Government Employees Pension Fund & Government Employees Medical Scheme performance in previous financial year: briefing

Committee: Public Service and Administration, as well as Performance Monitoring and Evaluation

Chairperson: Mr T Mufamadi (ANC) and Ms J Moloi-Moropa (ANC)

Date of Meeting: 04 May 2010

Summary

The Chairperson of the Board of Trustees and representatives from the Government Employees Pension Fund briefed a joint sitting of the Portfolio Committee on Public Service and Administration and the Standing Committee on Finance on the performance of the Fund during the 2008/09 financial year. The Fund had received an unqualified audit opinion from the Auditor-General. The Fund was the largest pension fund in Africa, with R639.7 billion of assets under administration, 1.2 million contributing members and 318,000 pensioners and beneficiaries. As a consequence of the global economic downturn, the actuarial value of the Fund’s assets had declined from R707 billion in the previous fiscal year.  However, the unaudited results for 2009/10 reflected an increase to R819 billion.  Since 2006, the return on investment had declined from 27% to minus 10% in 2009 but had recovered to an ROI of 18% in 2010.  The Fund was committed to the principles of Responsible Investing and had developed a four-pillar framework for sustainable investments, to deliver both good investment returns and a high social and environmental impact. The Fund’s assets were managed by the Public Investment Corporation.  The Fund was the major contributor to the Pan African Infrastructure Development Fund, which invested in development projects on the African continent.  An amount of US$ 220 million was committed to the PAIDF.  The Fund was currently reviewing its policies concerning investment in socially desirable investments.  The Government Pension Administration Agency was established with effect from April 2010 to facilitate the separation of the Fund and the administration thereof.  Offices were established in all the provinces and four satellite offices were opened in major centres.  Other initiatives concerned improving the Fund’s interface with members and employers, improving service delivery and the Information and Communication Technology systems.  The major challenges facing the fund were the processing of a backlog of 22,389 outstanding claims in 2008/09 and obtaining accurate and complete data on its members from the employers.

Members asked questions about investment in project on the African continent, the backlogs in processing retirement claims, the accuracy of data on the PERSAL system, the departure of the Fund’s Principal Officer, the increased administration expenditure, interest payable to members and contributions receivable reported, the situation concerning the provision made for the “Ciskei Strikers”, the decline in the actuarial valuation of the assets of the Fund between 2006 and 2009, the returns on social and developmental investments, the Fund’s interaction with members, who underwrote the Fund and the policies concerning trustee remuneration.

The Acting Director-General of the Department of Public Service and Administration, the Chairperson of the Board and the Chief Executive Officer of the Government Employees Medical Scheme briefed the Committees on the performance of the Scheme for the 2009 financial year.  The presentation included a brief overview of the establishment of the Scheme, the implementation process that was followed, the eligibility of members of the Scheme, the corporate structure and strategic principles.  The Scheme offered a range of different options and the Committees were briefed on the business indicators for 2009.  The Scheme currently had more than 429,000 members and the total assets amounted to R1.792 billion.  Major challenges in 2009 included a higher than anticipated number of claims, the implementation of the occupation-specific dispensation and the amendment of member eligibility rules to remove the application of discretion by the Board.  The Scheme would be affected by the introduction of the proposed national medical insurance scheme and developments were closely monitored.

Members asked questions about the demographical make-up of members electing the various Scheme options, the percentage of complaints received, the Scheme’s performance in terms of the strategic objectives and the levies charged by pharmacists.


Minutes

Ms Moloi-Moropa and Mr Mufamadi advised that the joint meeting was held to allow the Members of both Committees to be simultaneously briefed on the performance of the Government Employees Pension Fund and the Government Employees Medical Scheme.

The Ministers and Deputy Ministers of Finance and of Public Service and Administration were unable to attend the meeting and their apologies were noted.

Briefing by the Government Employees Pension Fund (GEPF)
Mr Arthur Moloto, Chairperson of the GEPF Board of Trustees, gave a summary of the content of the presentation to the Committees (see attached document).

