Late-joiner penalty on medical aid: how it is worked out

A medical scheme may add a late-joiner penalty to the contribution of anyone who applies at 35 or older, less any earlier scheme cover they can show. Regulation 13 of the Medical Schemes Act regulations caps it in four bands, from 5% to 75% of the contribution, and gives the formula. The scheme decides whether to charge it at all.

Olvian is a lead-referral service, not a scheme, broker or adviser. This guide explains the rule so you can ask the registered broker or medical scheme that calls you the right questions.

What is a late joiner?

Regulation 11 defines a late joiner as "an applicant or the adult dependant of an applicant who, at the date of application for membership or admission as a dependant, as the case may be, is 35 years of age or older".

There is one carve-out. The definition excludes any beneficiary who has had cover with one or more medical schemes from a date before 1 April 2001 without a break in cover of more than three consecutive months since that date.

The rule looks at age on the day of application. It does not matter when you turn 35 afterwards.

How is the penalty worked out?

Regulation 13(3) gives a formula: A = B minus (35 + C).

• A is the number of years that decides your band.
• B is your age on the date of application.
• C is the number of years of creditable coverage you can show.

Regulation 13(2) then sets the maximum penalty for each band, as a share of the contribution:

These are ceilings. The regulation says a penalty "shall not exceed" the band, so a scheme may charge less.

What does a worked example look like?

This is an illustration of the formula, not a prediction of what any scheme will charge.

Suppose a person applies at age 45 and can show three years of earlier scheme cover. A is 45 minus (35 plus 3), which is 7. Seven falls in the 5 to 14 year band, so the most the scheme may charge is 0,25 times the contribution. If the same person could show no earlier cover, A would be 10, which is in the same band. If they could show 10 years, A would be zero, and the table, which starts at one year, would leave no band to apply.

The point of the example is that every year of earlier cover is a year taken off.

What counts as earlier cover?

Regulation 11 defines creditable coverage as any period in which the late joiner was:

• a member or dependant of a medical scheme;
• a member or dependant of an entity doing the business of a medical scheme that was exempt from the Act at the time;
• a uniformed employee of the South African National Defence Force, or their dependant, receiving medical benefits from the Defence Force; or
• a member or dependant of the Permanent Force Continuation Fund.

Any period of cover as a dependant under the age of 21 is excluded.

Earlier cover is counted in years. The test for a break of more than three consecutive months sits in the definition of a late joiner, and it only helps people whose cover began before 1 April 2001.

What if I cannot prove my earlier cover?

Regulation 13(6) makes it easier than many people expect. It is enough to give the scheme a sworn affidavit that sets out:

• the periods in which you were a member or dependant, with the names of the schemes or entities; and
• that you made reasonable efforts to get documents and were unsuccessful.

If you produce evidence of creditable coverage after a penalty has been imposed, regulation 13(4) requires the scheme to recalculate it and apply the revised penalty from the time you provide the evidence. It is not backdated, so supplying proof at the start is worth the effort.

Who pays the penalty, and on what part of the contribution?

Regulation 13(1) says the penalty must be applied only to the portion of the contribution that relates to the member or adult dependant who qualifies for late-joiner penalties.

So if a 30-year-old member adds a 50-year-old spouse, the penalty is calculated on the spouse's portion of the contribution and not on the member's or the children's portions.

Regulation 13(5) adds that late-joiner penalties may continue to be applied if the member or adult dependant transfers to another scheme. Regulation 13(7) requires each scheme to report to the Registrar each year on how many late joiners it has in each band.

Does the scheme charge other loadings for age or health?

The Act answers this one directly. Section 29(1)(n) says a scheme's rules on admitting members must provide for contributions based on income or the number of dependants, or both, "and shall not provide for any other grounds, including age, sex, past or present state of health", other than as prescribed.

The late-joiner penalty is one of the things "as prescribed". The prescribed rule is regulation 13. Waiting periods are the other age-and-history related tool, and they are limited by section 29A. Our guide to medical aid waiting periods sets out those limits.

What if I think the penalty is wrong?

Ask the scheme to show the working: your age at application, the years of creditable coverage it has recognised, the band and the percentage it applied.

If you disagree, raise it with the scheme first and keep the replies. The Council for Medical Schemes asks complainants to use the scheme's own dispute process before coming to it. Under section 47 of the Act a written complaint to the Council is passed to the other party for comment and then resolved or taken to the Council, and under section 48 a person aggrieved by the decision can appeal to the Council within three months, unless more time is allowed for good cause.

What should I ask the scheme or broker who calls me?

Olvian does not advise on which scheme or option to join. These are questions of fact:

1. Do your rules apply a late-joiner penalty, and at what percentage in each band?
2. How have you worked out A for me: which age and how many years of cover?
3. What proof of earlier cover do you accept, and will you take an affidavit?
4. Is the penalty applied only to my portion of the contribution?
5. If I later move scheme, will you tell the new scheme my penalty band?

Sources

• Regulations made under the Medical Schemes Act 131 of 1998, regulations 11 and 13, as consolidated and published by the Council for Medical Schemes. https://www.medicalschemes.com/files/Acts%20and%20Regulations/MSREGS19July2004.pdf
• Medical Schemes Act 131 of 1998, as consolidated by the Council for Medical Schemes: sections 29(1)(n), 47 and 48. https://www.medicalschemes.com/files/Acts%20and%20Regulations/MSACT19DEC2003.pdf
• Council for Medical Schemes, the complaints procedure. https://www.medicalschemes.co.za/consumer-assistance/complaintsprocedure/

The Regulations are amended from time to time, and the consolidation linked above is the one the Council published. Check the current text on the Council's website before relying on a figure.