What is a late joiner penalty?
A late joiner penalty (LJP) is a permanent penalty paid by a medical aid member, added as a percentage of the base premium (not the savings portion) of the plan. It is meant to dissuade or penalise members from not belonging to a medical aid in their youth, when they are presumably healthy, and joining only when they get older, and are a bigger drain on the schemes.
Therefore, members who apply for medical aid and who are over 35 years old may have to pay a Late Joiner Penalty.
How is the penalty calculated?
- First we count out how many years it has been since you turned 35. (If you are under 35, the penalty band will not apply to you)
A = Current age – 35
- Then we work out how many years you have spent on a credible medical aid since you turned 21. (B)
- We then work out (A) -(B) to calculate your penalty band.
You then apply the Penalty Band to the table below:
- You are 43 years old, and were a member of a medical aid for 5 years since you turned 21:
Penalty Band = (43 – 35) – (5) = 3 years = 5% penalty
- You are 55 years old and were a member of two medical aid schemes in the past. One for 6 years (23-29 yrs) and one for 15 years (32-47yrs)
Penalty Band= (55 – 35) – (6 + 15) = -1 = No penalty
- The late joiner penalty is calculated as a percentage of the basic premium (not the savings portion).
- Credible medical cover is defined as belonging to a recognised medical aid scheme. If you cannot prove your past membership and have taken all reasonable steps to try and obtain proof, you can submit an affidavit outlining your past membership, and this has to be accepted by the scheme.
- Some schemes are beginning to recognise certain medical insurances as credible cover.
- According to the Medical Act, if a penalty has been applied incorrectly in the past, it does not automatically get “paid back”. However, we feel that if the LJP was due to an error on the part of the scheme or its broker, you should discuss it with them, or the Medical Scheme Council. We know of cases where the incorrect penalty was paid back to the member.
- Membership of an overseas medical aid does not count when working out the “years of credible coverage”.
- Late joiner penalties follow members, even if they change schemes.
- Schemes are not obliged to impose LJPs, but they do have to be consistent in their approach. In our experience, the only way to (possibly) not have an LJP imposed is if you are a member of an employer group that has such an agreement with the scheme.
LJPs are miscalculated ALL the time!
We have come across a number of schemes who misrepresent how a Late Joiner Penalty is calculated, in their favor. Our explanation is taken directly from the Medical Schemes Act. Please let us know if your scheme works out the late joiner penalty differently from our formula below.