State medical aid may go bust

22 August 2016 - 09:50 By Bronwyn Nortje

The Government Employees Medical Scheme (Gems) could be insolvent by financial year-end if drastic cost-containment measures are not instituted. This would mean the scheme would need to be bailed out by the Treasury or amalgamated into a different scheme‚ forcing significant changes in benefits for its 1.8-million members.It would be a big blow to those in government who hoped the scheme could provide a viable funding model for the proposed National Health Insurance.It would also be an embarrassment for the Council of Medical Schemes‚ which has used its discretion to avoid putting the scheme under curatorship‚ despite its longstanding failure to meet the industry’s minimum statutory requirements.Several sources within the industry‚ who spoke to Business Day on condition of anonymity‚ claim the scheme’s solvency ratio has plummeted in the first eight months of 2016‚ and may be as low as 5% or 6% — almost 20 percentage points below the required level.Internal documents that Business Day has seen‚ show if the current trend continues‚ the schemes’ deficit for 2016 could increase to R1.2bn‚ and its reserves could fall as low as 2% by February 2017. This was confirmed by a second independent industry source.The scheme’s strained financial position means that if it is to survive‚ its members will face contribution increases that are almost double inflation‚ and will have their benefits curtailed drastically. The scheme’s principal officer‚ Guni Goolab‚ confirmed last week benefit redesign was already under way‚ and the scheme would introduce underwriting for the first time to protect itself from entry selection.According to the internal communication‚ the scheme "would need a 15% contribution increase to balance the books. It is hoping for a 2%-3% decrease in this increase to be made possible by intensified managed care and benefit design."It will also introduce co-payments on some procedures‚ such as Caesarean sections‚ reported Business Day on Monday.TMG Digital/BDlive..

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