They are in response to two major factors.
- Medical aids exist for the benefit of their members. The trustees are responsible for the financial stability of the medical aid while ensuring that members receive their benefits at the lowest cost. This requires balancing the needs of both healthy and unhealthy as well as old and young members. The existing members of a medical aid are potentially compromised by people who ,when they are young and typically healthy do not join a medical aid and only choose to do so when they suspect/realise they have a need for cover or later in their life.
- There are certain regulations listed in the Medical Schemes Act which are required to be adhered to be all registered medial aids. These regulations are fairly onerous; however, to mitigate the cost and risk of compliance, the Medical Schemes Act provides medical aids with certain risk management tools – in the form of waiting periods and late joiner penalties.
Medical Aid Requirements
The Medical Scheme Act imposes the following requirements on medical aids:
Open enrolment
All medical schemes must accept all applicants and charge them the same monthly contribution (per benefit plan), regardless of their age and health status.
This is a fundamental provision which placed a huge burden on medical aids to manage their risk profile and their costs. The fact that the average age of members is increasing for many medical aids is one of the main reasons why medical inflation is about double the general inflation rate.
Regulatory reserve requirements
When a member joins, a scheme must hold 25% of the yearly contribution in cash reserves from day one (even before the member has paid their first contribution).
Again, while this gives members a degree of comfort that their claims will be met, it is quite an onerous provision which also affects the rate of medical inflation.
Prescribed minimum benefits.
All medical schemes must provide a set of minimum healthcare benefits which are know as Prescribed Minimum Benefits (PMBs).
In summary, all medical schemes have to cover the costs related to the diagnosis, treatment and care of:
- An emergency medical condition
- A defined list of 270 diagnoses
- A defined list of 26 chronic conditions
These cost of covering these PMBs must be paid out of the “risk” premium and not out of a member’s savings.
Legislated Risk Management tools
Having imposed various conditions on medical aids, to help them manage the risks that they are forced to accept, the Act also provides certain risk management tools medical aids may apply. These risk management tools take the form of
- Waiting periods and
- Late joiner penalties
Medical Aid Waiting Periods
There are 2 types of waiting periods that can be imposed upon new members joining a medical scheme:
- A general waiting period of up to 3 months
- A condition- specific waiting Period of up to 12 months
General waiting period
In a general waiting period, the member (and their dependents) cannot submit any claims to the medical aid. A general waiting period cannot be imposed in respect of PMBs unless there has been a break in cover of more than 90 days.
A general waiting period may be imposed when a member is joins a medical scheme for the first time; is moving between medical schemes or has had a break in cover.
Specific waiting period
A prospective medical aid member is required to answer a number of health-related questions on their application. This will include information regarding any health conditions that they (or their dependents) may have been affected by in the past or are currently experiencing. In certain circumstances (outlined below) a medical may apply a condition specific waiting period in terms of which the member is not able to submit any claims for that condition for a specific period.
This condition specific period may be up to 12 months. If a member is transferring from another medical aid where they are still subject to a condition specific waiting period, the new medical aid may only apply the balance of that condition specific waiting period to the new member.
A condition specific waiting period cannot be imposed in respect of PMBs unless there has been a break in cover of more than 90 days.
A condition specific waiting period may be imposed when a member is joins a medical scheme for the first time; is moving between medical schemes or has had a break in cover.
Once a member has served any waiting period imposed by the medical aid, they may not be reimposed e.g. if the member transfers between plans on the medical aid.
When determining what waiting period may apply to a new member, the medical aid will first need to classify the new member into one of the following three categories:
Having been classified as a Type1, 2 or 3 the medical aid may impose the following waiting period:
As per above, only type 2 and 3 will qualify for PMBs in the waiting period.
Waiting periods do not apply to children who are born during the period of membership, a member moving between options on the same medical scheme, or members transferring to a new medical scheme involuntarily (e.g. an employer changing the medical scheme of their employees).
A medical scheme may waive waiting periods under certain circumstances such as for a large employer group joining the scheme – particularly if membership is compulsory.
Late Joiner Penalty
A late joiner penalty can be applied to people over the age of 35 and is dependent on their age and the time that they have not been a member of a medical aid since the age of 35. The penalty is applied on a sliding scale and ranges from 5% to 75% of the premium. Once applied this penalty will always remain.
The late joiner penalty can only be applied on a member’s or a member’s dependent’s “risk” portion of their contribution i.e. not on any savings portion.
In summary a late joiner is an applicant or a dependent who, at the time of applying for membership is:
- 35 or older
- Was not a member of a registered medical scheme before 1 April 2001
- Or has allowed more than a 3 month break in membership since 1 April 2001.
A late joiner penalty is applied to the risk portion of the contribution based on the following scales:
The late joiner penalty is applied per member i.e. if a membership has a principal member together with 3 dependents, 2 of which are classified as late joiners, then the later joiner penalty is only applied to the contributions related to those late joiners.
Membership of any non-South African medical aid is not recognised when determining a member’s, or their dependent’s, medical aid coverage
Medical Aid Proposal
Do you still have questions about medical aid waiting periods or are you still confused about how your medical aid actually works? Reach out to Ubuntu Capital and a professional financial planner will get hold of you to explain everything and discuss any of your requirements.
Alternatively you can request a personalised medical aid proposal based on your income, requirements and your family composition (with Momentum Medical Aid) by completing our simple online form by clicking the link below.
Get a Medical Aid Proposal from Ubuntu Capital by clicking here
