The Government Employees Medical Scheme (Gems), the country’s second-largest medical scheme, will from October apply waiting periods to government employees who join the scheme only when they are already sick so that they can access expensive hospital benefits.
The “significant step” to combat what is known as anti-selection is one of three measures that Gems believes will reduce the increasing cost of hospital claims, which are reducing the scheme’s reserves and solvency ratio, Dr Guni Goolab, the principal officer of Gems, says.
Contrary to media reports that the scheme, which provides cover to some 1.7 million lives, may be insolvent by the end of the year, Goolab says Gems is “sound” and in a position to pay all members’ claims and other bills. It had reserve funds of R2.6 billion and cash assets of R3.8 billion at the end of last year.
The scheme expects to receive more contribution income than it will pay out in claims for the rest of this year.
At the end of last year, the reserves represented a solvency ratio (reserves as a percentage of contribution income) of 9.46 percent, which is below the 25 percent required by law. Gems has never reached the required level, mostly because strong membership growth has resulted in its income from contributions increasing each year, and reserves have not yet caught up.
Goolab would not comment on media reports that the scheme’s solvency ratio had fallen to five or six percent.
The Council for Medical Schemes has Gems under financial monitoring, which means that it has had to submit a business plan to achieve the legally required solvency ratio by 2020. Gems reports quarterly on how it is progressing.
The Council for Medical Schemes has itself acknowledged that 25 percent is inappropriately high, particularly for large schemes.
Goolab says the impact of increasing hospital claims on member contributions will be determined next month, when the scheme submits its benefits for next year to the council for approval.
Last month, Discovery Health chief executive Dr Johnathan Broomberg told the Board of Healthcare Funders conference that the country’s largest scheme, Discovery Health Medical Scheme, was also facing steep increases in hospital claims. Goolab and Broomberg said reasons for these steep increases were anti-selection, an increase in the number of hospital beds, fraud, wastage and abuse.
New waiting periods
Goolab says government employees are selecting against Gems, in particular by leaving the scheme and rejoining only when they need healthcare services, or adding dependants to the scheme only when these dependants need healthcare services.
He says that, during 2015, Gems members added 8 591 beneficiaries to the scheme and those dependants left in the same year. The hospital admission rate among these beneficiaries was 72 percent, whereas the average admission rate among all members was 25 percent. These beneficiaries paid R30 million in contributions in 2015, but they claimed R149 million.
Goolab says that, to stem the abuse of the scheme, the trustees decided to introduce waiting periods in certain cases.
The Medical Schemes Act prescribes the waiting periods that can be imposed. During a waiting period, a member cannot claim benefits, or is denied specific benefits.
Gems will apply the three-month general waiting period to members who resign from the scheme without also resigning from the public service and rejoin the scheme later, or to dependants who leave Gems and rejoin the scheme later.
It will apply both the three-month general waiting period and the 12-month condition-specific waiting period to dependants who join Gems after the main member, unless they are new-born babies or newly adopted children.
The waiting periods will not apply to people who join Gems without previously belonging to a medical scheme.
Although open schemes (which can admit anyone as a member) use waiting periods, many restricted schemes, such as Gems, do not.
Gems has engaged with hospital chief executives about the spike that both it and DHMS are experiencing in hospital admissions in areas where new hospitals have been opened.
Goolab says Gems is preparing a supplementary submission to the Competition Commission’s inquiry into the private healthcare market that shows how hospital admissions increase sharply in an area where a new hospital is opened.
Gems has increased its case managers in hospitals to ensure that people remain in hospital only for as long as is medically necessary.
Tough economic times tend to result in an increase in fraud, wastage and the abuse of medical scheme funds, and Gems has implemented various measures to combat these problems, Goolab says.
He says that next year Gems will introduce an alternative to its popular Emerald option. The new efficiency-discounted Emerald option will enable members to pay a lower contribution if they use GPs and hospitals within a network and see a specialist only if they are referred to one by a GP.
Goolab says the option will help to reduce the cost of membership and should result in fewer claims.