PORTFOLIO COMMITTEE ON PUBLIC SERVICE AND

ADMINISTRATION

GEMS and its performance

5 May 2010

Purpose

The purpose of this presentation is to provide the Portfolio Committee on Public Service and Administration with an update on GEMS and its performance in the previous year by focusing on:

– A brief appraisal of the Scheme’s background;

– An overview of the performance in 2009; and

– An update on the performance in 2010.

Founding Policy Objective

The overarching mandate issued by Cabinet in 2004

– “The state as an employer seeks to ensure that there is

adequate provisioning of healthcare coverage to public service

employees that is efficient, cost-effective and equitable; and to

provide further options for those who wish to purchase more

extensive cover”

– Mandate was informed by entrenched inequity, high costs,

absent employer control/influence and limited access to scheme

benefits by all employees

Policy Steps

PSCBC Res 7/2000 provided for restructuring of medical assistance

Feasibility of establishing a Scheme was tested in 2004

Cabinet approved the registration of GEMS in 2004

The Scheme was registered in 2005 and commenced enrolment in 2006

The new Medical Subsidy Policy, after agreement in the PSCBC, was introduced in July 2006

President’s Coordinating Council resolved that Executive Authorities and HoD’s are to promote employee awareness of the subsidy policy

Legal Form and Eligibility

Restricted membership medical scheme

– Full registration under the Medical Schemes Act

– Reports to the Registrar of Medical Schemes

– Subscribes to Medical Schemes Act 131 of 1998

– Establishment provided for in PSCBC Resolution 1/2006

Member eligibility is limited to

o National Departments and Provincial Departments & Administrations listed in Schedule 1 and 2 of the Public Service Act

o Organisational Components listed in Schedule 3 of the PSAct

o Approved employer groups (or related government structures)

o NB: SANDF, NIA and SASS have conditions of service which do not allow enrolment on GEMS

Corporate Structure

Corporate structure consists of:

– Board of Trustees (50% elected by members; 50% appointed by the MPSA) that governs the affairs of the Scheme;

– PO implements directives of the Board and manages the business; and

– Scheme Executive (5) supports PO in monitoring and managing the service levels and contractual obligations of appointed service providers

Efficient scheme ‘head office’ of 28 team members

– Strategic and risk management are owned and managed internally

– Operational activities outsourced (over 8 operational contracts)

– Resources dedicated to ensuring effective member services

– Performance of the scheme is constantly monitored

‘Locus of control’ always rests within the Scheme

Strategic Thrust

Mission Statement –

– To provide all public service employees with equitable access to affordable and comprehensive healthcare benefits

Vision Statement -

– An excellent, sustainable and effective medical scheme for all public service employees

Value Statement -

– Excellence Simplicity Clear communication

– Member orientation Consistent application

– Flexibility Innovative Responsiveness

– Value for money Prudence Integrity

Member Services

Call Centre 0860 00 4367

Fax 0861 00 4367

Confidential HIV & Aids Helpline 0860 10 0646

Emergency Medical Services 0800 44 4367

Walk In Centres 2 in each Province

Secure Website www.gems.gov.za

Postal Address Private bag X782, Cape Town, 8000

Email facilities Enquiries, complaints, compliments, join, presentations, premiums...

‘Please call me’ SMS service 083 450 4367

Friends of GEMS 33489

SMS Benefit Check 33489

Purpose

The purpose of this presentation is to provide the Portfolio Committee on Public Service and Administration with an update on GEMS and its performance in the previous year by focusing on:

– A brief appraisal of the Scheme’s background;

– An overview of the performance in 2009; and

– An update on the performance in 2010.

