So you haven’t been on a medical aid scheme before but finally you’ve decided to dig deep into your pocket and apply to become a member. Let’s just say the thought of landing up in a government facility nowadays has moved you swiftly into action. “But why is the medical scheme looking to penalize me for joining late? Are they within their rights to do that?”
Yes they are. The Medical Schemes Act introduced open enrollment (that means anyone can join a medical scheme) but to protect schemes from people who anti-select against the scheme by waiting until they are older to join (and are then more likely to need cover) medical schemes are allowed, by law, to apply late-joiner penalties. These penalties are loadings on the contributions the member will pay for as long as that particular person continues to belong to the medical scheme.
So why were late joiner penalties introduced?
Simply to encourage as many people as possible to join medical schemes while still young and healthy.
So how do the penalties work?
The calculation is pretty simple.
As a new applicant, after the age of (35) you get penalized in age bands for the amount of years you haven’t been on a medical scheme (example to follow below)
Penalty Bands Max Penalty
1 – 4 years Contribution x 0,05
5 – 14 years Contribution x 0,25
15 – 24 years Contribution x 0,5
25+ years Contribution x 0,75
Joy is 50 years old. She wants to join medical scheme XYZ as a new member. Since the age of 35 Joy was on a medical aid for only (3) years. She then resigned from the scheme at age 38 because of affordability issues. Since then Joy hasn’t belonged to a medical scheme.
What is the late joiner penalty applicable?
Joy came off medical aid when she was 38. Because she is now 50 that represents 12 years since Joy was on a medical scheme. The applicable late-joiner penalty band is then 5-14 years. You agree? The medical aid plan Joy has chosen is R1000 per month (hospital benefit only). The late joiner penalty is then 0,25 x R1000 contribution which is an additional R250 per month. Should Joy decide to join the scheme and accept the late-joiner penalty then here contribution is going to be 25% more at R1250 per month.
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The InsuranceFundi Team
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