Ms Adri van Niekerk, Acting Principal Officer, GEPF, presented an overview of the establishment and background of the GEPF and the responsibilities of the Board of Trustees of the Fund.  The GEPF was the largest pension fund in Africa and the sixth largest fund in the world.  The value of the assets under the administration of the Fund was equal to one third of South Africa’s Gross Domestic Product (GDP).  In 2009, the Fund had 1.197 million contributing members and 318,000 pensioners and beneficiaries.

Mr Phenias Tjie, Chief Executive Officer and Principal Officer, GEPF, briefed the Committees on the GEPF Annual Report and financial highlights for the fiscal period 2008/09.  The Fund had received an unqualified audit report for the 2008/09 financial year.  The value of the assets under administration amounted to R639.7 billion (R707 billion in 2007/08).  The unaudited value of the assets as at 31 March 2010 was R819 billion.  The Fund reported a 10% negative return on investment in 2008/09.  The decline in the value of the assets and the concomitant return on investment since 2006 was attributed to the global economic downturn experienced during the period under review.  As a result, the fair value of the Fund’s assets was adjusted by R99 billion in 2008/09.

The Fund’s assets were managed primarily by the Public Investment Corporation (PIC).  The Fund was currently reviewing its policies concerning investment in socially desirable investments, for example the Isibaya Fund and Afrisam.  Reports on Isibaya and the impairment of the loans entered into for the Afrisam deal had been requested from the PIC.  The GEPF had committed an amount of US$ 220 million to the Pan African Infrastructure Development Fund (PAIDF).

Mr John Oliphant, Head of Department: Investments and Actuarial, GEPF, briefed the Committees on the investments of the GEPF, the asset liability model applied, the actuarial valuation of the Fund and the portfolio structure.

Mr Moloto explained the framework on developmental investment developed by the GEPF.  The framework was based on four pillars, i.e. investment in economic infrastructure, investment in social infrastructure, investment in sustainability projects and investment in new enterprises, broad-based black economic empowerment (BBBEE) and job creation.  The investment framework was intended to identify sustainable investments that delivered both good investment returns and a high social and environmental impact.  The GEPF was committed to applying the principles of Responsible Investment (RI).

Mr Tjie presented an overview of the Fund’s organisational achievements and initiatives.  During the previous two months, the Fund was subjected to negative publicity in the media concerning the delays in processing retirement benefits to its members.  The Fund was legally obliged to commence benefit payments to members within 60 days of the retirement date.  A statistical breakdown of the number of outstanding claims was provided.  The total number of outstanding claims had increased to 22,389 in 2008/09 but the backlog had been reduced to 14,036 in 2009/10. The main reason for the backlog was incomplete and inaccurate information and documentations received from the employers (i.e. Government departments).  The Fund was in the process of signing a service level agreement with the Department of Public Service and Administration in an attempt to address the issue.  Another contributing factor was the adequacy of the Fund’s information technology (IT) systems.

Mr Tjie gave an outline of the initiatives introduced to improve the client and employer interfaces, the communication with members, service delivery and the information and communication technology (ICT) systems.

Matters concerning corporate governance included the internal audit function, the implementation of a risk management framework and a fraud prevention plan.  During the year, 115 cases of alleged fraud were uncovered, of which 55 cases were reported to the South African Police Service (SAPS).  The loss suffered through fraud amounted to R1.3 million.  Although the Fund was not governed by the Pension Fund Act, the GEPF recognised the need to apply the Clean Break Principle regarding claims from divorced spouses of members.

The Board of Trustees and the Minister of Finance had agreed to separate the fiduciary and operational functions of the Fund and the Government Pension Administration Agency (GPAA) was established with effect from 1 April 2010.  A summary of the separation governance arrangements and the roles and responsibilities of the Fund and the GPAA was provided.

The briefing was concluded with a summary of the challenges and the actions taken by the GEPF.

Discussion
Ms Moloi-Moropa asked for a summary of the key financial and governance issues of the GEPF.

