CMS rejects GEMS bid to cut 2026 contribution increase as unions demand answers

The Government Employees Medical Scheme (GEMS) has confirmed that the Council for Medical Schemes (CMS) has not approved its proposal to reduce the scheme’s weighted average 2026 contribution adjustment from 9.5% to 7.5%, leaving the higher contribution adjustment in place.

The proposal followed GEMS’s announcement in May that sought to reduce the weighted average contribution adjustment to 7.5%, effective from 1 July 2026 and subject to approval by the CMS. At the time, the scheme said the decision followed a structured empirical review by its board of trustees, together with engagements with the Minister for Public Service and Administration, organised labour, and other key stakeholders.

The CMS has declined the proposal, leaving the existing contribution adjustment unchanged.

“Following the review of the submission made by GEMS, the CMS has not approved the proposed adjustment, setting out the reasons for the decline in correspondence received by the scheme and affected stakeholders,” GEMS said on 30 June 2026.

South Africa’s largest restricted medical scheme said the CMS’s decision means it will retain the previously approved contribution adjustment.

“As a result, the scheme will maintain the previously approved weighted average contribution adjustment of 9.5%, which has been effective since 1 February 2026.”

The scheme added that it is “currently finalising the necessary implementation arrangements to ensure members are informed and supported throughout the process”.

Neither GEMS nor the CMS has publicly disclosed those reasons. The decision follows months of debate over the scheme’s contribution adjustments, affordability, and reserve levels.

The lack of public detail has since become a central point of contention, with organised labour arguing that members are entitled to know why the regulator rejected a proposal that GEMS said was intended to ease the financial burden on public servants.

GEMS’s 2025 annual integrated report shows that the scheme’s solvency ratio declined to 24.72% at the end of 2025, marginally below the statutory minimum reserve requirement of 25%.

The report attributes the decline to higher-than-expected healthcare expenditure, together with several years of deliberately low contribution increases introduced to support members during and after the Covid-19 period.

Despite this, GEMS says it “continues to operate as a going concern and is financially stable”. The report notes that the scheme retains an AA+(ZA) national-scale financial strength rating with a stable outlook and accumulated reserves of more than R18 billion.

In June, Business Day reported that the CMS had raised concerns that reducing the contribution adjustment could be financially unsound.

According to the report, the regulator believed the proposal could see GEMS’s solvency ratio fall below 25%, with projections indicating a decline to between 21% and 22% and no recovery plan in place.

Proposal intended to ease financial pressure

According to GEMS, the proposal to reduce the contribution adjustment was driven by its efforts to provide additional relief to members facing continued cost-of-living pressures.

“The proposal to reduce the contribution adjustment was informed by the scheme’s commitment to easing the financial burden on members wherever possible,” said Dr Stan Moloabi, the principal officer of GEMS.

“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.”

Moloabi said that although the proposal had not been approved, the scheme respected the regulator’s decision.

“While the outcome is a decline of the proposal submitted by GEMS, we have to respect the assessment of the regulator and address the concerns raised.”

He added: “GEMS remains committed to working within the regulatory framework on future contribution adjustments that balance the quest for affordability with financial sustainability. GEMS respects the regulatory process and appreciates the engagements we have had with the CMS throughout the review process.”

Long-running debate over affordability and solvency

The decision follows months of discussions between GEMS, organised labour, the government, and the CMS over the scheme’s 2026 contribution adjustments.

GEMS originally announced a weighted average contribution adjustment of 9.8% for 2026 before reducing it to 9.5%, effective from 1 February, following engagements with stakeholders.

In May, the scheme announced a further proposed reduction to 7.5%, saying cost-containment initiatives, improved operational efficiencies, and savings had created an opportunity to provide additional relief to members. That proposal was expressly made subject to CMS approval.

The proposal attracted close attention from organised labour, which has argued that rising contribution adjustments are placing increasing financial pressure on public servants. Labour has also previously called for greater use of the scheme’s reserves to cushion members from higher healthcare costs.

The proposal also revived debate around GEMS’s reserve levels. Earlier this year, the CMS reiterated that the Medical Schemes Act requires medical schemes to maintain accumulated funds equal to at least 25% of gross annual contributions and said any reduction to that statutory requirement would be contrary to the Act.

