The Government Employees Medical Scheme (GEMS) has warned that its solvency ratio is projected to fall below the statutory minimum of 25% by the end of 2026, following sustained pressure from public sector unions to drastically reduce planned premium increases. The scheme, which is the largest restricted medical scheme in South Africa serving approximately 2.4 million public servants and their dependants, expects its reserves to weaken to 23% by year-end.
The Council for Medical Schemes mandates that all medical schemes maintain accumulated funds equal to at least 25% of their gross annual contribution income to ensure financial stability. GEMS closed 2025 with a solvency ratio of 24.7%, already marginally below the threshold. The further deterioration is the direct result of a climbdown on member fees.
GEMS initially proposed a weighted average contribution increase of 9.8% for 2026. Following union objections regarding the financial strain on civil servants grappling with the rising cost of living, the scheme reduced the increase to 9.5% in February, before slashing it again to 7.5% effective from 1 July, subject to regulatory approval.
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Principal officer Stan Moloabi confirmed that the latest reduction will strip approximately R100 million per month from the scheme’s contribution income. To offset this structural deficit, GEMS will implement stricter expenditure controls and benefit adjustments. Members on the Tanzanite 1 option — a plan designed for lower-income earners — will see their private hospital care restricted to prescribed minimum benefits.
The scheme will also enforce tighter managed care protocols to verify the clinical necessity of claims and pursue more aggressive targets for recovering funds lost to fraud, waste, and abuse. Furthermore, GEMS has instituted steeper premium hikes for higher salary bands to dissuade higher-income members from migrating to the heavily subsidised Tanzanite 1 option.
The current financial squeeze is partly a legacy of the COVID-19 pandemic. During the crisis, when elective procedures were suspended and claims plummeted, GEMS accumulated substantial reserves. This allowed the scheme to implement exceptionally low premium increases of 2% in 2022 and 5% in 2023. Moloabi acknowledged that actuaries had warned at the time that such low increases would necessitate steeper hikes in subsequent years to maintain baseline sustainability. Consequently, GEMS instituted increases of 9.5% in 2024 and 13.4% in 2025, which ultimately triggered the current pushback from organised labour.
Public Service and Administration Minister Mzamo Buthelezi defended the downward adjustment during his budget speech, framing it as a necessary intervention to provide meaningful relief to workers while managing the scheme’s long-term sustainability. The developments occur against the backdrop of the impending National Health Insurance framework, which aims to implement universal healthcare and will eventually restrict medical schemes from providing cover for services funded by the state.