Mr M Motimele (ANC) requested further details on the investment made by the Fund in Nigerian oil rigs.  He remarked that oil was often the source of conflict and political upheaval in certain African Countries and he wanted to know what criteria were applied to ensure that the Fund’s investment in these oil rigs was secure.

Ms J Maluleke (ANC) noted that the Fund had increased the number of offices in the provinces.  She asked what monitoring systems were in place and what was being done to ensure that the information received by the Fund was accurate and that the correct exit documentation was submitted.  She expressed concern over the delays in processing retirement benefits and the lack of understanding of their entitlements by the surviving dependents of pensioners.  She cited an example of the benefits of a retired school principal that was erroneously paid to another person for a number of years and the slow response of the Fund in correcting the matter.

Ms A Dreyer (DA) expressed her appreciation for the arrangement of a joint briefing of the two Committees but was disappointed that the Ministers were unable to attend.  She had major concerns concerning the quality of the data provided by Government entities, which was shared by Statistics SA.  In particular, the information captured on the PERSAL system was inaccurate and unreliable and had been the case for a number of years.  She wanted to know when the data on the PERSAL system would be corrected and pointed out that the National Planning Commission would require accurate data from Government entities.

Dr D George (DA) referred to the report by the Principal Officer, Ms Maemili Ramataboe, on pages 8 and 9 of the annual report.  He understood that Ms Ramataboe had left the Fund rather suddenly and he asked what her reasons for leaving were and if there was any legal action pending against the Fund.  He asked why Mr Tjie was occupying both the positions of Chief Executive Officer and Principal Officer.

Dr George referred to the overview of Fund benefits detailed on page 37 of the annual report.  He noted that the GEPF was a defined benefit fund but no formula was provided in the report.  He asked if anyone had received more benefits than provided for under the rules of the Fund.

Dr George referred to the summary of accumulated funds and reserves on page 38 of the annual report.  He noted that the amount of interest payable to members and the administration expenses had increased substantially over the previous year and he wanted to know what the reasons were for the increased expenditure.

Dr George referred to the actuarial valuation reported on page 40 of the annual report.  He asked what steps were taken by the GEPF to provide funding for the unfunded items and what the reasons were for increasing the contingency reserve from R6 billion to R24 billion.  He noted that the amount of salary increases had been greater than expected and asked what steps had been taken to mitigate this risk.

The report of the Board of Trustees on page 46 of the annual report referred to a reserve account balance of R3 billion for “other past discriminatory practices”.  Dr George asked what the Fund’s policy was in this regard.

Referring to the statement of net assets and funds on page 50 of the annual report, Dr George asked for an explanation of the amount of R525 million reflected as contributions receivable.  He presumed that the increase in benefits payable from R13 billion to R18 billion resulted from the increased backlog in claims reported.

Dr George referred to the actuarial valuation data on page 19 of the presentation document.  He noted that the funding level had declined from 101.68% in 2006 to 91.5% in 2009.  He remarked that the decline did not reflect a healthy financial picture and asked what was being done by the Fund to address the matter.

Referring to the breakdown of the portfolio structure on page 20 of the presentation document, Dr George commented that the Fund could not afford sub-optimal returns from developmental and socially desirable investments.  He wanted to know what criteria were applied to ensure that the Fund earned an acceptable rate of return from such investments.

Dr George asked if the establishment of the Government Pension Administration Authority referred to on page 42 of the presentation document and the special pensions administration function referred to on page 51 could be considered to be the precursor to the administration of the proposed national retirement savings fund.

Mr Moloto explained that the investment in the Nigerian oil rigs was made by the PAIDF.

Mr Oliphant explained that the PAIDF was structured in a similar manner to a trust, with a number of different investors contributing to the fund.  The GEPF was the largest contributor, with an investment of US$ 215 million (39% of the total fund). The PAIDF was managed by a Board of Trustees.  The PAIDF’s fund managers sourced appropriate projects on the African continent, which was presented to the Board.  The Nigerian oil rigs were one such project.  Political instability in Africa was a fact of life in doing business on the continent and the GEPF took appropriate mitigation action by taking out risk insurance and by ensuring that a local investor was also involved in the project.  In the case of the oil rigs, the First Bank of Nigeria was a co-investor.

