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.
The LPJ was put in place to encourage potential medical members to join a medical aid while they are still young, and presumably more healthy than they will be at an older age. If it wasn’t for the penalty, healthy people would only join a medical aid when they need it, and this is not sustainable for the medical aid funds.
With the penalty in place, you will end up paying anything between 5%-75% more for a premium than you would if you didn’t have the penalty.
It’s not completely a bad thing though: because the late joiner penalty exists, schemes cannot deny you cover because of your age or prior health problems. So on the one hand, yes you are paying more but on the other hand you are guaranteed medical aid cover (as long as you can afford it, of course).
Don’t forget about waiting periods!
If you wait to join a medical aid only when you are ill, you will probably have have a waiting period applied. It could be as long as 12 months.
Will I have to pay the Late Joiner Penalty?
You don’t have to pay a late joiner penalty if…
- …you are under 35 years, or were younger than 35 when you joined your current scheme
- …you have been a member of a medical aid since April 2001, and have not had a continuous break in coverage of more than 3 months
It is also possible that if you join through your employer group (and not individually) that the late joiner penalty is “forgiven”. This is employer-group dependant though. You’d have to speak to your HR for the details.
The only way to definitely avoid the penalty is to join a medical aid before the age of 35, and to remain a member of a medical aid from that point.
I’m over 35 with no medical aid. Do I have to pay the Late Joiner Penalty?
If you were a member of a medical aid from the age of 21, even if you eventually cancelled your membership, all the years of membership count as “credit” if you are 35yrs+. See below for more details, when we discuss “The formula”.
How long do I have to pay the Late Joiner Penalty?
An LPJ is forever, and follows you when you change plans and schemes.
Conversely, if you current medical aid does not charge a penalty, the chances are that a new one won’t either. In fact, the only way a new medical scheme would charge a penalty if your current one doesn’t is if you currently have a special arrangement to not pay the LPJ due to your employer, or if your current scheme made a mistake when they worked out if you are liable for a penalty.
OK, let’s get on with it! How is this penalty calculated?
You’ll need a pen and paper, and possibly a calculator. We include many examples below, to help you work it out correctly.
- First count out how many years it has been since you turned 35. This will be “A“. (If you are under 35, the penalty band will not apply to you). A = Current age – 35
- Then, work out how many years you have spent on a credible medical aid since you turned 21 (see below for definition of “credible”). It’s ok if this is zero yrs. This will be “B“.
- Now, subtract (A)-(B) to calculate your penalty band. Apply this to the table below. The left hand column below is your answer to “A-B”, and the right column is the penalty you will pay.
Apply the Penalty Band to the table below:
|1-4||Risk Premium+5%+Savings Contribution (if any)|
|5-14||Risk Premium+25%+Savings Contribution (if any)|
|15-24||Premium+50%+Savings Contribution (if any)|
|25+||Premium+75%+Savings Contribution (if any)|
- You are 43 years old, and were a member of a medical aid for 5 years since you turned 21:
Penalty Band = A – B = (43yrs – 35yrs) – (5 yrs of cover) = 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= (55yrs – 35yrs) – (6yrs + 15yrs) = -1 = No Late Joiner Penalty
- You are 50 years old and were a member of a UK based medical scheme for 13 years:
Penalty Band= (50yrs-35yrs) -(0yrs) = 15yrs = 50% penalty
What is “credible cover”?
“Credible past cover” is any past membership of a South African medical aid scheme.
I had medical cover overseas. Does that count as past cover?
I had medical insurance. Does that count?
No, although we have heard that some schemes do make exceptions for Primary Health Products that are under their umbrella.
- The late joiner penalty is calculated as a percentage of the basic risk premium. There is no premium paid on the savings portion of the premium.
- 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”, but needs to be fixed going forward.
- Late joiner penalties follow members, even if they change schemes.
Bonus Tip: How to save on your LJP
If there are two adults on your plan, make sure that the one with the highest LJP is the dependant, not the main member. Their premium will be lower, and thus the penalty will be lower too.