BF&M calls for clarity on healthcare reform
The Bermuda Government’s singling out of BF&M for criticism over health insurance premium increases is clouding the bigger picture of the ramifications of healthcare financing reform.
That is the view of BF&M executives, who said there was much uncertainty about how the new system would work, with just 3½ weeks to go before its planned implementation.
Kim Wilson, the health minister, said last week that it was “unconscionable” that BF&M should blame the impact of government reforms for an increase in premiums.
She added that a letter from BF&M to clients was “misleading” and inaccurate.
In an interview, John Wight, BF&M’s chief executive officer, said the letter to clients was intended to clarify what went into premium rate decisions.
“Our primary objective was to educate our customers,” Mr Wight said. “This is a normal part of our discussion with clients and we want to be fully transparent.”
He added that the imminent reforms did nothing to address the drivers of healthcare cost increases.
A new system for funding the hospital is scheduled to kick in on June 1.
It involves the Government paying an annual grant to the Bermuda Hospitals Board, capped at $330 million for the coming year to replace the existing fee-for-service model.
Mr Wight said there seemed to be a lack of understanding in the healthcare industry about how things would operate under the revamped system.
To fund the block hospital payment, the Government will more than triple the amount it takes directly from the monthly premiums paid to health insurers from $101.97 to $331.97, with the proceeds going into the Mutual Reinsurance Fund.
BF&M has characterised this as an “indirect tax”, a description Ms Wilson rejected.
Michelle Jackson, BF&M’s senior vice-president, group lines health and life, said public discussion should not focus on the Government’s attack on BF&M.
“There is a much, much bigger picture,” Ms Jackson said. “There are wider questions about the $330 million cap and what happens as healthcare costs continue to go up and what that means for future years.”
The Government had informed BF&M of the planned financing reforms only about three months ago, she said, and now the reforms were just weeks away from being implemented with much uncertainty about many aspects.
Ms Jackson said under the present system, insurers manage and process their clients’ hospital claims.
This gives the insurer data, allowing them to analyse trends, as well as creating a check and balance in the system to ensure treatment of their clients is appropriate and efficient.
Under the new system, insurers will no longer manage claims or receive information on claims from the hospital when its clients receive treatment, according to Ms Jackson.
Ricky Brathwaite, the acting chief executive of the Bermuda Health Council, said last week that insurers would receive data on their clients’ hospital care. Ms Jackson said BF&M had received no guidance on what claims data would be shared.
She said health insurance premiums include two components.
First, the standard premium rate, which is set by the Government and which covers most hospital services, diagnostic imaging and support of government-administered plans.
This component is made up of the standard health benefit, managed by insurers, and the Mutual Reinsurance Fund contribution, paid straight to the Government. Under the reforms 93 per cent of the SPR will go to the MRF, leaving just $23.34 of the total $355.31 be.
The second component is comprehensive coverage, the extra non-hospital benefits provided by insurers on most policies, such as prescription drugs, dental care and mental healthcare.
In its letter to clients, BF&M states: “We will be increasing comprehensive coverage premium rates by more than in years past as a result of our significantly reduced SHB premiums (approximately 90 per cent less than current).
“Given current health trends and healthcare cost inflation, we project premiums will not be sufficient to pay expected claims for 2019-20 without this increase.”
Healthcare cost inflation was running at 6.5 per cent, well above general inflation, a rate that would likely accelerate as the population aged, leading to greater use of health services and higher claims, Ms Jackson said.
The Royal Gazette approached health insurers Argus and Colonial, asking whether they had increased premiums and for views on Ms Wilson’s comments about BF&M.
A spokeswoman for Argus said adjustments to premiums “take into account a number of factors, including but not limited to the rising cost of healthcare”.
She added: “As per the Aon 2019 Global Medical Trend Rates Report, global medical inflation is currently trending at 7.8 per cent, however, Bermuda traditionally experiences greater increases due to our high incidence of chronic disease and utilisation of services.
“It is important to understand that adjustments vary by corporate client as they are based on the respective claims experience for each client and their particular benefit package.
“Regardless of changes to legislation, we know that a healthy lifestyle, supported by healthcare professionals, is the key to keeping premiums low and driving down overall costs.”
No one at Colonial was available for comment.
• This story was amended to show that BF&M referred to an “indirect tax” and not a “direct tax” in its letter to clients.