Mr Oliphant explained that the decline in the actuarial valuation was as a result of the global economic crisis in recent years.  The Fund had a high exposure to growth assets, such as equities and property.  The 2006 valuation of the assets was made at the top of a bull market and the 2009 valuation was made at the bottom of the economic cycle.  The assets of the Fund were valued at R819 billion as at March 2010.  Other issues affecting the liabilities of the Fund included the implementation of the occupation-specific dispensation (OSD), which would result in higher salary expenditure than anticipated.  Higher salaries, however, translated into larger contributions to the Fund.

Mr Oliphant advised that the GEPF had conducted research into social responsibility investments and avoided investing in projects with no or low returns.  The Fund considered high-impact social investment opportunities where the projected returns were 3% or higher in real terms.  He cited the example of a church in Soweto that needed funding to build a church but did not qualify for a bank loan.  The GEPF provided the loan, which was repaid within five years.  The four-pillar strategy was developed to aid in identifying appropriate investment opportunities and to ensure that the Fund’s investments were adequately diversified.

Ms Mantiti Koia, Chief Operations Officer, GEPF, explained that the increased administration expenditure resulted from the need to increase the number of provincial and regional offices from four to 13 in 2008.  Forty-two client liaison officers were appointed but the Fund expected the various Government Departments to also provide resources for the client and employer interface initiatives.  The Fund was active in promoting member education and had arranged for road shows to be taken to the townships, which provided the opportunity to educate the spouses of members.

Concerning the issue of data integrity, Ms Koia advised that the fund had initiated an information quality improvement project and that the members of the Fund were made aware of their responsibility to provide up-to-date information to the Fund.  The GEPF made use of third-party sources of data, such as the Government Employee Medical Scheme (GEMS) and the South African Revenue Service (SARS) and had approached independent commercial data vendors.  Concerning benefit payments, the GEPF was reliant on the employer to provide accurate member data and to submit accurate exit documentation timeously.  The Fund had established a call centre to assist members with queries and complaints.

Mr M Swart (DA) asked if the percentage invested in sustainable social investments would be increased from 6% to 35%.  He requested that future reports included those investments that did not perform in accordance with the Fund’s expectations.

Ms Z Dlamini-Dubazana (ANC) understood that the Fund had not yet met with the PIC, despite being the biggest client.  She was perturbed that the Fund had not yet received information from the PIC on the investments made on behalf of the GEPF.  She suggested that the Fund arranged a meeting with the PIC as a matter of urgency.

Dr A Williams (ANC) had the impression that the Fund was not adequately connected with the people on the ground.  He was concerned over the continuing problem with data accuracy and felt that it was not sufficient to merely endeavour to halve the number of outstanding claims each year.

Ms F Bikani (ANC) shared Dr Williams’ concerns and felt that the Fund was not sufficiently in touch with its members.  She did not perceive a coordinated approach with the Department of Public Service and Administration (DPSA) concerning the data on the PERSAL system.  The Fund was affected by PERSAL and she wanted to know what was being done for the two entities concerned to connect on the issue.  She was aware of the problems associated with ICT systems and failed to see how the GEPF connected with the DPSA and how the current backlogs would be eliminated.  She referred to page 18 of the presentation document and noted that a revised investment mandate had yet to be discussed with the PIC.  She was concerned that the GEPF as the largest client of the PIC had not met with the organisation.  She asked what progress had been made in this regard.  Concerning the proposed service delivery initiatives, she suggested that the Fund submitted a detailed strategic framework with timeframes to the Committees, which would allow the Members to assess the progress made.  She requested a similar detailed framework on the ICT project as well.  She referred to the reference made in the presentation to unaudited results and asked why the Fund’s financial reports had not been audited.

