Medical aids cannot charge different rates for members on the same plan and option, unless they are over the age of 35 years. Sometimes additional fee is added to monthly contributions (medical aid premiums) which is known as the late joiner penalty (LJP). It varies depending on age and can increase premiums by as much as 75%. This can render cover unaffordable, especially for older medical aid members.
What is the late joiner penalty?
A late joiner penalty is an additional monthly fee that is added to the medical aid premium for any member who joins the scheme after the age of 35 years. It is calculated according to the number of years without medical aid cover and the number of years after 35 years when a person joins the scheme. This penalty can therefore range anywhere from 5% to 75% of the medical aid premium.
Medical aid members who are moving from one scheme to another are not liable for a late joiner penalty. However, if medical aids switching between schemes were charged the penalty by the previous scheme, then it also applies to membership with the new scheme. Similarly a new medical aid member who had cover within the preceding 90 days may not be charged a late joiner penalty.
Why do medical schemes charge a late joiner penalty?
In order to understand the late joiner penalty, it is first important to understand how medical schemes work. Medical schemes are non-profit organisations (NPOs) that pool the contributions of members and pay for essential healthcare expenses for those members that claim. The administrator of the scheme can charge a small fee for services rendered and the administrator may therefore be a for-profit organisation or business.
Therefore medical schemes often depend on the young and healthy members to fund the expenses of the old and ill members. However, when a person joins a medical scheme only when they need it (already ill) or later in life (after the age of 35 years when illness is more likely) then the scheme’s resources are unfairly strained. Therefore medical schemes have waiting periods and penalties in place.
Do late joiner penalties end after a certain period of time?
No. Late joiner penalties do not fall away after a certain period of time. It is an ongoing penalty fee that is added to the monthly contribution for the duration of the membership. A late joiner penalty does not increase with advancing age. It is calculated at the time of starting the medical aid cover and applicable thereafter. These penalties are applicable to the main member or any adult dependant on the scheme.
How is the late joiner penalty calculated?
Two variables are considered when calculating the late joiner penalty:
- Current age of medical aid member
- Number of years of prior medical aid cover
The equation for calculating the late joiner penalty depends on the years without cover.
Current age – (35 – Number of years of previous cover) = Years without cover
Penalty According to Years Without Cover
The late joiner penalty that will be added to the monthly contribution is then calculated accordingly.
- 0 – 4 years uncovered: 5% of total contribution
- 5 – 14 years uncovered: 25% of total contribution
- 15 – 24 years uncovered: 50% of total contribution
- 25 years or more uncovered: 75% of total contribution
In other words, if the medical aid monthly contribution (premium) was R 1,000 and the years uncovered was 3 years then the contribution will be R 50 higher or R 1,050 per month. However, if the years uncovered 28 years then the monthly contribution would be R 750 higher or R 1,750 per month.
Example of Late Joiner Penalty Calculation
For example, John is 52 years old and has never been on medical aid previously in his life. Therefore the number of years of prior medical aid cover is 0. The number of years without cover is therefore 17. This means that John is liable for a 50% late joiner penalty. If John’s medical aid premium was R 1,000 then he would have to pay R 1,500 monthly due to the late joiner penalty added to the monthly contribution.
Are Older Members Penalised?
Sometimes older members may have not been able to afford cover earlier in life. Medical aid for pensioners can be unaffordable due to the late joiner penalty which appears to “discriminate” against the elderly. However, this is untrue. While a person is being penalised for joining a medical aid later in life, it is important to understand that as with any form of insurance, cover should not only be sought when it is needed.
A medical scheme is fiscally responsible to all of its members. Apart from properly administrating the scheme, it also has to ensure that new members do not unfairly disadvantage existing medical aid members. Older people are naturally more likely to require a higher level of medical care and this can strain the scheme’s resources. Therefore it is always advisable to join a medical aid as early as possible in life and not only when it is most needed.