2009 Business Indicators

2009Sapphire Option

Beryl Option

Ruby Option

Emerald Option

Onyx Option

Total Scheme

Net contributions per member per month (average)

R 1,045

R 1,252

R 1,548

R 1,952

R 2,691

R 1,752

Net contributions per beneficiary per month

R 307 R 478 R 547 R 762 R 1,116 R 732

Non-health expenses as a percentage of gross contributions

10% 10% 7% 6% 5% 7%

Number of new members 7,296 3,475 8,957 104,281 5,481 129,490

Number of members leaving the scheme

970 11,232 1,722 2,018 1,140 17,082

Pensioner ratio 0.85% 6.73% 2.73% 2.87% 20.40% 4.13%

Average accumulated funds per member

R 2,407 R 2,407 R 2,407 R 2,407 R 2,407 R 2,407

2009 Business Indicators

2009 Business Indicators

Statement of Financial Position as at 31 December 20092009 2008

Notes R R

ASSETSNon‑Current AssetsProperty, plant and equipment 3 1,794,042 1,622,633

Current AssetsTrade and other receivables 4 167,501,032 181,280,176Cash and cash equivalents 5 1,623,510,199 1,051,664,483

1,791,011,231 1,232,944,659

Total Assets 1,792,805,273 1,234,567,292

FUNDS AND LIABILITIESMembers' fundsAccumulated funds 986,269,453 722,979,746

LIABILITIESCurrent LiabilitiesSavings plan liability 6 67,075,704 40,078,786Trade and other payables 7 421,476,166 241,386,159Lease escalation reserve 48,244 439,356Outstanding claims provision 8 317,935,705 229,683,245

806,535,820 511,587,546

Total Equity and Liabilities 1,792,805,273 1,234,567,292

2009 Business Indicators

Statement of Comprehensive Income

2009 2008

Notes R R

Net contribution income 9 8,719,806,997 5,471,780,794Relevant healthcare expenditure (7,946,097,880) (4,686,055,860)

Net claims incurred (7,910,667,278) (4,648,854,919) Claims incurred 10 (7,911,802,415) (4,648,880,985) Third party claim recoveries 1,135,137 26,066

Net expense on risk transfer arrangements 11 (35,430,602) (37,200,941)

Gross healthcare result 773,709,117 785,724,934

Less: Managed care ‑ management services 12 (160,975,570) (93,042,670) Administration expenses 13 (384,412,406) (221,678,153) Marketing services (31,955,956) (13,197,225) Net impairment losses on trade and other receivables 15 (15,499,240) (12,197,013)

Net healthcare result 180,865,945 445,609,873

Other income 82,423,762 62,933,904Add: Investment income 16 80,354,481 61,834,409 Other income 2,069,281 1,099,495

Total comprehensive surplus for the year 263,289,707 508,543,777

Achievements in 2009

Rapid growth continued to over 429,000 membersInnovative services were introduced

– SMS benefit check and Maternity programme

Over 10,000 healthcare providers registered on Friends of GEMSIndependent member satisfaction survey revealed that over 75% of members have a positive perception of GEMS2nd GEMS Symposium was held successfully in KZN Complaints remained low despite the continued growthAnnual Board Effectiveness Appraisal found the Board to be ‘Good’Successful AGM, with record attendance, held in Nelspruit Record of posting surpluses continuedAudit environment well maintained 4th Annual unqualified audit opinion receivedSLA’s were maintained and confirmed by way of an auditTransfer of the business of MEDCOR to GEMS conductedFraud Prevention Plan was implemented with the support of the SIU

Challenges in 2009

Claims were higher than anticipated– Numerous epidemics– Statutory tariffs increased in 2009 for 2009– Onyx option posted a loss– Reserves at 11,08%

Cost of living increases, numerous OSD’s and an adjustment to salary levels were introduced effective 1 July 2009– 2009 contribution income bands were proactively adjusted – Over 11% of members were affected and dissatisfaction increased – Income bands will be assessed in 2010 to ensure an even spread

Assisting the Dept. of International Relations and Cooperation with the development of an international benefit option for employees stationed abroadCouncil for Medical Schemes instructed GEMS to amend its member eligibility rules to remove the application of discretion by the Board