Mr L Suka (ANC) requested further clarity on the investments in new enterprises, BBBEE and job creation in terms of pillar IV of the investment framework illustrated on page 22 of the presentation document.  He wanted to know what progress had been made and what the challenges were.  He requested more details on the 115 alleged cases of fraud mentioned on page 37 of the presentation document and asked what the value of the instances of fraud amounted to and how much had been recovered.  He was gratified to note the location of the GEPF offices listed in the annual report and advised that he intended to visit the offices.

Dr Z Luyenge (ANC) wanted more details on the appointment of the underwriters of the Fund.  He asked how the Fund interacted with the employers to determine which employees would be exiting the fund and if there was a system in place to avoid further backlogs.  He asked how the Fund dealt with inflation with regard to the benefits payable to members.  He asked if the Fund had a suspense account and how the Fund managed unclaimed benefits.

Mr N Koornhof (COPE) referred to page 19 of the annual report where details of the remuneration and number of meetings attended by the trustees were provided.  He cited the relevant amounts paid to and the number of meetings attended by three trustees and asked for an explanation of the differences in the average remuneration paid.  He wanted to know why the Fund had 28 trustees.  He noted that the Fund’s assets were managed by the PIC and asked why the GEPF had appointed twelve asset managers.  He noted that the Fund had a substantial investment in ESKOM and asked if the GEPF had been approached by ESKOM to increase its investment in the power utility.

Mr D Van Rooyen (ANC) asked where information on the performance of the investments made by the Fund in the PAIDF and the Isibaya Fund could be obtained.  He suggested that the Fund considered making use of the Parliamentary constituency offices to increase its outreach to fund members.

Responding to Ms Bikani’s questions, Mr Moloto confirmed that the 2008/09 annual report had been signed off by four auditing firms (see page 43 of the annual report).  He said that the Fund’s relationship with the PIC was good and that three liaison committees (i.e. the finance, investment and communication committees) met with the PIC on a regular basis.  He said that the Board would consider Mr Van Rooyen’s suggestion concerning liaison with the constituency offices.

Mr Mufamadi referred to the provision made for “Ciskei strikers” in the reserve account balance (see page 46 of the annual report).  He asked for an explanation of this item as he understood that the GEPF had amalgamated with various pension funds (see page 5 of the presentation document).

Mr Oliphant explained that the contributions of active members of the Fund were based on their salaries, which was adjusted for inflation.  The benefits payable to beneficiaries were increased on an annual basis in accordance with the rate determined by the Board.  The GEPF had an equity portfolio of R400 billion, which was internally managed by the asset managers employed by the Fund.  External asset managers were mandated to deliver investment returns that out-performed the equity market.  The utilisation of both internal and external asset managers was in terms of the Fund’s core satellite approach to investments.  The four pillar investment framework was only adopted by the Board in February 2010 and was yet to be fully implemented.  The Fund had a substantial amount available for investment and care had to be exercised in how investment resources were allocated in the sector under the fourth pillar as this sector was subject to certain challenges.  Concerning the investments in PAIDF and the Isibaya Fund, he pointed out that the determination of returns in private equities differed from that of listed entities.  The returns from investment in unlisted entities could only be realised when the investments were sold.  The Board had appointed a sub-committee to determine the value of investment in all unlisted entities on an annual basis and the report from this committee could be made available to the Parliamentary Committees.  The investment in the Isibaya Fund was currently 1%.

Ms Koia advised that the relationship of the GEPF with the DPSA and the other employers was based on a partnership and interaction took place at all strategic and operational levels.  The Fund provided defined benefits and was reliant on information captured on the PERSAL system to accurately determine contributions and benefits.  The GEPF participated in the meetings and other efforts to improve the PERSAL system.  The provision for the “Ciskei strikers” was made to address the imbalances that had resulted from past discriminatory practices and the Fund was working with the DPSA to implement the agreements that had been entered into by the Department.

Mr Tjie explained that the “Ciskei strikers” were civil servants who were dismissed after a wage dispute in 1992, when the former Ciskei was re-incorporated into South Africa.  The strikers re-entered the system in 1996 and the provision was made to compensate them for the loss in benefits incurred.

