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The medical schemes regulator has rejected the Government Employees Medical Scheme’s (GEMS) request to reduce its average contribution increase to 7.5%, saying the proposal flies in the face of industry best practice and is at odds with advice from the scheme’s own actuaries. The development is set to heighten tension between GEMS and unions, which have run a sustained campaign against the rising cost of membership.“While the registrar acknowledges the scheme’s objective of improving affordability, such considerations cannot override statutory obligations, including the requirement to maintain financial soundness and protect members’ long-term interests,” said Council for Medical Schemes (CMS) registrar Musa Gumede.“Schemes seeking to moderate contribution increases are generally those that have already attained and maintained solvency levels in excess of the prescribed minimum. In this instance (GEMS) solvency remains below the statutory threshold, and the proposed reduction is therefore not considered prudent,” he said in a letter to GEMS, a copy of which has been seen by Business Day.The Medical Schemes Act requires schemes to maintain a solvency ratio of at least 25%. A scheme’s solvency ratio, the ratio of its accumulated funds to its annualised contribution income, is considered a key measure of its financial stability. GEMS’ plan to cut its contribution increase to 7.5% in July would result in a net deficit for the year and see its solvency ratio decline to 22.9% in 2026, said Gumede. Its solvency ratio would then drop still further to 21%, he said. “The recovery to 25% occurs only by 2030, or earlier only if higher future contribution increases of between 9.2% and 9.8% are achieved or substantial savings of R2.7bn are achieved,” he said.The scheme had not demonstrated a credible path for restoring solvency, he said.GEMS initially planned an average contribution increase of 9.8% for 2026. In an effort to accommodate union demands, it obtained CMS approval to lower the contribution increase to 9.5%, with effect from April. However, the unions were not satisfied and pushed GEMS to lower the contribution increase still further, to 7.5%, with effect from July. In an unusual turn of events, GEMS and the unions announced they had agreed to the change before GEMS had received the go-ahead from the regulator. Gumede first signalled his concerns about the plan in early June but gave GEMS an opportunity to make further input to demonstrate how the 7.5% contribution increase would meet its claims, expenses and solvency requirements. He has now rejected GEMS’ plan, saying its proposals for cutting costs to offset the drop in contribution income are risky as they are not guaranteed to deliver the required savings. “The registrar is not satisfied that the savings are sufficiently certain, realised or enforceable to support the reduced contribution level,” he said.Gumede flagged the fact that GEMS’ actuary had stated it was unable to support the proposed reduction to 7.5%. “The scheme has not demonstrated that the proposed contributions are actuarially adequate, as required in our letter of June 11,” he said. GEMS principal officer Stan Moloabi said the proposal to reduce the contribution adjustment to 7.5% had been informed by the scheme’s commitment to easing the financial burden on members. “We recognise the cost-of-living pressures many of our members continue to face, and affordability remains a key consideration in every decision we make,” he said. GEMS respected the regulator’s decision, he said.
