It’s that time of the year again…you need to decide on your medical aid option.

Besides the usual hefty increases (and reduced benefits), there seems to be a whole lot more to consider when choosing your 2021 option. There’s the pandemic, of course. But the National Health Insurance (NHI) proposal is another development. In the face of these uncertainties, it’s no surprise that our clients are exploring all the options available to them, including changing providers altogether.

With this in mind, it seems prudent to discuss the dreaded Late Joiner Penalty (LJP). It’s something you’ll need to contend with when moving from one medical aid provider to another. It can also apply to those joining a medical aid scheme for the first time.

Background

LJPs were introduced by the Council of Medical Schemes (CMS) via the Medical Schemes Act, effective 1 April 2001. The legislation stipulates that a penalty will be levied against any South African individual – upon joining a scheme – who has gone without registered medical aid cover for any length of time once they’re over the age of 35.

Any credible coverage that an individual was on from the age of 21 is offset against the amount of years that an individual had not been on a medical aid from the age of 35. The penalty imposed is based on a sliding scale. The more years with no creditable coverage, the greater the penalty.

How is the penalty calculated?

First, let’s deal with what constitutes ‘credible coverage’ and then discuss how it feeds into the LJP calculation.  

Credible coverage

• Credible coverage can only be accumulated from an SA registered medical aid scheme
• Only medical aid cover from 21 years of age and older is counted as credible coverage

Formula to calculate LJP

To determine the applicable penalty band to be applied to a late joiner, the following formula is used:

A = B minus (35 + C)

• “A” means the number of years to be used in determining the appropriate penalty band;
• “B” means the age of the late joiner at the time of his or her application for membership or admission as a dependent; and
• “C” means the number of years of creditable coverage which can be demonstrated by the late joiner.3. Penalty bands

Penalty bands

The figure ‘A’ derived from the above calculation then plugs into the appropriate band in the table below, with the penalty leveled equal to the new monthly medical aid contribution multiplied by the factor associated with the relevant band.

The premium penalties shall not exceed the following bands:

Penalty Bands	Maximum penalty
1 - 4 years	0.05 x contribution
5 - 14 years	0.25 x contribution
15 - 24 years	0.5 x contribution
25+ years	0.75 x contribution

Points to consider in determining the LJP

• Where an applicant, or one of their dependents, produces evidence of creditable coverage after a late joiner penalty has been imposed, the scheme must recalculate the penalty and apply such revised penalty from the time that evidence is provided.
• Late joiner penalties may continue to be applied upon transfer of the member or adult dependent to other medical aid schemes.
• Sufficient proof of creditable coverage will be accepted if the applicant produces a sworn affidavit in which he or she declares;
  •   the relevant periods in which he or she was a member or dependent and the name or names of the relevant medical aid schemes or other relevant entities corresponding with such period or periods; and
  • that reasonable efforts have been made to obtain documentary evidence of such periods of creditable coverage, but have been unsuccessful.

Hopefully this gives a little more insight into what an LJP is and how to calculate it.

Our specialised Healthcare Advisory division is dedicated to offering a superior healthcare consulting and brokerage service, giving you exactly the advice you need to find the perfect medical scheme to fit your exacting needs and budget.

Please feel free to contact us with any questions regarding your LJP or if you should have any other medical aid queries.