Ms Koia acknowledged that the Fund had experienced challenges concerning the completeness and accuracy of data but pointed out that progress had been made to address the backlogs in processing claims.  Page 27 of the presentation document reflected a reduction in the number of outstanding claims of 37% during 2009/10.  Progress had been made in tracing members and in obtaining the required documentation.  She advised that the proposed new automated system was expected to address the issue of backlogs and to improve the turnaround times once the new system had been approved by the Board.

Ms Hannah Ntshingila, Chief Financial Officer, GEPF, explained that the amount of interest accrued on benefits payable that remained unpaid for longer than 15 months had to be manually calculated.  The amount of interest payable was reducing as the backlogs were cleared.  The increase in administration expenditure was attributed to the increased number of offices established.  The contributions receivable were as a result of certain employers being late in paying over the contributions deducted from employees to the Fund but measures had been implemented to ensure that the contributions were paid timeously.  The Fund reconciled the suspense account for unpaid benefit claims on a regular basis.

Ms Van Niekerk explained that, prior to June 2009, independent specialist trustees were paid an hourly rate and principal trustees were paid a fixed rate for attendance at meetings.  Certain trustees served on task teams and received additional remuneration for their services.  In June 2009, the Board revised the Fund’s policy concerning trustee remuneration and all trustees currently received a fixed fee for attendance.  In terms of the rules of the Fund, the Board comprised 16 trustees plus one alternate trustee for each member of the Board.

Mr Moloto advised that a written reply will be forwarded to Dr George in response to his question on the former principal officer.  The Minister had been advised of the matter.  The Fund did not anticipate any legal action as the contract with Ms Ramataboe had been honoured and she would be compensated for the remainder of the term of the contract.

Mr Tjie advised that a fraud hotline had been set up by the Fund and all allegations of fraud and corruption reported were taken seriously and investigated.  Charges were laid with SAPS in all instances where fraudulent activity was uncovered.  He explained that the South African Government was the underwriter of the Fund and was responsible for making good any shortfall in the event of failure of the GEPF.

Ms Moloi-Moropa expressed her appreciation for the input provided by the GEPF during the briefing.  She advised that further engagement with the Standing Committee on Finance would take place at a later stage.  Due to time constraints, she requested that further discussion was postponed.

Dr George objected to not being given the opportunity to speak and pointed out that not all his questions were responded to.

Mr Mufamadi noted that Mr Suka’s question concerning the fourth pillar of the investment strategy was not adequately answered.  Mention was made during the presentation that the Fund’s involvement with the Isibaya Fund and the PIC was too narrowly focused and he was interested to hear how the matter would be addressed in future.  The Committee would like to hear more about the successes and failures of the Fund and had taken note of the decision taken that investments of more than 5% would require Board approval.  Matters concerning shareholder participation, fraud and corruption required further discussion.  He said that the Fund’s policies had a significant impact on the lives of the members and the issue of the backlogs required the implementation of a successful turnaround strategy similar to those implemented by SARS and the Department of Home Affairs.  The matter of the PERSAL system required inter-departmental cooperation and more information on the implementation of the social and developmental investment plan was required.

Briefing by the Government Employees Medical Scheme (GEMS)
Ms Colette Clark, Acting Director-General, Department of Public Service and Administration, explained the historical background to GEMS and the Department’s relationship with the Scheme.

The concept of a medical scheme restricted to members of the public service was approved by the Cabinet in 2004.  Following a process of consultation with public service representatives, the closed medical scheme was approved in 2006.  Member contributions were subsidised and the subsidies were negotiated on an annual basis by means of a collective bargaining process.  The shareholders of the Scheme were the members of GEMS.  The Minister of Public Service and Administration appointed six employer representatives to serve on the Board of GEMS.  The Department worked closely with GEMS as the subsidies were paid out of the fiscus.  An initial cash injection was made to start the scheme in the 2005/06 and 2006/07 fiscal years.  GEMS was governed by the Medical Aid Act and reported to the Minister of Health.  The Scheme was administered by the Council of Medical Schemes.

