Supreme court gives Guardrisk go-ahead to insure gap between medical aid rates and actual health costs
- 31 March 2008

Supreme Court gives Guardrisk go-ahead for South Africans to insure gap between medical aid rates and actual health costs

Regardless of which option of cover you have chosen on your medical scheme, the reality is that you may need to fund the difference between what your medical aid pays and what your treatment really costs.

In the case of hospitalisation, the size of this gap could spell financial ruin for many South African families. In response, Guardrisk and parent company Alexander Forbes developed a cost-effective product: Admed, allowing families to insure the gap between the National Health Price List Tariffs (medical aid rates) and what doctors charge for in-hospital treatment. To date about 55,000 families have purchased this cover from Guardrisk.

However, the CMS (Council for Medical Schemes) took issue with Guardrisk's Admed gap product, claiming that the company was conducting the business of a medical scheme as defined in the Medical Schemes Act. Litigation instigated by the CMS followed and Guardrisk lost the initial case. However, the High Court of the opinion that another court may produce a different ruling and in deference to the significance of the matter granted the company leave to appeal. This culminated in the Supreme Court of Appeal's ruling last week that Guardrisk's Admed gap products do not fall within the scope of the Medical Schemes Act.

Says Herman Schoeman, Managing Director of Guardrisk, "This ruling provides peace of mind for our clients who can continue to rest assured that they remain covered for the shortfall between doctors in-hospital charges and medical aid rates."

Had the ruling gone the other way it would have impacted significantly on the entire short-term insurance industry. However, it is important to note that this ruling specifically relates to Guardrisk and its product range. It should not, in any way, be construed as a general industry standard and individual insurers will have to examine their own products to measure their validity.

Says Schoeman, "One of our arguments was that Guardrisk's Admed gap cover products did not encourage people to take cheaper options in their medical schemes. Nor did they offer the lower end of the market an alternative to medical cover. Simply put: Guardrisk's gap cover insurance in no way threatens, competes with or compromises medical schemes. In fact, since you need to be a member of a medical aid to buy the Admed gap cover, it actually encourages the purchase of medical aid."

Though we still need to examine the detail of the Supreme Court of Appeal's ruling, we are pleased that the court has brought clarity to the debate and has found a way to allow Guardrisk's Admed products to continue complementing traditional medical aid schemes products, ensuring that South African families do not become financial victims of the shortfall between medical aid cover and the real costs of doctors in-hospital treatment, concluded Schoeman.

Prepared by: Beachhead Media & Investor Relations (Stuart Meyer)
+27 11 214 2401 / +27 83 618 7260

On behalf of: Herman Schoeman, Managing Director, Guardrisk
Tel: Direct: +27 11 669 1001, Mobile: +27 82 376 3821