• Linda van Rensburg

How to avoid your medical aid’s late joiner penalty

Medical schemes are required to maintain a reserve level of 25% of gross contributions. Members who joined the scheme earlier in life would therefore have contributed towards the scheme’s reserves for a longer period than those that join the medical scheme later in life or when they need to claim. It is for this reason that the Medical Schemes Act allows the application of late joiner penalties, not only to encourage members to join earlier in life, but also to protect the existing members.

Late joiner penalties are applied after the age of 35 and are not applicable to members or dependants who were on a medical scheme prior to 1 April 2001 and who have not had a break in cover of more than three months since this date.

Should this however not be the case, a late joiner penalty may be applied. When calculating the late joiner penalty, only coverage on a registered South African medical scheme is taken into account. This is referred to as ‘credible coverage’.


An applicant aged 65 declares having been on a medical scheme for a period of 25 years. The credible coverage is deducted from the member’s current age (65 – 25 = 45) which means that the member was not on a medical scheme for 10 years after the age of 35. The late joiner penalty percentage is therefore 25%.

It is important to note that the late joiner penalty is only calculated on the late joiner’s risk premium i.e. excluding savings account contributions.

How long does a late joiner have to pay the penalty?

As the late joiner penalty is intended to ensure that reserves are accumulated for members/dependants joining later in life, the late joiner penalty is applicable for the entire period that the late joiner is a member of a medical scheme.

What if the late joiner is an expatriate and had been on a medical scheme in another country before relocating to South Africa?

As expatriates are not contributing towards reserves while overseas, a late joiner penalty may be applied upon relocating to South Africa. Medical Scheme cover in another country is not considered credible coverage and will therefore not be taken into account.