Administrative costs eat into healthcare revenues
High administrative costs are diverting key revenue away from healthcare, and contributing to a deficit for Government’s health insurance, according to the Opposition.
Figures released in Friday’s House of Assembly for the year ending March 31, 2010 show FutureCare, the Health Insurance Fund (HIF) and the Mutual Reinsurance Fund (MRF) running roughly $13 million below revenues.
After Health Minister Zane DeSilva tabled the financial statements, One Bermuda Alliance MP Grant Gibbons questioned Government’s ability to manage the Island’s healthcare under its 2014 National Health Plan.
Dr Gibbons noted that administrative costs stood out prominently in the most recent statements, compared with the revenue taken through insurance premiums.
He said: “With the Health Insurance Fund, if you take the policyholder premiums from 2010, they’re $7.37 million. Administrative expenses are $2.58 million, which is roughly a third of the premiums.
“What I raised in the House was that, with administrative costs that high as a proportion of your premium, a lot of premium income that could be used to pay for health services is being chewed up. It’s quite inefficient for a small country like Bermuda. Health insurers are running probably 10 or 15 percent of their gross premiums in administrative costs.
“In these statements, we’re seeing double or triple what premiums of what the private sector is looking at. And in a large place like the US you would be looking at five to eight percent. The point I was trying to make is that while it’s getting better, it’s still very high, and the money is not being put where you want to put it.”
Dr Gibbons accused Government of “kicking the can down the road, probably for political reasons”.
“The challenge with the premium set by this government for Health Insurance Plan, HIF and FutureCare is they don’t take the advice of the actuary. For the last couple of years the actuaries have recommended higher increases in premiums. There’s a big deficit for 2010, and for political reasons they have not put the premiums at a more realistic rate.”
The seniors health insurance package FutureCare was “doing better” than HIF, he conceded, but administrative costs were nonetheless “double what you’d normally expect”.
FutureCare’s 2010 figures show revenues at $8.4 million, and administrative costs running at $2.5 million. Dr Gibbons said: “Again, you’re not operating at what would be, by commercial standards, a terribly efficient operation.”
While the Bermuda Health Council does not manage HIF or FutureCare, BHC CEO Jennifer Attride-Stirling described both funds as “social programmes intended to assist the population by providing low-cost insurance options”.
Dr Attride-Stirling told The Royal Gazette: “Their design includes provision of support from Government and the MRF. It is reasonable to expect that a low-cost social programme won’t pay claims purely from revenue raised as premiums. If they did, the premiums would be higher. In this context, reliance on Government funding is a feature of the programme, as it is for similar programmes elsewhere.”
When it was put to him that FutureCare has to be Government subsidised, Dr Gibbons said: “Yes, but at the end of the day, it’s not Government picking it up. It’s taxpayers.”
The Opposition continued to criticise the lack of 2011 statements — and the need for Auditor General Heather Matthews to withhold an audit opinion on the figures, which Dr Gibbons said had reduced the statements to “a best guess”.
Signing off on the financial condition of the HIF as of March 31, 2010, Ms Matthews wrote: “I was not able to satisfy myself that all assets, liabilities, revenues and expenses of the Fund had been reflected, nor was I able to satisfy myself that recorded transactions represented valid transactions of the Fund for the year then ended.”
Said Dr Gibbons: “One of the issues we’re dealing with here is that, since the Auditor General has denied opinion here for five years in a row, it’s hard to put a lot of credence in these numbers.”
Meanwhile, Age Concern Executive Director Claudette Fleming called it “highly unlikely” that the organisation’s members would accept another rate increase.
She said Age Concern’s top complaint from cash-strapped seniors was that their current income levels were insufficient — and that healthcare costs “represent a large portion of their annual expenses”.
Ms Fleming said she agreed in theory that if administrative costs went down, “subscribers would be better off”.
“Without question, wherever practical, we should be looking to lower costs,” she said. “However, we also have to be careful as to how our decisions impact the broader community. For example, we might be able to improve the cost of health insurance premiums overall if we outsourced the delivery of health insurance to overseas insurance companies. But, what impact would that have on the local economy with respect to local jobs and the circulation of capital?”
Calling it “a balancing act”, she added: “Seniors and the general public need to be reassured that there is solid rationale for, and evidence of, the value being added for every public dollar that is spent.”
She said her agency has not had any recent complaints specifically about FutureCare.
“However we have observed, during our hardship fund assessments, that there are seniors who are having difficulty in sustaining themselves financially, and healthcare expenses, including health insurance premiums, are contributing to this difficulty.”
She said she had observed “an insidious fear” on the part of seniors worried about their ability to meet heath care premium costs in the future.
“Therefore, we caution that careful thought be given to who is going to pay for the deficit of current shortfalls. We would strongly oppose that the current deficit be passed on to FutureCare subscribers — particularly those who are already struggling to make ends meet.”
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