offer more benefits and greater safety nets for employees on the road towards greater peace of mind and productivity is a win-win for all concerned.

“By adding supplementary products such as gap cover to the host of other employee benefits such as retirement and healthcare, employers get to help reduce employees’ anxieties about protecting their families in a health crisis, and at much lower premiums and better benefits than they could obtain on their own,” concludes Jacqui.