A plan by the Government Employees Medical Scheme (GEMS) for lower contributions – to accommodate union demands – is neither financially sound nor in members’ long-term interests, according to the Council for Medical Schemes, which says it is also unlikely to address the funding shortfall, reports Business Day.
GEMS is being pushed by unions to slash its average contribution increases for 2026, originally pegged at 9.8% for January, then dropped to 9.5% in April, and now expected to be lowered even more to 7.5% from July, subject to approval from the CMS.
CMS registrar Musa Gumede wrote to GEMS principal officer Stan Moloabi last week expressing his concerns and giving him 14 days to submit further documentation to support the revised contribution increase.
Citing an actuarial report submitted by GEMS to the CMS, Gumede said the reduced increase would lead to an annual loss of contribution income of R1.5bn, which the scheme had proposed recouping with benefit adjustments and managed care interventions of a similar magnitude.
But the effectiveness of such interventions was not guaranteed, he said in the letter.
The proposed reduced increase was not in line with the scheme’s obligation to maintain financial soundness, and would exacerbate ongoing operating deficits and a further decline in its solvency ratio below the statutory minimum of 25%, said Gumede.
The scheme’s projections indicated a decline in its solvency ratio to between 21% and 22%, with no immediate path to recovery, he added. This was at 24.7% at the end of 2025.
GEMS has been instructed to provide a revised financial sustainability plan “demonstrating a credible pathway” to increasing its solvency ratio and restoring compliance with Regulation 29 of the Medical Schemes Act, which sets the required solvency threshold at 25%.
It must also provide more details on the cost containment and managed care savings it relied on to support the revised contribution level, and a sensitivity analysis showing the impact on solvency, deficits, reserves and member contributions if the assumed cost savings were not fully realised, or took longer than currently assumed.
Gumede also asked for an explanation of how the scheme intended to manage its loss-making options, Onyx and Emerald.
Moloabi said the scheme was preparing additional information to show it had already achieved savings from recent changes to member benefits and managed care, which included limiting private hospital cover for members of its Tanzanite option to conditions classed as prescribed minimum benefits.
It was also hoping to trim costs by making changes to its list of approved medicines, and to its pre-authorisation for hospital admissions: it was in sound financial health, and able to pay members’ claims, insisted Moloabi.
Cosatu’s chief negotiator at the Public Service Co-ordinating Bargaining Council Itumeleng Molathlegi said if the CMS rejects the plan to cut contribution increases to 7.5%, it would render membership unaffordable for some members.
He suggested GEMS consider alternatives to cutting benefits – like scrapping its marketing budget and slashing the number of board meetings. Trustees held more than two dozen board meetings in 2025, according to its most recent annual report
However, Moloabi said the scheme’s marketing budget was small in comparison to its contribution income, and its non-healthcare expenditure significantly lower than the industry average.
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Unions step up threats over GEMS increases
State medical aid premiums now unaffordable, claims PSA