The Council for Medical Schemes (CMS) has ruled out any reduction to the statutory 25% reserve requirement for the Government Employees Medical Scheme (GEMS), despite trade unions and other industry bodies arguing that the medical schemes environment is stable enough to allow for such a move.
The statement comes amid a deepening standoff between organised labour and GEMS following the scheme’s announcement, in November last year, of a 9.8% contribution increase for 2026, which public sector unions strongly opposed.
At a meeting on 18 December 2025, GEMS presented a revised proposal of a 9.5% increase, which was subject to approval by the CMS. However, unions, including the Public Servants Association (PSA) and the South African Democratic Teachers Union (SADTU), rejected the proposed 0.3-percentage point reduction, saying it would not provide meaningful relief to members or sufficiently reduce the financial burden on public servants.
GEMS stated it could not reduce the increase below 9.5% without jeopardising the minimum 25% solvency level required by the Medical Schemes Act.
At the same meeting, the Public Service Co-ordinating Bargaining Council (PSCBC) resolved to approach the CMS to intervene. The Council also agreed to engage the CMS on a review of the statutory 25% reserve requirement, arguing that a lower threshold could help cushion future contribution increases.
The regulator confirmed that the PSCBC formally approached it in mid-December 2025 through an official written communication. According to the CMS, the correspondence raised concerns about GEMS’ proposed contribution increase for the 2026 benefit year.
As part of a regulatory intervention, the CMS said it has since engaged with the scheme to address concerns raised about the proposed 2026 contribution increase.
“In line with section 7 of the Medical Schemes Act (MSA), the Council for Medical Schemes has a statutory obligation to protect the interests of members and engage with all relevant stakeholders and interested parties.”
The CMS stated that following these engagements, GEMS reduced its contribution increase through a formal board resolution and amended its rules accordingly.
“CMS’s role was to ensure compliance with governance, regulatory, and procedural requirements under the MSA, rather than to directly intervene in the dispute.”
On its view of the possibility of reducing the statutory 25% reserve requirement for GEMS, the CMS told Moonstone: “It is important for all stakeholders involved, directly or indirectly impacted by the contribution increases, to understand that a request to reduce the 25% statutory reserve requirement will totally go against Regulation 29 of the Medical Schemes Act.”
The regulator added that: “All schemes, open or closed, are mandated by law, to maintain accumulated funds (reserves) of at least 25% of their gross annual contributions to ensure they can meet future obligations.”
It emphasised that “regardless of the arguments advanced by unions and the PSCBC, any scheme that does not meet the 25% reserve requirement is therefore regarded as non-compliant with the law”.
The 9.8% increase was implemented in January 2026, pending any further regulatory decisions.
The PSA has indicated that it is considering legal action.
SADTU slams delay in employer medical subsidy for public servants
Subsequently, the Department of Public Service and Administration (DPSA) issued a circular advising the departments that there would be a delay in the implementation of the employer medical subsidy adjustment for employees on GEMS. According to a DPSA circular, the 4.5% subsidy increase will now take effect from 1 February 2026, backdated to January, instead of being applied in January 2026 as originally planned.
The delay means that although employees are paying the full 9.8% increase in contributions from January, the employer portion of the subsidy will be applied only a month later.
SADTU expressed outrage at the delay. The union said the practice, which has occurred over several years, places undue financial strain on members during the costly month of January.
The Minister for Public Service and Administration has approved a 4.5% subsidy increase for the period 1 January to 31 March 2026, followed by an additional 0.5% adjustment from 1 April 2026 to 31 March 2027.
SADTU noted that its members are already bearing the full impact of the 9.8% contribution hike implemented in January.
“The employer has, over several years, turned it into a norm not to pay the subsidy concurrently with the annual medical aid increase in January. SADTU is calling for an immediate end to this practice which negatively affects members, particularly during the financially demanding month of January,” the statement read.
Push for cost-containment measures
Following the impasse at the December meeting, the PSCBC resolved to explore all legal avenues to seek a reduction in the reserve level applicable to a closed medical scheme such as GEMS.
The PSCBC also said it would propose cost-containment measures to GEMS, including reducing administrative expenditure, freezing executive salary increases, and lowering board fees, with any savings passed directly on to members.
GEMS, for its part, undertook to conduct further actuarial calculations to ensure accuracy and to satisfy all parties.
GEMS has repeatedly defended the increase, saying it is necessary to safeguard the scheme’s long-term financial sustainability.
According to Juta Medical Brief, GEMS said contribution increases would vary depending on salary bands and the number of beneficiaries. Principal officer Dr Stan Moloabi said: “This adjustment is explicitly positioned as the necessary financial input to deliver value, access, and ensure long-term sustainability.”
GEMS has also pointed to the broader market. Discovery Health Medical Scheme will implement a weighted average increase of 7.2% in 2026, effective from 1 April, while Bonitas will raise contributions by an average of 8.8%. Medshield and Bestmed will increase contributions by 7.5% and 6.8%, respectively.
Moloabi said that for a standard public service family, GEMS contributions would be up to 23% lower than comparable open schemes before subsidies.
“It is important to consider the actual rand value of the increase and the final contribution amount when comparing affordability,” said Dr Vuyo Gqola, GEMS’ chief operations officer. “GEMS contributions will continue to be among the most affordable in the sector because of its low starting base.”
Long-running tensions
The current standoff between organised labour and GEMS is not new. Similar concerns were aired during parliamentary oversight meetings in June and November 2025, where unions warned that the scheme was drifting away from its founding mandate of affordability for public servants.
At the June meeting, union representatives highlighted that administrative outsourcing to for-profit entities had affected service quality, citing the 13.5% premium increase in 2024, which exceeded the industry average.
Committee members questioned why billions in GEMS reserves were not being used to reduce contributions or expand benefits. They also expressed concern about low-income employees – such as cleaners earning between R3 500 and R5 000 a month – who were expected to pay R1 200 for coverage in addition to basic living expenses.
Members also raised the lack of flexible benefit structures, noting that some members exhausted their benefits early in the year.
During the November session, unions reiterated similar points, saying repeated above-inflation contribution increases were outpacing salary growth and eroding employer subsidies. They argued that GEMS has become increasingly unaffordable for lower-income workers, pensioners, and members in rural areas, while benefits were constrained by restrictive hospital networks that resulted in co-payments and limited access to specialists.
Unions also raised governance and transparency concerns, questioning high administrative and outsourcing costs, the frequency and remuneration of board meetings, and what they described as weak accountability to members. They complained of delayed claims, and poor communication and engagement platforms that they said were ineffective, with GEMS arriving at meetings with predetermined positions rather than meaningfully consulting labour.
A recurring theme was the lack of choice facing public servants. Labour representatives told MPs that government employees were effectively locked into GEMS, which limited competitive pressure on the scheme and left members with little recourse as contributions rose year after year.
GEMS, for its part, told the committee that rising healthcare costs, an ageing membership, and increasing chronic disease prevalence were placing sustained pressure on the scheme.
It said it had drawn down more than R10 billion in reserves in recent years to cushion members from even higher increases and maintained that its contributions remained lower than those of comparable open schemes after subsidies.
The board defended its governance model and outsourcing arrangements, arguing these were aligned with transformation objectives and long-term sustainability.
