By Michael Emery, Marketing Executive at Ambledown Financial Services

Medical jargon can be quite intimidating – it pays to understand the details‍

The self-payment gap and co-payments are important concepts, and it’s very important that medical scheme members really understand what they mean. Then there’s the issue of gap cover—how does it fit in?

Here’s what you need to know.

Self-payment gap. Some medical schemes provide their members with a medical savings account, which is typically 15-25% of the medical aid contribution, and may not exceed 25%.i

This account can be used to pay for day-to-day medical expenses, and if it is depleted, the member becomes personally liable for further expenses. This is the self-payment gap. While the member is in the self-payment gap, the scheme will continue to cover certain benefits, such as chronic medicine, hospitalisation, oncology and so on.

However, some medical schemes will begin paying again once the member has paid a certain amount personally to reach what is called the threshold.

The details of how the self-payment gap is calculated and the threshold (if any) depend on the medical scheme’s rules.

Mr A’s medical scheme has a medical savings account of R23 400 at the beginning of the year and a self-payment gap of R14 081. The threshold is thus R37 481. This means that once he has spent the full R23,400, he must cover expenses that would ordinarily have been paid by the medical savings account himself to the value of R14 081. Once he has reached the threshold amount of R37 481 total expenses, he is eligible for above-threshold benefits, where claims are paid out at the medical scheme tariff rate.

While you are in the self-payment gap, you should continue to submit claims as normal to the medical scheme so administrators can calculate your progress in closing the self-payment gap and ultimately reaching the threshold.

It’s important to note that gap cover has nothing to do with the self-payment gap. Gap cover is only applicable for in-hospital treatment or procedures and certain specified out-patient procedures.

Co-payment.

Medical schemes often designate that a specific portion of certain procedures are paid personally by the member. These co-payments are defined in the scheme’s rules.

For instance, when admitted for a gastroscopy or colonoscopy, you may need to pay a predetermined fixed amount. Another common example is the coverage provided by medical schemes for oncology, where the scheme sets a coverage limit. Once this limit is reached, members of the scheme are responsible for a co-payment equal to a pre-defined percentage.

The medical scheme’s rules also permit it to levy penalties for certain kinds of behaviour and are often referred to as penalty co-payments. For instance, a penalty co-payment can be levied when a member fails to obtain pre-authorisation before certain health interventions.ii

A third form of co-payment occurs when the medical service provider charges above the medical scheme tariff, and the member is responsible for the difference. This difference is commonly known in the insurance industry as “above tariff cover” or “medical expense shortfall” but it can also be called a co-payment.

Depending on the terms and benefits of the policy, gap cover can be used to defray some or all of the co-payments referred to above.

Let’s look at some hypothetical examples.

Ms B is due to undergo spinal surgery, which will cost R100 000 and her medical scheme has a co-payment of R10 000 included in their rules. Because she has a gap cover policy with a co-payment benefit, she can claim for the R10 000.

Another example, Mrs C decides to have an elective caesarean and the anaesthetist charges R10 000, while the medical scheme tariff is R8 000 and results in a shortfall of R2 000. Mrs C’s gap cover policy includes above tariff cover, so the shortfall of R2 000 will be paid by her gap cover insurer.

It is possible to reduce your exposure to co-payments by taking out gap cover, while penalty co-payments can be avoided by following the guidelines given by your schemes. However, gap cover generally does not cover shortfalls owing on medicines.

Knowledge is the key to a successful strategy.

The examples cited above are included for illustrative purposes only.