Portfolio Committee on Public Service and Administration GEMS Update 2O June 2007

1. Portfolio Committee on Public Service and AdministrationGEMS Update2O June 2007

2. Structure • Policy objective and background • GEMS: The Scheme • GEMS: The Corporate Entity • Progress • Challenges • Conclusion

3. Policy objective and background

4. Overarching Policy “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”

5. Historic Shortcomings • Old subsidy: 2/3rds of contributions to R1014 • 550 000 employees accessed the subsidy • 44% of covered employees had reached the Rand cap • 39% of employees (380 000) did not access the subsidy • Employees enrolled on 68 medical schemes • Over R5,4 billion per annum • 91% of covered employees on 15 medical schemes • Large spend yet inequity prevailed • Lack of employer control, influence and guidance • Excessive annual increases • Lack of value-for-money

6. Inequity and Imbalance

7. Efforts to Address Imbalances • Cabinet approvals • Registration of GEMS in 2004 • Member enrolment strategy in 2005 • Implications of implementation in a developmental state • An equitable subsidy structure • July 2006 • Resolution 1/2006 • The President’s Coordinating Council in 2006 resolved: • That Executing Authorities, DG’s and HoD’s are to actively promote employee awareness of the scheme and the new subsidy policy; and • That all employing departments create an enabling environment for GEMS communication activities.

8. Medical Subsidy Policy

9. GEMS: The Scheme

10. Official Status • Restricted membership medical scheme • Separate legal entity • Body corporate • Membership • Employees and pensioners • National and Provincial Departments and Administrations • Employer groups approved by the Board • Registered on 1 January 2005 • Enrolment commenced 1 January 2006 • Subscribes to Medical Schemes Act 131 of 1998

11. Benefit Options

12. Member Services

13. GEMS: The Corporate Entity

14. Corporate Structure • Governance and Management • Board of Trustees that directs the Scheme’s activities; • PO implements the directives of the Board; and • Scheme executive supports PO in managing the service levels and contractual obligations of appointed service providers • Efficient scheme ‘head office’ whereby: • Operational activities outsourced • Performance of the scheme is constantly monitored • ‘Locus of control’ always rests within the scheme

15. Strategic Focus • Understanding employees’ healthcare needs • Remain a competitive scheme • Ensure sustainability • Encourage primary health care • Incorporate innovation • Ensure efficiencies and eliminate wastage • Promote BBBEE

16. Employer Employees Members Board of Trustees Advisors Actuaries Auditors Investment Committees Principal Officer Management Team Contracted Service Providers Metropolitan / Solutio / Aid for Aids / Qualsa / Medipost / Netcare 911 / FNB / Sizwe Ntsaluba / Deloittes / Gildinhuys Malatji Adams and Adams Operational Structure

17. Service Integration • Multiple Providers • GEMS does not seek nor can it afford to manage any degree of ‘disintegration’! • Introduction of a market-first ‘co-operation’ agreement • “…contracted by GEMS must be willing and able to constructively engage, integrate, interface and participate with all other service providers that are contracted by GEMS.” • If a particular party fails to co-operate with any other party then the parties, subject to their respective service level agreements with GEMS, they shall be jointly and severally liable towards GEMS.

18. Progress

19. Progress Report • Strategic planning performed in January 2007 • The vision and goal in 2007 • GEMS to be an excellent medical scheme! • Strategic objectives define and shape the plan: • Execute communication activities and member affairs exceptionally; • Satisfy stakeholder requirements and expectations; • Ensure sound governance, accountability and legislative compliance; • Operate efficient and effective scheme services; • Manage finances prudently and transparently; • Optimize scheme corporate services; and • Manage risk effectively.

20. Progress Report • Sound corporate governance • Unqualified audit opinion for 2006 Financial Year • Independent Board performance appraisal for 2006 concluded • 2006 Annual report submitted to all members and the Council for Medical Schemes • Comprehensive rule revision concluded • Open and transparent member trustee elections concluded • Board and Committees functioning optimally • Annual Risk Assessment performed • Corporate services established • 18 Employees • Policies and procedures similar to the Public Service

21. Progress Report • Prudent and pro-active financial management • Contribution income of R220 million collected in 2006 • Annualized 2007 contributions will exceed R 2 billion • Significant operating profits recorded in March and April 2007 • Cash flow, solvency and financial performance monitored closely • Actuarial peer reviews performed on claims experience • Optimal tariff structures in place for medicines, hospitalizations and other service categories • Collective purchasing power will continue to increase

22. Progress Report • Continued member communication • Quarterly newsletters distributed • Regular member letters, SMS and emails distributed • Over 150 000 visitors to website monthly and updates performed weekly • Over 9 000 visitors to regional walk-in centers • Complaints currently less than 0.05% of all interactions but are addressed in a systemized manner with attention placed on causal factors

23. Progress Report • Member enrolment • Registered principal members exceed 140 000 in June 2007 • Take-up in Northern and Western Cape exceeds 20% of all eligible employees • 50% of GEMS members did not access the subsidy previously • Awareness promoted through road shows, presentations, SMS’s and mailing campaigns • A telemarketing service to be introduced in Q3 to manage enquiries

24. Progress Report

25. Progress Report

26. Progress Report

27. Progress Report • Effective member services • Operational processes continuously monitored, evaluated • Where indicated processes and procedures are amended or replaced • All supplier service level agreements are reviewed and monitored • Member interactions exceed 200,000 per month • Operational Statistics from 1 Jan 2006 to 31 May 2007 include:

28. Progress Report • Effective member services • GEMS operates in a service industry • Complaints are received through the Scheme • Complaints and enquiries dealt with in 48 hours • A break down of complaints is presented below:

29. Challenges

30. Challenges • Exceeding member expectations • Managing constant member growth • Collection of contributions from members who resign from open schemes and move to GEMS has resulted in a number of complaints arising. • Managing the Scheme’s financial performance is challenging in the face of rapid member growth and the non-application of waiting periods (underwriting). • Despite an increase of 44% in the enrolment on Sapphire in Quarter 1, the enrolment of employees on Level 1 to 5 eligible for a 100% subsidy is challenging.

31. Conclusion

32. Conclusion • Experience gained to date • Member enrolment • Employer interactions • Operational infrastructure established • Financial management tested • Procurement and contracting procedures instituted • Policy objective is being met • Over 50% of members did not access the subsidy in previous 12 months • Over 700 new registrations processed per day • Significant accomplishments for any new scheme • Much work still to be performed

33. THANK YOU