GEMS continues its meteoric rise

If government has its way, the Government Employee Medical Scheme (GEMS) will notch up one million principle members within the next few years. This will ensure that government accounts for a huge slice of the private medical scheme sector, currently estimated at R35 billion a year.

Government enjoys two major advantages over the competition where the quest for medical aid members is concerned. The first advantage is that government is able to stipulate that all new employees belong to its medical scheme - effectively removing their freedom to choose their own scheme. And the second advantage is that government is able to offer salary incentives to existing employees who are on other medical schemes.

The salary subsidy offered by government is so effective that employees earning less than R60, 000 per annum receive free medical cover. It is no wonder then, that GEMS has already chalked up 130, 000 main members since its inception little more than a year ago.

Cries of unfair competition from smaller schemes

Open medical schemes will have to add the challenge posed by GEMS to the already long list of regulatory issues impacting the sector. A number of schemes are losing significant numbers of members.

Pro Sano Medical Scheme, recently placed in final curatorship, is known to have large numbers of government employee members. The company spent over R17 million on advertising in the last three years without a significant increase in member numbers, possibly indicating a significant loss in members to GEMS.

In an article posted on Fin24, Buti Sithole, principal officer of Hosmed, said that they had lost more than 4, 000 members to GEMS in a 12 month period. Furthermore, the scheme expected to lose as many as 3, 000 members in the coming year. Considering Hosmed's total membership of only 16, 000, the threat of GEMS is placed in real perspective.

In the same article, Joe Kunniger, managing director of Status Medical Aid Administrators, stated his belief that the government enjoyed an unfair advantage since the Council for Medical Schemes had failed to provide a level playing field. The 'advantages'  mentioned earlier were used as case in point. Status administers nine schemes with some 35, 000 members.

Always some winners

It seems private open medical schemes and other companies providing services to this sector will have to remain innovative to keep afloat in the current environment. One option is to closely monitor the changes in the industry and to identify new opportunities for revenue.  As example, Medscheme has benefited from a number of tenders issued by GEMS.

Another example is Metropolitan Health Group, which is no doubt enamoured by the success of GEMS, since it administers the scheme.

As an interesting aside, Metropolitan views governments proposed implementation of a social security tax in a similarly positive light. It seems they have experience of the lucrative financial reward available to financial services companies in administering government's complex social schemes. Perhaps we have an early indication of one of the bidders for administering the government social security scheme?

Editor's thoughts:
Membership in open medical schemes has been stagnant for a number of year's now. Industry regulation is aimed at ensuring better protection for the consumer, yet employee only medical schemes remain in force. Does GEMS constitute unfair competition - and does GEMS indicate that the 'closed' medical scheme is hear to stay? Send your comments to [email protected].