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A late joiner penalty is a fee that a medical aid in South Africa levies for new members who join the scheme after 35 years of age. While South African medical schemes have an open policy for members younger than 35 years, the situation changes as you get older. By joining a scheme later in life a penalty is added to your monthly medical aid contribution. It is one way that medical aids cover the risk of accepting older members who are more likely to require more cover which is largely an age-related issue.

How is late joiner penalty calculated?

Medical schemes use an equation to determine the amount of the penalty that will be added to your monthly contribution. It takes into consideration your age and membership to a medical aid in the past. Your current health status is not a factor when calculating the late joiner penalty since the open policy of South African medical schemes means that any person of any health status can join a scheme for the same rate. However, waiting periods do apply if you have a pre-existing condition.

A late joiner penalty can almost double your medical aid monthly contribution if you have never been on a medical aid in the past and if you are older than 60 years. Since it is calculated on an individual basis, it is not a set fee that is applicable to every person who joins after 35 years of age, whether you are 35 years old today or 65. It is always important to provide proof of your past medical aid membership if applicable – it can play a significant role in reducing your monthly contributions when the late joiner penalty is calculated.

Why is this fee levied?

If you have taken life insurance, severe illness cover or a physical impairment policy then you will know that your age at the inception of the policy plays a major role in determining your premium. Medical aid is the same but much more flexible up until the age of 35 years – there is no additional fee to the monthly contributions whether you start up on medical aid at 20 or 30 years of age. With these other financial products even your lifestyle, past medical history and family history can affect the premiums you pay every month. It does not with medical aid.

Remember that as you get older your medical needs increase. While younger people may fall ill and even develop life-threatening conditions, general health status is closely related to age. Therefore your risk profile increases as you get older. Medical aid only takes age into factor after 35 years which allows you a large leeway if you are starting up medical aid later than you should. The late joiner penalty policy is in place to protect all members of a medical aid and is a very fair policy when considering the way age is applicable to costing of other financial products.

Medical aids are non-profit organisations in South Africa. Schemes work by pooling the total contributions of all members and paying out for the legitimate medical bills from those members that claim. The basis of this cover is that younger medical aid members are less likely to claim while older members will have more medical bills. Ideally a medical aid would prefer to have a large member base of younger and healthier people.  A later joiner penalty ensures that people do not only start up on cover when they are older and need to claim thereby draining the resources of the scheme.