How medical schemes ‘cheat’
Beware the penalty if you joined after your 35th birthday.
Given our employment insecurity, we can’t all belong to a medical scheme all the time, but are the late-joiner fees we’re paying calculated correctly?
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 overcharging.
An independent medical aid comparison site, the Medical Aid Bible, has submitted complaints to the Council of Medical Schemes (CMS) about the alleged misrepresentation of late-joiner penalty calculations by several medical schemes.
Apples and oranges
Eve Dmochowska, founder of the Medical Aid Bible, says not every late-joiner is overcharged, but there appears to be inconsistency in the ways schemes say they calculate the penalty.
“We have come across a number of schemes who misrepresent how the penalty is calculated, in their favour,” she says.
The latest CMS Annual Report shows that the council resolved 46 official complaints about late-joiner penalties in 2014 and 33 in 2015.
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. It considers the applicant’s age and previous membership. The longer the applicant was without medical aid, the higher the imposed penalty.
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.
Missed cover for up to four years attracts a 5% contribution penalty, five to 14 years missed has a 25% penalty, 15 to 24 years gets a 50% penalty and more than 25 years a 75% penalty.
So, 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.
In all the Medical Aid Bible’s complaints, the schemes seem to base the calculation on the cred- ible coverage that applicants had after age 35.
Legal eagle
Alicia Schoeman, legal adviser of the CMS, confirmed that creditable coverage as defined includes any period in which a late joiner was a member of a medical scheme, not only after 35.
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.
Dmochowska states she has no evidence that these schemes maliciously overcharge members.
We have come across a number of schemes who misrepresent how the penalty is calculated.
Eve Dmochowska, Founder of the Medical Aid Bible