Late joiner penalties

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The nightmare of late joiner penalties

A medical scheme may impose a late joiner penalty on a late joiner in terms of regulations 11 and 13 of the Medical Schemes Act 131 of 1998.

What? Who? When?

A late joiner penalty is an amount added to your monthly contribution, if you are a late joiner, for as long as you are a member of a medical scheme. The penalty (the percentage applicable) is even carried over to the new scheme in the case of you joining another medical scheme.

You are a late joiner if you are 35 years of age or older at the date of your application for membership of a medical scheme and were, at any stage since 31 March 2001, not a member of a medical scheme for more than three consecutive months.

A late joiner can be the main member or any other of his/her dependant beneficiaries, e.g. a spouse, a parent or an adult child. It is not applicable to minor children.

The said regulation 11 defines Creditable (sic) coverage (it should, with respect, read Credible coverage) as any period in which a late joiner was a member of a medical scheme or schemes since the age of 21 years.

Even if you are a late joiner, you can still avoid the imposition of a penalty if you can proof enough years of credible coverage.

Enough years of credible coverage

Add up all your periods of membership of medical schemes since age 21 and then add this sum total to 35. Now, subtract the number so obtained, from your current age.

You have enough years of credible coverage if the answer amounts to a negative number or a nil and a late joiner penalty will not be imposed. You do not have enough years of credible coverage if the answer is a positive number and a late joiner penalty will then be imposed.

This positive number determines the extent of the penalty:

1 to 4 years — 0,05 (05%) of the contribution
5 to 14 years — 0,25 (25%) of the contribution
15 to 24 years — 0,50 (50%) of the contribution
25 years and more — 0,75 (75%) of the contribution

The penalty is calculated on your risk contribution, not on your savings.

Sufficient proof

Normally, certificates of membership issued by previous medical schemes furnished to your new scheme will suffice. Such certificates confirm start and end dates, dates benefits started, any waiting periods not yet concluded and also the possible existence of previously imposed late joiner penalties.

It is often impossible, for various reasons, to obtain these certificates.  A scheme perhaps does not exist anymore, or relevant records don’t go back so far or you cannot even remember a previous scheme’s name. In such a case you may produce a sworn affidavit as sufficient proof of your credible coverage.

The affidavit must attest to your periods of membership, the name or names of the relevant scheme(s) and that you have made reasonable efforts to obtain documentary evidence of such periods of coverage, but have been unsuccessful. It would be wise to actually describe the steps you have taken and the extent of the efforts you have put in.

Put it right if it’s wrong

Do you (or anybody you know) suffer from an imposed late joiner penalty? It is definitely worth your while to ascertain if you are indeed a late joiner, that you have furnished your scheme with sufficient proof of your credible coverage and that your penalty was determined correctly.

Especially if you were not given the opportunity to proof your previous years of credible coverage by way of an affidavit, there is a very good chance that your penalty was calculated wrongly. By producing such affidavit now, you can still put it right if it is wrong, albeit it from the date of producing the new evidence

Regulation 13(4) of the said Act states: Where an applicant or his or her dependant produces evidence of creditable (sic) coverage after a late joiner penalty has been imposed, the scheme must recalculate the penalty and apply such revised penalty from the time such evidence is provided. Evidence may also be in the form of a sworn affidavit, as explained above.

Unfortunately, the scheme is not obliged to do it retrospectively.

Case study

What I wrote to the member’s current scheme:

Hierby sertifikate van lidmaatskap deur Transmed en Medshield ten opsigte van die lid, mnr. XYZ. Sy totale aantal jare van geloofwaardige lidmaatskap by hierdie twee skemas is ten minste 23 jaar. Tel mens 23 by 35 is die totaal 58. Hy is tans nog nie 53 jaar oud nie en die huidige laat-aansluitingsboete van 25% wat hom opgelê is, is dus foutief.

Ek versoek u dus hiermee eerbiediglik om die laat-aansluitingsboete summier af te haal.

Die feit dat al die nodige bewyse van vorige lidmaatskap klaarblyklik nie saam met die oorspronklike aansoek by u ingedien is nie, is nie aan die nalatigheid van die lid te wyte nie, maar waarskynlik as gevolg van gebrekkige hulp/advies wat destyds aan hom verleen is.

The scheme’s reaction:

Dear Hein
Thank you for your enquiry dated…
The late joiner penalty in respect of the above member has been removed.
Should you require…
Kind regards

Just by obtaining a certificate of membership from Medshield and lodging it with the member’s current scheme (which the previous broker initially should have done) I now save the member at least R323,75 per month

From the said regulations it appears that schemes do have a discretion as far as late joiner penalties go. Although they are normally very strict to impose late joiner penalties, it is definitely worth the trouble to debate a case with a medical scheme in certain circumstances, especially in borderline situations.

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