State medical scheme GEMS urges caution on merger plans
Changes should be discussed in Public Service Co-ordinating Bargaining Council, principal officer says
The principal officer of the Government Employees Medical Scheme (Gems) has warned about the state’s plans to merge it with other schemes for public servants, saying consolidation will require careful planning and consultation with unions.
The Council for Medical Schemes released a discussion document in September proposing the consolidation of all medical schemes for public servants into Gems in line with government policy on National Health Insurance (NHI).
The council identified 10 schemes that could be amalgamated with Gems, including Polmed for the police and Parmed for MPs and judges, as well as state-affiliated entities such as the SABC and Rand Water. It said that consolidating public-sector medical schemes with Gems offered potential savings as a larger scheme would have more negotiating power with health-care providers.
“I don’t see it as a rushed process. It needs to be done in a carefully considered way,” said Gems principal officer Guni Goolab in an interview with Business Day on Tuesday.
“It has to be government-led and carefully negotiated with employees,” he said. Changes should be discussed in the appropriate forum, namely the Public Service Co-ordinating Bargaining Council, he said.
Goolab said two processes should ideally unfold before other schemes merged with Gems: the various medical schemes available to public servants should align their benefit plans and options, and investigate the scope for combining their purchasing power for goods and services.
Consolidation with Gems should not be limited to the schemes identified by the Council for Medical Schemes in its discussion document. For example, local-government employees and those working for chapter 9 institutions such as the public protector should also be considered, he said.
Plans to consolidate Gems with other schemes have already run into opposition from the Public Servants Association, which represents about a fifth of public servants. PSA spokesperson Tahir Maepa previously told Business Day that the union had received many complaints about Gems from its members and was concerned about its financial stability as its solvency ratio was below the 25% statutory requirement.
Goolab said Gems expected to meet the regulator’s requirement to have a 25% solvency ratio for the first time in 2019, a full 15 years after the scheme was launched in 2004.
Gems had 1.833-million members at the end of 2017, and provided cover to more than half of all eligible public servants. Its financial stability was crucial to the government’s plans for NHI, in which Gems would be merged with all other medical schemes available to public servants.
Gems has always had a solvency ratio far below the 25% required by the Medical Schemes Act due to the fact that it was growing its membership base and because it provided generous benefits without underwriting.
It did not impose waiting periods on new members and allowed people to join and quit repeatedly as their healthcare needs ebbed and flowed, compromising its ability to build reserves.
A scheme’s solvency ratio measures its claims-paying ability and is the ratio of members’ accumulated reserves to its annualised contribution income.
Gems made headlines two years ago when its solvency ratio plunged due to an unexpected spike in costly hospital admissions. Its solvency ratio fell from 9.46% in December 2015 to an intra-year low of just below 4% in September 2016.
Gems’s solvency ratio had since improved, thanks to a raft of changes that included the introduction of underwriting and measures to combat fraud . Gems ended 2017 on 15.22%, and expected to close 2018 above the 18.2% target set by the Council for Medical Schemes, said Goolab. The scheme expected to reach a 25% solvency ratio in 2019, three years ahead of target, he said.
“Hopefully this concern about our financial position will finally be behind us,” he said.
Goolab said Gems would increase its premiums by a weighted average of 7.1% in 2019, below the industry average.
Public servants enjoy generous subsidies from the state for medical scheme contributions. In line with the most recent wage agreement, they will get an increase in their subsidy for 2019 that is pegged to medical inflation.
The precise figure for medical inflation was still under discussion between the Treasury and the department of public service & administration, but it was likely to come in at 7.8%- 8.6%, said Goolab. The premium increases of most Gems options would be lower than medical inflation, he said.