compulsory-vs-voluntary-gap-cover Compulsory vs voluntary Gap cover

Compulsory vs voluntary Gap cover for employer groups

Explaining Gap cover

Medical schemes may not always cover in-hospital tariffs in full, leaving South Africans to pay the difference from their pocket. As the healthcare landscape in South Africa evolves, with rising costs and increasing pressures on medical scheme plans, the need for additional layers of financial protection has become more pronounced.

A medical scheme alone may not provide sufficient financial protection against unforeseen expenses. Gap cover is a form of short-term insurance that is designed to provide financial protection for individuals with medical scheme coverage. It is intended to cover the difference or shortfall between the charges billed by healthcare providers and the amount paid by the medical scheme from the risk or hospital benefit.

In this context, Gap cover insurance has emerged as an important tool to address the growing gap between medical scheme coverage and actual healthcare expenses. Simeka Health’s Gap cover providers allow for employer groups to select between voluntary and compulsory Gap cover membership, and it is important to understand the differences of such memberships.

Compulsory vs voluntary Gap cover

Compulsory Gap cover provided by employers can offer significant advantages over voluntary Gap cover for employees on a medical scheme. Let’s explore why.

• Coverage consistency
  Compulsory Gap cover ensures that all eligible employees have consistent coverage. It prevents gaps in protection that might occur if employees individually opt for voluntary Gap cover, or choose not to have any. Voluntary Gap cover can lead to disparities in coverage among employees, potentially leaving some without adequate protection.
• Risk pooling and cost efficiency
  When Gap cover is compulsory, employers can negotiate better rates and underwriting terms since it creates a larger risk pool with all employees contributing and assisting to spread the risk across the group.
  Voluntary Gap cover lacks the bargaining power of a collective employer-sponsored plan and relies on individual choices. This results in a smaller risk pool and higher premiums with less favourable terms in respect of underwriting, which means that employees will have waiting periods and possible pre-existing medical condition exclusions before being able to claim.

Comparison of premiums and claims loss ratios: Compulsory vs voluntary group (approximately 900 contributing employees)

* Per family per month

Source: Ambledown 2023 financials

• Employee wellbeing
  Compulsory Gap cover ensures that employees have peace of mind and financial protection against medical expense shortfalls. They will not be left financially crippled and knocking on their employer’s door for a personal loan to fund their medical expense shortfalls.
  Voluntary Gap cover on the other hand, may lead to some employees opting out, or leaving them vulnerable to unexpected medical expense shortfalls. This will inevitably result in higher stress levels, as well as them having to borrow funds from their employer or elsewhere, to fund for these unexpected shortfalls.

Closing remarks

Compulsory Gap cover provides consistent protection, cost efficiency, and peace of mind for employees, making it a favourable choice for employers to offer as part of their benefits package. By including compulsory Gap cover as part of an employee’s overall benefit package, employers help alleviate employees’ anxieties about protecting their families during health crises.

Voluntary Gap cover is also an option for employer groups who prefer not to introduce Gap cover as an employer benefit but can have this available to employees to assist with additional protection for employees at a discounted rate.

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