Read: CMS says GEMS cannot cut 25% reserve requirement

Before reaching its decision, the CMS told Moonstone that the application remained under consideration and that it could not comment on the details.

The regulator noted that no medical scheme may implement contribution changes or rule amendments without the Registrar’s approval. It said the CMS has the authority to reject contribution adjustments if they are not fair, after which schemes may revise their submissions or appeal the Registrar’s decision.

The CMS further cautioned that it had observed instances where medical schemes under-price benefits to attract members. It said this practice could ultimately disadvantage members, who could later face substantial contribution increases to compensate for earlier under-pricing or risk the collapse of their medical scheme, while also creating unfair competition for schemes that price their benefits appropriately.

GEMS has also been engaging with the CMS on measures to restore compliance with the statutory reserve requirement. According to its annual report, the scheme submitted a business plan to the regulator outlining mitigation measures and expects strategic interventions in benefit design, claims management, and operational efficiencies to support an improvement in its reserve ratio over time.

The report noted that GEMS was participating in discussions with the CMS on a risk-based capital framework, which it said would better reflect the actual level of reserves required than the current statutory solvency measure.

Union backlash intensifies

The CMS’s decision has prompted a strong response from organised labour, with unions accusing GEMS of failing to adequately represent members’ interests during the regulatory process and demanding greater transparency about why the proposal was rejected.

The Public Servants Association (PSA) said it was “outraged and profoundly disappointed” by GEMS’s announcement that the regulator had declined to approve the proposed reduction.

The union questioned whether GEMS had submitted a sufficiently compelling motivation to the CMS, arguing that if the scheme had genuinely been committed to protecting members from excessive contribution increases, it should have presented “a far more compelling and comprehensive motivation” to secure regulatory approval.

Instead, the PSA argued, the outcome raises questions about whether the submission prioritised the scheme’s financial position over the affordability concerns of public servants.

The union also criticised GEMS for informing members of the outcome before engaging recognised labour parties at the Public Service Co-ordinating Bargaining Council (PSCBC), saying this demonstrated a continued disregard for established collective bargaining processes.

It called for full disclosure of the submission made to the CMS and the regulator’s reasons for declining the proposal, adding that it was considering further engagement with GEMS and possible legal action should it emerge that members’ interests had not been adequately protected.

The latest criticism builds on concerns previously raised by public sector unions over the affordability of GEMS contributions. Earlier this year, COSATU’s public service affiliates, including NEHAWU, DENOSA, POPCRU, and SADTU, argued that contribution increases well above public sector salary adjustments were placing healthcare beyond the reach of many government employees. The unions questioned governance, administration costs, and the scheme’s use of reserves, while calling for greater efforts to cushion members from rising healthcare costs.

NEHAWU similarly argued that operational costs should be reduced before members are expected to absorb higher contribution increases, while the National Teachers’ Union questioned whether organised labour had been adequately consulted during the process.

The unions’ criticism has intensified following a PSCBC media statement issued on 25 June, which said implementation of the proposed 7.5% contribution adjustment had merely been delayed because of ongoing administrative engagement between GEMS and the CMS. At the time, the PSCBC indicated that the revised contribution adjustment would be implemented once the necessary regulatory processes had been completed. Five days later, however, GEMS announced that the CMS had declined to approve the proposal, leaving the original 9.5% weighted average contribution adjustment in place.

Although the PSA said members deserve greater transparency regarding the CMS’s reasons for rejecting the proposal, most of its criticism was directed at GEMS rather than the regulator. The union said that while the CMS had exercised its statutory mandate, GEMS remained accountable for the quality and persuasiveness of the submission it had made.

Next steps

GEMS said it “remains committed to working with all our stakeholders on the matter of cost containment going forward and maintaining transparent communication with its stakeholders in this regard”.

The scheme added that it “will continue to act in the best interests of members while ensuring the ongoing sustainability of the healthcare benefits they are entitled to”.

Concluding the statement, Moloabi said: “Finally, the CMS, in exercising its responsible mandate to protect scheme members, has retained the previously approved contribution adjustment. GEMS remains steadfast in its commitment to balancing members’ access to quality, affordable healthcare.”

With organised labour now demanding greater transparency and questioning whether GEMS did enough to secure regulatory approval for the lower contribution increase, the debate has shifted beyond affordability to the conduct of the approval process itself.

Note: This article was updated on 2 July 2026 to include commentary from the unions.