When you apply to join a medical scheme, you may find that the scheme will enforce waiting periods or late-joiner penalties. You need to know your rights and the reasons the scheme will impose these measures. You should also be aware that it is better to be honest when you fill out your membership application form and to sit out the waiting periods, because failing to make full disclosure could have dire consequences for you. In this, the last of our current series of articles on how to manage your money, we tell you what you need to know about joining a medical scheme.
The final steps in choosing a medical scheme are to work out what you will pay to belong to your chosen medical scheme option, whether you will pay any late-joiner penalties and whether the scheme will impose any waiting periods.
You may need to complete and submit your application form before the scheme will notify you formally of any waiting periods and late-joiner penalties it will apply.
Before it sends you such notification, the scheme may request further information from you about your membership history, your medical conditions or those of your dependants, and/or your income.
The medical scheme may insist on a medical report so that it knows whether to apply certain waiting periods, but the scheme must pay the costs of any medical tests or examinations it requires.
The letter you get back from the scheme, known as the counter-offer letter, will detail the terms and conditions of your becoming a member. These are valid for 30 days.
You should sign the acceptance form only after you have read the terms and conditions carefully, and have ensured that you understand and agree to them. Do not sign if you do not agree with any waiting period or late-joiner penalty the scheme imposes.
Also, if you already belong to a scheme, do not cancel your membership until you have received formal notification that another scheme has accepted you as a member.
To work out what you will pay to belong to a scheme, check the rates the scheme charges for a member. If you have dependants, add the rates for each adult dependant and each child dependant.
Before you work out the final amount, if you have not been a member of a scheme consistently since the age of 35, check whether the scheme will impose any late-joiner penalties, as these could raise your contributions significantly.
When late-joiner penalties will apply
Medical schemes can apply late-joiner penalties on people who join a scheme late in life when they are older and are more likely to need medical cover, or are already in need of medical attention.
The penalties are intended to encourage people to join schemes while they are still relatively young and healthy to ensure there is sufficient subsidisation by the young and healthy of the old and sick.
Open schemes have to admit anyone who applies to join, and the penalties help to protect existing members from the negative financial consequences of the scheme admitting older members who are likely to claim more.
If late-joiner penalties are applied, you will pay a loading on your contributions that will apply for as long as you are a member.
If you change schemes after belonging to a scheme that imposed such a penalty, the new scheme may impose the same penalty.
The late-joiner penalties can be applied to anyone who joins a scheme, or to an adult dependant of that member, who is 35 years of age or older, who has had a break in membership or cover as a dependant on any scheme since March 31, 2001 and who does not have enough years of what is known as creditable medical scheme cover as a member and/or dependant.
If you think a scheme may impose a late-joiner penalty, contact it or get your broker to inquire what penalty will apply.
How late-joiner penalties are calculated
The penalties that may be applied are laid down in regulations under the Medical Schemes Act.
The method a scheme will use to determine the penalty is:
1. It will work out the number of years you have been a medical scheme member. You can include the number of years you have been:
- A member or a dependant of a medical scheme but not any years when you were under the age of 21 and a dependant of a medical scheme member;
- A member or a dependant of an entity that does the business of a medical scheme that at the time was exempt from the provisions of the Medical Schemes Act;
- A uniformed employee of the South African National Defence Force (SANDF), or a dependant of such an employee, who got medical benefits from the SANDF; or
- A member or a dependant of the Permanent Force Continuation Fund.
You cannot include any period when you had health cover under an insurance policy, nor any periods when you were out of the country and covered by a health plan or policy in another country.
If you join a scheme after a break of more than 90 days from any previous membership or if you do not have two years of continuous membership when you join a new scheme, you will need to prove your previous periods of membership to the new scheme.
If you have lost the records of your previous membership of a scheme or if you were a member of a scheme that has been liquidated, you can sign a sworn affidavit stating when you were a member, and this can be used to negate all or a part of a late-joiner penalty.
2. Add the answer in step one to 35 (the age from which the late-joiner penalties apply).
3. Subtract the answer in step two from your current age.
4. The answer in step three will determine the penalty band and hence the maximum penalty, as a percentage of your contributions, that will apply according to the following table:
1-4 years: contribution x 0.05
5-14 years: contribution x 0.25
15-24 years: contribution x 0.50
25+ years: contribution x 0.75
Schemes have the discretion to waive late-joiner penalties, but some apply them strictly regardless of the reason for which members join a scheme late in life.
