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Is the GEMS medical aid going bust?

“GEMS medical aid may be insolvent by year end unless drastic cost cutting measures are implemented.”

I have received many worried phone calls from GEPF members about their medical aid recently. If you believe articles in the press, the GEMS medical aid may be insolvent by year end unless drastic cost cutting measures are implemented. If this were to happen, National Treasury would have to step in and bail out the scheme.

Medical aids are required to have a solvency ratio of at least 25%. This means that they have a financial reserve that can accommodate claims going forwards should they experience adverse claims.

This has been the major problem for GEMS. With reportedly a solvency ratio of only 6% and an adverse claims history it will need to implement drastic remedial action. Possible solutions may be the implementation of co-payments and waiting periods for new members. There also may need to be an increase in membership fees. That said, I do not think members should panic. There is a plan in place to increase the solvency ratio through to 2020.

Charles Horner is a CERTIFIED FINANCIAL PLANNER® and a retirement and investment specialist with Sanlam. He writes in his personal capacity and this article and opinions must not be construed as advice in terms of the Financial Advisory and Intermediary Services Act.