The Government Employees Medical Scheme (GEMS) says it is now focused on engaging organised labour and implementing cost-containment measures already under way, rather than pursuing a further application to reduce the approved 2026 contribution increase, as it looks to moderate contribution increases over the coming years, beginning with the 2027 adjustment.
Speaking to Moonstone following last week’s decision by the Council for Medical Schemes to reject GEMS’s proposal to reduce its weighted average 2026 contribution increase from 9.5% to 7.5%, principal officer Dr Stan Moloabi (pictured) said the scheme now needs to take what he described as “a very prudent approach” that recognises both the relief members hoped the lower increase would provide and the regulator’s concern that reducing contributions now could create greater pressure in future years.
Read: CMS rejects GEMS bid to cut 2026 contribution increase as unions demand answers
GEMS will meet the Public Service Co-ordinating Bargaining Council (PSCBC) next week before holding further engagements with individual unions to discuss the way forward.
“There is no doubt that our members feel that the 7.5% would have brought relief to the current situation,” Moloabi said. “Now that we have a decision, the scheme and organised labour will have to talk and say, what is the best way forward?”
Rather than pursuing another application later this year, Moloabi said the more prudent course would be to continue implementing the scheme’s savings initiatives so they can influence future contribution adjustments, beginning with 2027.
He said submitting another application would require another round of member communication, systems changes, and administrative implementation only months before preparations begin for the next contribution cycle.
“Wouldn’t it rather be prudent for us to say, ‘Okay, we are here where we are’?” Moloabi said. “If we can achieve an even better percentage for 2027, then at least we will have solved the problem.”
He said the scheme must also take account of the CMS’s concern that reducing contributions now could simply shift financial pressure onto members in future years.
R1.7 billion savings plan
Moloabi said the 7.5% application did not arise in isolation.
After GEMS reduced its weighted average 2026 contribution increase from 9.8% to 9.5% following initial engagements with organised labour, unions rejected the revised increase. Further discussions between GEMS, organised labour, and the Minister for Public Service and Administration, Inkosi Mzamo Buthelezi, resulted in agreement that the scheme would apply to the CMS for a further reduction to 7.5%.
Only then, he said, did the scheme ask its actuaries to determine whether such a reduction could be supported without compromising GEMS’s long-term sustainability.
Actuarial projections were based on claims-management interventions already under way that GEMS projected would generate about R1.7 billion in savings during 2026.
Those interventions include changes to claims-management processes, selected rule amendments, systems changes, and operational adjustments involving service providers.
Moloabi said implementing those measures required more than simply changing contribution rates. Systems had already been configured around the approved 9.5% increase, while some interventions required additional staffing, system development, and operational adjustments before they could be introduced.
“We were very confident that we should achieve these savings,” he said. “Those savings, when achieved, were the basis of us saying we would still be operating within a sustainable environment.”
He emphasised that when GEMS referred to projected savings, the qualification was not because the scheme doubted the interventions would succeed. Rather, it reflected the reality that actuarial projections can never be guaranteed until they have been realised.
“It’s not that we doubted it,” he said. “Sometimes you project something, and the results are not exactly what you think.”
Although the CMS ultimately declined the application, the interventions continue to be implemented, and, according to Moloabi, the resulting savings will feed into future contribution adjustments.
Moloabi said that process begins with the 2027 contribution cycle but is intended to benefit members over the longer term.
“That can only be a positive thing,” he said. “Maybe lowering the increase by a factor, but that factor will be dependent on the quantum of savings achieved.”
How GEMS and the CMS assessed the proposal
Moloabi said the difference between GEMS’s proposal and the CMS’s assessment centred on how the scheme’s projected savings could be taken into account.
He explained that GEMS’s application was built on a programme of claims-management interventions already under way that the scheme believed would generate sufficient savings to support a lower contribution increase without compromising its long-term sustainability.
The CMS, however, assessed the application using established actuarial models and historical claims trends.
According to Moloabi, the difference reflected the respective responsibilities of the scheme and the regulator. Although GEMS believed the projected savings were sufficiently robust to justify a lower contribution increase, the CMS was required to base its assessment on established actuarial models and demonstrated claims experience.
He acknowledged that projections, by their nature, always carry some uncertainty, which is why actuaries continually test assumptions against emerging claims data and use several forecasting methods rather than relying on a single estimate.
“The regulator’s basis for taking decisions is standard technical trends and actuarial models. What we had put forward is not something that usually a decision like this is adjudicated on.”
Moloabi said the CMS was not persuaded that projected savings, which had yet to become established claims experience, provided a sufficient basis on which to approve the lower contribution increase. According to him, the regulator preferred to rely on established actuarial trends rather than anticipated savings that, although already beginning to emerge, had not yet been fully demonstrated over time.
According to Moloabi, the regulator also concluded that if the projected savings did not materialise, the scheme’s reserve ratio could decline further and take longer to recover to the statutory 25% level.
When the CMS requested additional information during its assessment, GEMS supplemented its submission with more recent claims data.
“The regulator released a letter and said, ‘I need more information.’ We then included information that was not there previously. The claims that had come through in the interim were already showing savings based on the very interventions that we are talking about, and that is the big difference.”
Moloabi emphasised that GEMS respects both the regulatory process and the outcome.
He said the scheme submitted what it believed was the strongest possible case, responded to every request for additional information, and accepted the regulator’s conclusion once that assessment had been completed.
“We supplied the best possible information, and it was assessed. Based on that assessment there was the decline. It is process.”