In Summary

Significant progress was made– The strategic shift in healthcare management took place

– 2009 Strategic Plan Progress Report • 96% of Indicators met

– 2009 Three Year Strategic Plan Progress Report• All indicators met

A further level of achievement was evident when reviewing the progress made– GEMS did not receive a qualified audit

– GEMS did not experience a cash crisis

– GEMS did not experience a service catastrophe

– GEMS was not brought into disrepute

Purpose

The purpose of this presentation is to provide the Portfolio Committee on Public Service and Administration with an update on GEMS and its performance in the previous year by focusing on:

– A brief appraisal of the Scheme’s background;

– An overview of the performance in 2009; and

– An update on the performance in 2010.

2010 Strategic Plan

The 2010 Strategic Plan is informed by:

– Performance in 2009;

– Consideration of strategic matters that require attention in 2010; and

– Appreciation of the capacity and resources to do the approved work.

“Sustaining excellence by reviewing the effectiveness of GEMS’ business, incorporating efficiencies and providing an enabling environment for future success”

– Initiated strategies must be implemented and practically applied

– There is a need to take stock and appraise ‘where GEMS is’ so as to effectively plan the next three year strategy

– This prudent approach will sustain the excellence of GEMS business in an environment that is characterized by extensive change

Business Indicators

469,000 members 1,310,000 beneficiaries

Business Indicators

Business Indicators

Not Covered Covered - Other Covered - GEMS Total Covered Total Covered %Feb-06 467,292 523,223 568 523,791 52.85%Dec-09 540,460 260,259 382,923 643,182 54.34%

Not Covered Covered - Other Covered - GEMS Total Covered Total Covered %Feb-06 194,135 137,206 226 137,432 41.45%Dec-09 186,626 41,804 143,027 184,831 49.76%

• 151,908 employees are on salary level 17

• 20,505 employees are covered as dependants on GEMS

• 821,178 employees (69.37% of the December 2009 total) are “employed all the while”

• 371,168 not covered as members on any scheme reduced to 287,668 (reduction of 22.49%)

• 172,222 employees terminated their service

• 12.61% were members of GEMS

• 362,464 new employees appointed since February 2006

• 107,153 (29.57%) are covered by GEMS, whilst 2,519 (0.69%) are covered by other schemes

• Coverage of employees on salary levels 1 to 5 are tabulated below:

Business Indicators

Mar-10

Average Age 27.54

Average Family Size 2.798

Pensioner Ratio 5.79%

Calls 263,850

Emails 19,522

Applications 12,336

Claim Lines Settled 5,633,841

Contributions 1,049,193,716

Annualized Gross Contributions 12,525,086,577

IBNR 526,272,230

Accumulated Funds 895,902,603

Cash at End of Period (Rand) 2,018,430,436

Work Underway

Implementing Q2 deliverables in the strategic plan

Implementing approach to member consumerism

Confirming GEMS’ member eligibility rules

Monitoring the implementation of NHI

Attending to potential changes to the Board – The term of 3 employer appointed and 3 member elected trustees ends in July

– Confirming the status of employer appointed Trustees

– Implementing the Trustee Election Plan

Managing the Scheme’s financial performance (and Onyx)– Monitoring the 2010 claims experience against projections

– Q1 of 2010 better than Q1 of 2009

– Preparing for 2010 audits

Participating in CMS task teams

Participating in MPSA activities

Conclusion

Business is operating well – Growth is significant – Work is centered on executing the Strategic Plan– Risks have been identified and are being mitigated– Controls are established and well implemented

In a press release issued by the CMS as it turns 10 years old, the CMS states that it smiles at its achievements, such as:– The “registration of the Government Employees Medical

Scheme (GEMS), contributing to significant growth in the number of medical scheme beneficiaries”.

It is proposed that the Portfolio Committee on Public Service and Administration note this update on GEMS and its performance in the previous year