Medical aids in South Africa have an ‘open door’ policy. No person can be refused membership irrespective of their age, health status or income level provided that they can afford the respective cover. However, there are a few time restrictions in place to ensure that consumers do not only join a medical aid when they need it.

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Waiting periods and the late joiner penalty are two such restrictions. It does not prevent consumers from being covered but restricts payout for a period of time or adds a fee to the medical aid premium under certain circumstances. This protects the membership base of the medical scheme.

What is the late joiner penalty?

The late joiner penalty of LJP is a fee that is included into the monthly medical aid contribution for new members who join a medical scheme after 35 years of age. It is not a once off fee but part of the monthly premium. It can range from 5% to 75% of the monthly premium depending on several factors. A late joiner fee can significantly increase the cost of medical aid for pensioners who have not had previous cover.

However, this penalty fee is not applicable when consumers join a medical scheme before the age of 35 years. It is this younger age group that plays a significant role in contributing to the scheme’s pool without claiming. As with any form of financial cover, a scheme has to balance the funds between those who contribute without using cover and those who tend to claim more frequently.

How is the Late Joiner Penalty Calculated?

The late joiner penalty fee is calculated according to the number of years a person has not been on medical aid cover after the age of 35 years. The more years that a person has been without cover after 35 then the higher the penalty fee. Therefore the fee can range from 5% to 75% of the medical aid premium.

It also factors in the number of years a person was on medical aid prior to turning 35 years.  The more years a person had cover prior to 35, the lower the penalty fee that will be levied. This is a very simplistic explanation for how the late joiner penalty is calculated.

However, a late joiner penalty does not apply if a person changed medical schemes provided that they were not liable for the penalty fee with their previous membership. It will also not apply for consumers who have left one medical scheme and joined another scheme within 90 days.

Nevertheless the late joiner penalty can be a significant financial strain for consumers who want medical aid cover. As with any insurance, the solution is to join a medical scheme as early in life as possible (before 35 years of age) and maintain uninterrupted medical aid cover.

Does the LJP discriminate against the elderly?

The late joiner penalty does not discriminate against South African consumers as is sometimes thought. Elderly South Africans can still acquire medical aid cover if they can afford it. At the same time, existing medical scheme members are protected from new members who join the scheme only when they need cover. Without restrictions like waiting periods and late joiner penalties, medical aid cover would not be sustainable.

Unfortunately many South Africans did not have the means to afford medical aid cover earlier in life, particularly before the age of 35 years. Therefore these elderly South Africans are disadvantaged, although not discriminated against, by the late joiner penalty levied by medical schemes.

Several medical schemes in South Africa have tried to cater for the pensioner market by offering low income medical aid plans. While a late joiner penalty is still charged to members who start cover after 35, the fee (based on percentage) does not make cover entirely unaffordable to low income members.

References:

  1. Retirement – a looming medical aid crisis. News24.com