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In my experience, medical aid needs to be the starting point of your financial portfolio because in the marketplace of South Africa, you've got private hospitals and you've got government hospitals - and the reality is people don't want to go to government hospitals. So, if that is the case, medical aid is imperative.

You need a medical aid before you look at your investments, before you look at your life insurance. Because if you land up in the car accident, where do you want to go? It doesn't matter if you lose a leg and you get a payout for that; if you're in hospital for a month in ICU, you're not going to have any funds leftover anywhere.So medical aid, in my opinion, needs to be the first thing that you talk about when structuring a financial plan for a client.

We in the independent arm provide advice a little bit differently when it comes to medical aids. We try to inform our clients - as best as possible - how the structure of the medical aid actually works? We've got a number of clients that have that traditional mindset in that a medical aid needs to pay for everything in and out of hospital. But the reality is that it's not how it works anymore. And unfortunately, our clients are not informed that things have changed.

So, we are big advocates of hospital plans when it comes to medical aid. This way the insurance components of the medical aid is the hospital plan and if anything happens to you with a bit of gap cover, you've got peace of mind that you're not going to have to pay out of your pocket. And if you need to self-fund a GP or medication. It's our point of view that it's cheaper to do R1000 or R2000 every now and again as opposed to spending the R2500 extra every single month for the savings that the medical aid gives you in January.

We don't actually sell medical aid without GAP cover anymore. Because, the reality of our medical industry is that our doctors are not regulated in terms of what it is that they can charge. So, you can have a professional surgeon that is charging 5/6 times the medical aid rate, whereas the medical aids, whether it be Discovery, Bonitas, whoever it is, they only have agreements up to a certain percentage. So then that cost then falls onto the clients and then invariably falls on to us as the advisors as a complaint - because we either didn't explain it properly or the client forgot, or the client just doesn't understand how a doctor can charge what they charge.

So, what GAP cover does? It fills the gap between what these doctors are charging and what the medical aids can afford to pay. It's a nominal amount of money in the bigger scheme of things. It's generally less than 10% of the actual medical aid premium, and in our opinion it should be on all medical aids across the board.

What GAP cover does is it covers the gap in hospitals. So, if you’re admitted into hospital - for whatever reason, whether it be a planned procedure or an emergency - and there's a shortfall in payments, that GAP cover then covers that shortfall. However, if you need to go to the GP and you're on a hospital plan, or you've run out of savings, that cover doesn't cover you outside of hospital. The reason why is because GAP cover is an insurance, whereas medical savings is a loan. So, the medical aids give you that savings in January and then you as the clients pay that loan in 12 equal increments over the year.

GAP cover can’t cover you for a loan that you've spent, but it can cover you for an insurance shortfall in hospital. The 1.618 GAP cover product does have added benefits, where if it's 12:00 at night, child’s got a fever and you need to go to the emergency room…They do have certain limits that you can then claim that back. I think it's about R2000 per member; but you do have that added benefit, but only for, ER visits in certain times of the day.

The process is very similar to your medical aid claim process. You'll communicate with your advisor or directly with the GAP cover company. They'll then supply you with a claim form. You fill out that form, send it back to them, and then 90% of the time the GAP cover company handles everything in the back end. It’s very seldom. That you, as the client need to then step in as well as the gap cover to cover those shortfalls.

~ John-Michael Glaeser - 1.618 Financial Planner ~

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