The late-joiner penalties apply only to adult members and dependants and not to child dependants.
Waiting periods
Medical schemes are allowed to impose limited waiting periods on you when you join a scheme, with harsher periods for those who join schemes without having belonged to one previously, or after a certain break in membership. This is to prevent you from joining a medical scheme only when you are sick and need benefits.
During waiting periods, you and/or your dependants will not enjoy certain benefits.
Schemes can impose:
- A three-month general waiting period on all benefits. During this period, you and your dependants are not entitled to claim any benefits, except sometimes the prescribed minimum benefits (PMBs).
- A 12-month waiting period on benefits related to a specific condition. The condition-specific waiting period can be applied to any condition for which you or your dependants sought medical advice, obtained a diagnosis, or for which care or treatment was recommended or received within the 12 months before the date on which you applied to join the scheme.
If a waiting period is imposed and you change medical schemes before that waiting period is up, your new scheme can impose whichever new waiting periods apply, as well as the remaining portion of the waiting period the previous scheme imposed.
When waiting periods cannot be imposed
The Medical Schemes Act says schemes cannot impose waiting periods if:
- You apply for membership or register a dependant within 90 days of ending your previous medical scheme cover and the change is due to a change in your employment; or
- If the change of medical scheme is due to your employer changing or terminating the group scheme for its employees, the application is made within 90 days of your employer terminating your cover with the previous scheme, the application is made within a reasonable period before the start of a new year and your membership will start at the beginning of a year.
Which waiting periods can be imposed when
If neither of the above conditions apply, a scheme may impose the following waiting periods:
1. A three-month general waiting period if you have been a beneficiary (a member or dependant of a member) of a scheme within the 90 days before you apply to join a new scheme and if you have been a beneficiary of one or more schemes for a continuous period of more than 24 months. The general waiting period will not apply to the PMBs.
2. If you have not been a beneficiary of a medical scheme for a period of more than 90 days before you apply to join a new scheme, the scheme may impose:
- A three-month general waiting period; and
- A 12-month condition-specific waiting period (if applicable).
These waiting periods will also apply to any treatment that falls under the PMBs.
3. If you have been a beneficiary of a scheme within the 90 days preceding an application to join a scheme but have not been a beneficiary of one or more schemes for a continuous period of 24 months, the scheme can impose:
- A 12-month condition-specific waiting period (but this will not apply to the PMBs); and
- The balance of any unexpired general or condition-specific waiting period imposed by the previous medical scheme.
The waiting periods are applied to the member and each adult dependant individually.
You cannot buy out of any waiting period, and you cannot remain a member of one scheme and join another at the same time in order to have cover while the waiting periods on the new scheme apply.
MATERIAL NON-DISCLOSURE CAN COST YOU DEARLY
When you fill in your medical scheme application form, be aware that there can be serious consequences for you if you fail to declare "material information" about your medical history or that of your dependants.
Material information is any information the scheme requests that could be used to assess the risk of taking you on as a member.
Medical schemes have the right, in terms of the Medical Schemes Act, to cancel or suspend your membership or that of any of your dependants on the grounds of the non-disclosure of material information.
If you fail to disclose all the information the scheme asks for on its application form, you will prevent it from being able to assess its risks and possibly from imposing condition-specific waiting periods.
You cannot be made to pay more in contributions if you have health problems. The worst that can happen is that the 12-month condition-specific waiting period will be imposed, and this will apply only if you have left more than 90 days between changing schemes or if you have not belonged to a scheme for more than two years.
The financial consequences of your membership being terminated and your claims being denied may far outweigh those of this waiting period.
Schemes check for non-disclosure by checking the hospital admissions, chronic medication applications or other big claims submitted by new members. Then they will check if you declared the condition and your medical history.
In many cases, schemes have discovered non-disclosure when a member or dependant has been hospitalised for something related to a pre-existing condition. As a result, they have terminated these members' memberships, leaving them with expensive hospital bills.
The Council for Medical Schemes Appeal Committee has even upheld the right of schemes to terminate membership where members have claimed their broker was to blame for supplying the incorrect information.
The committee has taken the view that if you sign the application form and confirm you have read the form and warranted that the information on it was correct, you must bear responsibility for your conduct.
Do not rely on a medical scheme broker to fill in your medical history on an application form. Instead, fill in the form yourself or supply your broker with a list of your and your dependants' medical conditions, and then check that the conditions have been recorded correctly on the application form before you sign it.