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.
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.
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)
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
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.