The Department’s relationship with the GEPF was similar to its relationship with GEMS in that member’s contributions were subsidised by the fiscus.  The GEPF reported to the Minister of Finance, who appointed employer representatives to the GEPF Board.

Prof Richard Levin, Chairperson of the GEMS Board, presented an overview of GEMS (see attached document).  The briefing included a summary of the policy objectives and the process followed in setting up the Scheme.  GEMS currently had more than 450,000 members.  The eligibility of members, the corporate structure and the strategic thrust of GEMS were explained.

Dr Eugene Watson, Chief Executive Officer, GEMS, presented on overview of the Scheme’s performance during the 2009 fiscal year.  The briefing included the main business indicators, the financial position of GEMS as at 31 December 2009 and the achievements and challenges faced during the year.  The strategic plan for 2010 and an update on the performance to date were provided.  The presentation included graphs and bar-charts illustrating the major business indicators and an overview of the work currently in progress.

Discussion
Ms Dreyer asked for clarity on the demographical make-up of the members opting for the various scheme options offered.  She requested further details concerning the removal of the Board’s discretion in evaluating member eligibility rules.

Ms Bikani felt that not enough information was provided concerning the strategic plans and the Members were not able to evaluate the Scheme’s performance.  She was under the impression that GEMS did not have a strategic plan in place.  She asked for clarity on the mention made of involvement in the proposed national health insurance scheme.

Mr Suka asked what the percentage of complaints was relative to the number of members.  He requested clarity on the impact of the application of the occupation-specific dispensation on GEMS.

Prof Levin gave the assurance that GEMS did have a strategic plan in place.  The 2009 annual report was in the process of being finalised and he undertook to provide the Committees with copies.  The annual report contained details of GEMS’ strategic plans.  The decision to implement a national health insurance scheme had been taken by the ruling party and GEMS intended to closely monitor developments and interact with the Department of Health as the scheme was developed.  As the second largest medical scheme in the country, GEMS was affected by the introduction of the national scheme.

Dr Watson explained that the older and sicker members generally opted for the option that provided more benefits (e.g. the “Onyx” option), members with families chose the “Emerald” option and the “Beryl” option was preferred by members who were satisfied to make use of a laid-down network of service providers.  GEMS evaluated the eligibility of employer membership on the basis of the risk to the scheme and took various factors into account, such as the number of employees, if a subsidy was in place and the general behaviour of the employees.  A detailed progress report in terms of the strategic objectives was compiled but the presentation included details of the smaller and longer term initiatives that were taken by GEMS.  The Scheme offered a number of services and benefits and it was necessary to take stock from time to time to assess whether or not the members were in fact making use of all the services being offered.  All complaints received were logged, regardless of whether or not a complaint was valid.  GEMS received approximately 350 complaints per month and the overall percentage was relatively low in the light of a membership of 1.3 million people and 6 million claims.  The Board received a detailed complaints report on a quarterly basis and appropriate action was taken if the number of complaints reflected any increase.  The effects of the implementation of the OSD on GEMS were primarily the back-dating of the increases.  GEMS’ debt-collecting systems automatically attempted to recover back-dated contribution increases, which had caused some problems.  The Scheme was reviewing the policy in this regard and a change in the rules was contemplated.

Ms Bikani remarked that members paid contributions to GEMS but were also being charged a levy by pharmacies.  She asked how GEMS dealt with this issue.

Dr Watson explained that GEMS considered the charging of levies to be undesirable.  Contracts had been entered into with hospitals so that levies were not charged and members of the Scheme were encouraged to make use of these services instead.

Ms Moloi-Moropa advised that the Committee would be meeting with other stakeholders in the Public Service and Administration sector to discuss a number of outstanding issues.

Mr Mufamadi felt that the concerns raised concerning the levies needed further attention.  GEMS offered a sophisticated product but also had to interact with less sophisticated members.

The meeting was adjourned.