THE Government Employees Medical Scheme (GEMS) is about to become far less generous to civil servants and their families, as it tries to stabilise its membership base and improve its finances.
From October 1, it plans to implement waiting periods for previous and new members, a measure it hopes will put an end to civil servants opting in and out of GEMS as their health needs wax and wane.
While the move may be financially prudent, it is a move unlikely to sit well with public sector unions. Medical benefits are a key perk of the job and were central to last year’s three-year wage deal.
Earlier this week it emerged that GEMS is scrambling to deal with an unexpected spike in hospital claims, which has put pressure on its solvency ratio. GEMS’s solvency ratio stood at 9.46% at the end of last year, less than half the statutory requirement of 25%. The solvency ratio measures a scheme’s claims-paying ability and is the ratio of members’ accumulated reserves to its annualised contribution income.
While GEMS confronts many of the cost pressures facing the medical schemes industry as a whole, it also has some unique challenges. Unlike other medical schemes, it has never made use of the underwriting provisions in the Medical Schemes Act designed to protect schemes from "anti-selection", a phenomenon in which people only join up when they get sick or anticipate big health bills. The Act allows schemes to impose a late joiner penalty on people who have never previously belonged to medical schemes, a three-month waiting period in which the new member pays contributions but cannot claim, as well as a 12 month-exclusion on pre-existing medical conditions.
As a result, many civil servants and their dependents join and leave GEMS on a whim, compromising the scheme’s ability to build up its reserves.
GEMS principal officer Guni Goolab said on Wednesday that beneficiaries who entered and left GEMS in the same year had triple the hospital admission rate of other members. There were 8,591 such beneficiaries last year, who had a hospital admission rate of 72%: they contributed R30m yet claimed R149m from the scheme, he said. The overall hospital admission rate was just 25% during the same period, he said.
Goolab said GEMS’ board of trustees had decided in June to combat membership churn by introducing waiting periods for former GEMS members and their dependents who wanted to re-join the scheme. Dependents would also face a 12 month exclusion period for pre-existing medical conditions if they did not sign up at the same time as the principal member, he said.
"Accessibility is an important factor within GEMS as our mission has always been to provide all public service employees with equitable access to affordable and comprehensive healthcare benefits. The decision to introduce limited underwriting was therefore carefully considered," he said.
GEMS currently has 1.803-million beneficiaries, and its average family size is 2.63 members, he said. It has much more generous provisions for members than many other schemes, allowing principal members to sign up as many dependents as they wish provided they can pay. Civil servants also get a generous subsidy from the government, capped at R3,545 a month.
Goolab said GEMS was so concerned about the rise in hospital claims that it planned to make a submission to the Competition Commission’s health market inquiry.
GEMS had also met the CEOs of the three JSE-listed hospital groups Netcare, Mediclinic and Life Healthcare to raise its concerns, he said. "They have committed to work closely with our managed care service providers including to provide appropriate access to case managers," he said.
PPO Serve CEO Brian Ruff said the recent proliferation of new hospitals had led to a spike in demand. "A bed built is a bed filled," he said.
"The only way to counter hospital admissions is to have better community level services," he said.
Discovery Health, one of SA's biggest medical scheme administrators, said it too was concerned about an increase in hospital admissions, particularly in regions where new hospitals had opened.
"In 12 of 18 regions studied, there is evidence of supplier-induced demand where the admission rate in the region exceeds the expected admission rate based on the underlying disease burden. In these regions, the availability of additional hospital beds seems to change the admission rate and length of stay pattern," said Discovery Health deputy CEO Ryan Noach.
Noach said Discovery Health and its biggest client Discovery Health Medical Scheme had recently met doctors and private hospitals to make them aware of their concerns.