Unions are pressuring the Government Employees Medical Scheme (Gems) to keep its 2026 contribution increase to single digits, after this year’s controversial 13.4% hike.
The double-digit premium increase was implemented despite opposition from two of the public sector’s biggest unions, the Public Servants Association (PSA) and the National Education, Health and Allied Workers’ Union (Nehawu), and came after several years of modest increases.
Gems is the biggest medical scheme for public servants and their dependants, and provides cover to just fewer than 2.42-million beneficiaries.
Unions had indicated they did not want another double-digit increase, said Gems principal officer Stan Moloabi.
“We will work hard to come up with an increase that takes the interests of the member into consideration while we protect the financial sustainability of the scheme,” he said in an interview on Monday.
Members had indicated they would like next year’s premium increase to be no higher than medical price inflation, which is likely to be about 8.5%, he said.
In line with industry trends, Gems instituted unusually low annual contribution increases after the Covid-19 pandemic, as it deliberately ran down accumulated reserves.
Most schemes built up a cash pile during the pandemic due to unexpectedly low claims, as people deferred nonurgent care and avoided visiting healthcare facilities to reduce their risk of Covid-19 infection.
Many schemes reported record solvency ratios during the height of the pandemic and then sought to return some of the accumulated funds by holding down contribution increases and budgeting for a deficit.
A medical scheme’s solvency ratio, a key metric in gauging its claims-paying ability, measures the ratio of accumulated funds to gross annual contribution income. The Medical Schemes Act stipulates that a scheme’s solvency ratio must be at least 25%.
Gems had a solvency ratio of 47% at end-2021, and thus raised premiums by just 2% in 2022. Contribution increases were similarly low for 2023, at just 3%.
But since 2024, Gems has sought to balance its anticipated claims for the year with its projected contribution income, and moved its solvency ratio closer to the statutory threshold. Its average contribution increase for 2024 was thus 9.5%.
Gems’ solvency ratio stood at 26.45% at end-May and is projected to be just 25.06% by year-end, slightly lower than the 25.62% budgeted for the year.
The lower-than-planned solvency ratio is due to lower-than-expected contribution income and higher-than-expected claims expenditure, said Moloabi.
Gems is projecting its contribution income will be R65.5bn instead of R66.7bn. It expects claims expenditure to be R66.4bn, rather than the R65.7bn it budgeted for.
The lower-than-anticipated contribution income is due to a slight decline in membership, combined with buy-downs, as some members have switched to cheaper options, said Moloabi.
The scheme projects it will have 886,081 principal members at year-end, down on the 887,981 it budgeted for, and saw almost 65,000 buy-downs in January.
The increase in claims expenditure is due to multiple factors, including an ageing population with a growing burden of disease, supplier-induced demand, and ongoing problems with fraud, waste and abuse, said Moloabi.
Gems has already taken steps to manage its claims expenditure with the introduction in May of stricter rules for waiting periods and late-joiner penalties.
These changes are aimed at stopping people from cycling in and out the scheme as their medical needs wax and wane, said Moloabi. The scheme also plans to strengthen its managed care interventions and will not enhance its benefits for 2026, he said.
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