The Government Employees Medical Scheme (GEMS) expects to meet the regulator’s requirement to have a 25% solvency ratio for the first time next year — 15 years after it was launched.

The GEMS had 1.833-million members at the end of 2017, and provided cover to a little more than half of all eligible public servants. Its financial stability is crucial to the government’s plans for National Health Insurance (NHI), which envisages the GEMS being merged with all the other medical schemes available to public servants.

The GEMS has always had a solvency ratio far below the 25% required by the Medical Schemes Act, partly due to it growing its membership base, but also 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.

The GEMS made headlines two years ago when its solvency ratio plunged on the back of 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.

The GEMS solvency ratio has since improved, thanks to a raft of changes that include the introduction of underwriting and measures to combat fraud and waste. The GEMS ended 2017 on 15.22% and expects to close 2018 above the 18.2% target set by the Council for Medical Schemes, its principal officer Guni Goolab said on Tuesday.

The scheme anticipates reaching a 25% solvency ratio next year, three years ahead of target, he said. “Hopefully this concern about our financial position will finally be behind us.” 

Goolab said the GEMS would increase its premiums by a weighted average of 7.1% in 2019, which is below the industry average.

Civil servants enjoy generous subsidies from the state for their medical scheme contributions. In line with the most recent wage agreement, civil servants will get an increase in their subsidy for 2019 that is pegged to medical inflation. The precise figure for medical inflation is still under discussion between the Treasury and the department of public service and A=administration, but is likely to come in between 7.8% and 8.6%, said Goolab, who added that most of the GEMS options will see premium increases below medical inflation.