Medical schemes: Beware inflated late-joiner fees

Beware the penalty if you joined a medical aid after your 35th birthday. Irregularities in the way schemes present the calculation of the late-joiner penalty could lead to some members being overcharged.

An independent medical aid comparison site, the Medical Aid Bible, submitted complaints to the Council of Medical Schemes (CMS) about the alleged misrepresentation of the late-joiner penalty calculation against the names of the medical schemes are known to Moneyweb, but they have not yet been notified by the CMS about the complaints.

Eve Dmochowska, founder of the Medical Aid Bible, says the site received several queries from scheme members who suspected that their late-joiner penalties had been incorrectly calculated.

Not every late-joiner is overcharged, but there appears to be inconsistency in the ways different schemes present the calculation of the penalty. “We have come across a number of schemes who misrepresent how the penalty is calculated, in their favour,” she says.

These type of complaints are nothing new, the latest CMS Annual Report shows that the council resolved 46 official complaints about late-joiner penalties in 2014 and 33 in 2015.

How it works

The Medical Schemes Act allows for a late-joiner penalty if the applicant is older than 35, under certain conditions.

The penalty is calculated as a percentage of the applicant’s basic contribution, which excludes the savings component of the contribution. It takes the applicant’s age into account as well as previous membership. The longer the applicant was without medical aid, the higher the imposed penalty.

Membership of an overseas medical aid does not count for credible coverage nor any period of cover as a dependent under the age of 21.

The penalty is then added to the contribution the member pays for risk benefits (for example, hospital stays and chronic medicine) and not to the contribution of the medical savings account, for the duration of membership. It applies to all types of medical aid plans, including hospital plans.

To determine the penalty the following calculation is used: Age upon application minus (35 years + years of previous cover) = total years uncovered.

Number of years uncovered and applicable percentage to calculate fee

Example: If you are 58 years’ old on the date of registration and belonged to another medical scheme for 12 years, the following late-joiner penalty band would apply:

58 – (35+12) = 11 uncovered years, which will result in a 25% late-joiner penalty according to the table above.

Source: Discovery Health Medical Scheme

Complaints

The Medical Aid Bible’s complaints against the schemes are because they all, in different communication formats, seem to base the calculation on the credible coverage that applicants had after age 35.

Alicia Schoeman, legal adviser of the CMS, confirmed that creditable coverage as defined in Regulation 11 includes any period in which a late joiner was a member or a dependant of a medical scheme, not only after age 35. “It is a factual statement and will always apply irrespective of the age of the applicant.”

So for instance if Sally is 38 and was a member of a credible South African medical scheme between age 25 and 30, that 5 years should be considered when calculating credible coverage. Not the 0 years she did not belong to a scheme after age 35.

The Regulations of the Medical Schemes Act Regulations gives the following definition of credible coverage:

Dmochowska states she has no evidence that these schemes actually maliciously overcharge members and that it is possible that they are merely mis-representing the penalty on the application form, brochure or website, but not applying the wrong interpretation.

The consequences if applied incorrectly are that members could be overcharged and that some could be on a less-than-ideal plan, because they believe they cannot afford the plan they want to be on.

Not always applied

As late-joiner penalties form part of the legislation governing medical aid cover, it’s usually the case that it will be applied if an applicant meets the criteria for the penalty. But schemes seem to be flexible and each use their own discretion whether they apply the late-joiner fee. A scheme can impose a lower penalty, for instance 10% even if the applicant actually qualifies for 25%, or waive it completely.

Proof of membership

To ensure their credible coverage is taken into account and correctly calculated, late joiners need membership certificates issued by previous schemes as confirmation of former membership.

The number of schemes have dwindled significantly over the past years. In 2007 there was more than a 120 schemes, whereas there are now only about 80. Hence it could be difficult for former members to get hold of membership certificates.

If you are not able to obtain a certificate, a sworn affidavit of your membership details such as name of the scheme, membership number and period should be accepted according to the Medical Schemes Act. You should however have tried and taken all reasonable steps to obtain proof.

Brought to you by Moneyweb