Next stop: organised labour
Although the CMS has reached its decision, GEMS’s engagement with organised labour is far from over.
The scheme will meet the PSCBC on 14 July, followed by further discussions with the individual unions represented on the council.
Moloabi said those meetings are not being convened because of the current dispute.
“They’re not starting now,” he said. “That’s how we’ve been doing things.”
He said engagement with organised labour has long formed part of GEMS’s governance and stakeholder processes.
That said, he acknowledged next week’s discussions will take place against the backdrop of disappointment over the CMS’s decision.
Responding to criticism from the Public Servants Association (PSA) that GEMS had failed to present a sufficiently compelling case to the CMS, Moloabi questioned how that conclusion could be reached before the unions had seen the submission.
“They are asking that both the CMS and GEMS supply them with the detail of the application. It means they haven’t seen it. So how is it possible for a person to make an assessment on something they haven’t seen?”
Asked whether GEMS would make the application available, Moloabi said the forthcoming engagements with organised labour were the appropriate forum for those discussions.
He said unions would have an opportunity to raise the issues they wanted addressed and that GEMS would share information “to the extent that from a governance perspective we are allowed to”.
“We will discuss the matters that they raise… I’m sure this issue will come up, and we will discuss it to the extent that from a governance perspective we are allowed to share. We share a lot of information in these meetings.”
At the same time, he emphasised that unions were fulfilling an important role.
“Where there is an employer-employee relationship, there will be unions,” he said, adding that GEMS understands the responsibility unions have to advocate on behalf of their members.
He nevertheless expects next week’s discussions to be “robust”.
Why GEMS believes the reserve debate should continue
One of the CMS’s key concerns was that approving the lower contribution increase could place further pressure on GEMS’s solvency position.
Read: CMS explains why it rejected GEMS’s bid to lower contribution increase
In explaining its decision, the regulator said a 7.5% contribution increase would not adequately address the scheme’s underlying financial and solvency risks and could increase reliance on reserves, making it more difficult for GEMS to return to the statutory 25% reserve requirement.
According to GEMS’s latest integrated annual report, the scheme’s solvency ratio stood at 24.72% at the end of 2025, marginally below the statutory minimum.
The debate over whether the current reserve requirement remains appropriate for a large restricted medical scheme is not new.
Earlier this year, the PSCBC asked the CMS to consider whether the statutory 25% requirement should be reviewed. The regulator declined, pointing out that the requirement is prescribed in Regulation 29 of the Medical Schemes Act and applies equally to all medical schemes.
Read: CMS says GEMS cannot cut 25% reserve requirement
Moloabi said GEMS fully accepts that position and has no option but to operate within the existing legislative framework.
At the same time, he believes the broader discussion about how reserve requirements should be determined should continue.
He emphasised that GEMS is not arguing for special treatment. Instead, he believes any future review should consider a more risk-based capital approach across the industry that takes account of factors such as scheme size and claims volatility.
Using the example of an R8 million claim for the treatment of a rare blood disorder, Moloabi said such a claim could materially affect the reserves of a small medical scheme.
For GEMS, with about 890 000 principal members and 2.4 million beneficiaries, the same claim would be spread across a much larger membership base, resulting in significantly lower claims volatility.
According to Moloabi, work already done on risk-based capital models indicates that a scheme the size of GEMS could require reserves in the region of 18% to 22%, rather than the current statutory 25%, although he stressed that this remains part of a broader industry discussion rather than a proposal specific to GEMS.
“That is why,” he said, “we believe there should be a discussion.”
He emphasised, however, that the regulator had been equally clear that such discussions could not take place on behalf of a single scheme.
“The regulator is very clear: it cannot be only a GEMS initiative. It is an industry thing.”
Moloabi said any future review would therefore have to involve the wider medical schemes industry and be supported by technical analysis rather than the circumstances of one scheme.
In the meantime, GEMS remains focused on rebuilding its reserves under the existing framework.
Based on the scheme’s current projections, Moloabi said GEMS expects to begin rebuilding its reserve ratio from this year and to return above the statutory 25% requirement within the next two to three years.
Balancing affordability and sustainability
Throughout the interview, Moloabi returned to what he described as the central challenge facing the scheme: balancing members’ need for affordable healthcare with the responsibility to keep GEMS financially sustainable.
“There is one very clear thing that has been coming through,” he said. “Balancing member needs in terms of affordability against financial sustainability.”
Moloabi said that balancing affordability and sustainability has informed the scheme’s approach throughout the contribution-setting process, from pricing discussions with organised labour through to its engagement with the CMS.
Moloabi also distinguished between affordability as reflected in the annual contribution adjustment and affordability when GEMS is compared with similar medical scheme products.
While acknowledging that contribution increases place pressure on members, Moloabi said GEMS also considers affordability in the context of what members ultimately pay for comparable healthcare cover. On that measure, he said, GEMS remains about 23% cheaper than comparable products in the open medical scheme market and about 51% cheaper once the government subsidy is taken into account.
He said the scheme’s objective remains to ensure that any savings generated through its cost-containment programme are reflected in future contribution adjustments while continuing to operate within the legislative framework governing medical schemes.
Asked what single message he wanted members and financial advisers to take away from the process, Moloabi said: “We are here for the members of GEMS. We will continue to do our best to ensure that GEMS remains affordable in line with its mandate.
“On the other hand, we have to balance this against ensuring that the scheme remains sustainable into the future and, at the moment, based on the current legislation, that measure is the reserve ratio, which is monitored by the regulator.
“It is balancing between those two.”
