Unfortunately, the public healthcare system in South Africa is not reliable, and as such, South Africans are encouraged to become members of medical aid schemes to be able to afford private healthcare. From a personal financial planning point of view, it is a core consideration to be a member of a medical aid given that any event that might cause a hefty medical bill will derail any long-term financial goals you might have been working towards.
To incentivise individuals to contribute towards medical aid schemes early, and not just when they need to make a claim, the Council for Medical Schemes has implemented a policy known as “late joiner penalties”, that medical aid schemes are allowed to impose on members in given circumstances. These penalties are designed to strike a balance between promoting early enrolment and accommodating those who may have delayed joining a medical aid scheme. In this article, we will explore how late joiner penalties work in South Africa, how they are calculated, and essential points to remember when considering medical aid enrolment.
Late joiner penalties apply to individuals who have not been a member of a medical aid scheme before the age of 35. In other words, if you have never had medical aid cover or if you had it, but let it lapse for an extended period, usually three months, and rejoin after turning 35, you may be subject to late joiner penalties. These penalties are imposed to ensure that younger, healthier individuals do not wait until they need medical services to join a scheme, which would adversely affect the risk pool and increase overall costs for the scheme and its members.
Calculating Late Joiner Penalties
The late joiner penalty is calculated based on the individual’s age at the time of joining the medical scheme and the number of years they were not a member of any registered South African medical scheme since the age of 35. The penalty is applied as a percentage of the individual’s premium, which is added on top of their standard monthly contribution to the specific medical aid scheme. The penalty amount is usually a percentage (ranging from 5% to 75%) of the base contribution rate, which is set by the specific medical aid scheme.
It’s important to note that late joiner penalties are cumulative, meaning that the penalty amount increases with each additional year of non-membership. For instance, if an individual delayed joining a medical aid scheme for five years after turning 35, and the penalty for each year is 10%, the total late joiner penalty would be 50% of the base contribution rate.
Key Considerations for Late Joiners
It is clear that by not contributing to a medical aid scheme, despite being in good health in your youth, can have a lasting impact on your future finances. Be mindful therefore to make medical aid scheme contributions a priority in your budget to avoid having to pay for it later in life. If you have however not been able to contribute to a medical aid scheme for various reasons, here are some things to consider before joining a medical aid scheme.
Understand the Waiting Periods: Late joiner penalties are often accompanied by waiting periods, during which certain pre-existing conditions may not be covered. Be aware of the waiting periods specified by the medical aid scheme you are considering.
Seek Professional Advice: Calculating late joiner penalties and choosing the right medical aid scheme can be complex. It is advisable to seek advice from a qualified financial advisor or healthcare consultant to understand the implications fully.
Compare Different Schemes: Each medical aid scheme has its benefits, coverage options, and pricing structures. Thoroughly compare different schemes to find one that best suits your needs and budget.
Consider Future Needs: Think about your future healthcare needs and consider how the medical aid scheme’s benefits and coverage align with those needs.
Prioritise Preventive Care: Taking care of your health proactively can reduce the likelihood of relying heavily on medical aid in the future. Consider lifestyle changes and regular health check-ups to stay healthy.
Late joiner penalties are an essential aspect of South Africa’s medical aid system, encouraging early enrolment and promoting responsible healthcare planning. Understanding how these penalties are calculated and considering the necessary factors when choosing a medical aid scheme can help individuals make informed decisions about their healthcare coverage as well as their financial well-being.
