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Underwriting


Since GEMS started to operate in 2006, we have prided ourselves on being able to provide all public service employees with equitable access to affordable and comprehensive healthcare benefits.

We have pursued this goal with the understanding that our members face unique social and economic situations which require that we operate differently from other medical schemes.

To ensure that our members and their families have access to the healthcare they need, we have up to now applied the following:

  • No condition-specific underwriting: Full cover without any waiting periods for people who join with chronic or life-threatening conditions.
  • No late joiner penalties: No penalties for people who have never had medical cover before (on other medical schemes, people who join later in life pay more in contributions). 
    A broader category of dependants eligible for cover: Your parents, grandparents, in-laws, nieces and nephews may join GEMS if they are financially dependent on you (some of these family members would not be covered on other medical schemes).

While these measures were introduced to assist members to provide healthcare cover to their families and extended family members in their care, through the years we have noticed an increasing number of members have taken advantage of these measures through anti-selective behaviour towards the Scheme. This behaviour has resulted in very high costs, which results in high contribution increases to all members of the Scheme. 

What is anti-selective behaviour?

This includes:

  • Members who only join the Scheme when they need expensive medical treatment, and resign from the Scheme soon after receiving the required care or procedure.
  • Members who add dependants only when they require medical interventions and resigning those dependants soon after the required procedure or care has been received.
  • Members who belong to other medical schemes and only join GEMS on retirement.

Members who behave in this way access funds at the expense of other members who have contributed over a much longer period, without contributing for a long period to the Scheme. This reduces the funds we keep in reserve for the future healthcare needs of members and affects the rest of the membership as they have to pay higher contributions in subsequent years to replace the lost funds. For example, there were 8 591 members who joined and left the Scheme in 2015. These members were three times more likely to go into hospital than members who had been on GEMS for longer. Collectively they paid only R30 million in contributions, but by the time they resigned, they had incurred R149 million worth of claims. This kind of behaviour is anti-selective and is unfair to members who have stayed longer and contributed to the money used for claims by these members.

One effective way of protecting the Scheme from anti-selective behaviour is through underwriting.

Underwriting to specific member categories

Underwriting refers to the application of waiting periods before a member can claim. Medical or health information is used to determine whether waiting periods are applied when a member joins a medical scheme. The underwriting of members joining a medical scheme is allowed by law and is within the GEMS Rules.

In the past the Board had decided, after the yearly benefit design, to not apply waiting periods in support of the GEMS mission to provide access to all public service employees. The severe claims and behaviour by members and providers explained above has, however, led to the Board deciding to apply some underwriting from this year to protect the Scheme.   

The Scheme will impose a three-month general and/or twelve-month condition-specific waiting period from 1 October 2016 on the following member categories:

  • Principal members who resign from the Scheme with their dependants (without also resigning from the Public Service) and then re-join the Scheme at a later stage.
  • Dependants who are resigned from the Scheme and who are then re-registered by the principal member at a later stage.
  • Dependants who join GEMS on a different date from the principal member (excluding newborn babies and newly-adopted children).

The Scheme has also been exposed to general fraud, waste and abuse of benefits. Both members and healthcare providers are responsible for this behaviour. Sometimes members and providers even work together to defraud the Scheme or abuse benefits. The following are examples of fraud and abuse committed by some members and/or healthcare practitioners:

  • Doctors submitting claims where actual services have not been rendered.
  • Members allowing non-members to access services using another dependants' identity.
  • Members colluding with pharmacists to purchase non-healthcare items, such as toiletries and homeware, and then submitting a false claim.
  • Members colluding with healthcare practitioners to be admitted where there is no actual need to be in hospital. Some members may want to claim from a hospital cashback plan, or to unlawfully access in-hospital benefits where there is no need to or due to exhausted out-of-hospital or day-to-day benefit.
  • We have identified cases where members and doctors have engaged in serious acts of fraud, where a doctor is allowed unlimited access to a membership card in return for a big reward by the member at the end of the year.
  • Some doctors abuse benefits by admitting patients longer than is necessary, or putting them in more expensive wards than they need, e.g. being admitted in high care instead of a general ward.

Whereas over the years we have absorbed the impact of fraud, abuse, waste and anti-selection, we have noted that the behaviour has become worse this year. This has resulted in much higher claims than we had expected, at an additional cost of R665 million above what was budgeted for by June 2016. 

It is important to note that despite these additional costs, the Scheme remains solvent and will be able to pay claims into the future.

Our auditors, fraud division and actuaries have advised that we introduce measures to contain these claims in order to protect the broader membership. As a result, there are a number of measures that we will be introducing to protect the Scheme and members' funds:

 

New measures

Why

How you will be affected

Hospital authorisation process will be tightenedTo ensure that every admission is valid and necessaryThe hospital authorisation process may take longer than normal
Changes in how and in which facilities certain conditions are treatedTo ensure that your condition is treated in the right facility to limit waste and abuseAn authorisation request may be rejected if the condition is not treated in the right way or in the right facility. This does not mean that we will not pay, it means we will not pay in certain facilities. If you experience this, speak to your doctor about alternatives or call the GEMS call centre for more information and advice
Additional claims review, especially in areas where we have noticed unusual claiming patterns  To ensure that what is claimed for is appropriate for the condition diagnosed and to verify that claims submitted are validThe claims process may take longer than normal. We are making healthcare providers aware of this as well
Introduction of underwriting to specific members and their dependantsTo limit the effects of anti-selective behaviour by members on the Scheme's reserve fundsRefer to the paragraphs above to know which membership categories will be affected
 

These changes are being implemented after a consultation process that started in July with stakeholders, including members, the Department of Public Service and Administration (DPSA) and the Public Service Collective Bargaining Council (PSCBC).

To consult directly with members, we embarked on a national Lekgotla roadshows across the Public Service. The Lekgotla is an opportunity for members to engage with us on these proposed changes and how it may affect them. Should you wish for a Lekgotla to be conducted in your department, please consult with your HR to request this from us.

 

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