Still, the number one concern for retirees is access to and affordable health care.

The high cost of insuring the health of the Bermuda resident population is pushing the whole public and private insurance industry into critical strategy mode. Recently, the local health council and its members acknowledged that health care as it exists today is not sustainable, laying the real facts at the doors of the previous rhetoric, name calling, sidestepping and noise spent refuting these facts.

To help understand the market forces and the challenges facing providers of health care across the spectrum in Bermuda, let's also start by refuting the perception and opinions of some that insurance companies are greedy, big mean people earning huge profits on our health premiums while hoarding all that cash.

Health insurance companies are in business to make money. They cannot afford to only sell insurance to people who are most likely to use it. At the end of the day, what determines their profitability is that they need to take in more dollars in premiums than they pay out in benefits and administration costs. When a health insurance company sells a policy to a large business, it generally gets all of the employees of that business - healthy and sick, younger and older. The insurance company uses complicated formulas developed by actuaries to set their pricing, based on the idea that the premiums paid by the healthy employees will help pay for the costs of those employees who are not so health. This is one component of spreading the risk.

One is the loneliest number, according to Health Insurance Resource Center at www.healthinsurance.org. If you are a small self-employed individual, or a retiree without resources to a previous employer's larger health pool, you may have to buy an individual health insurance policy directly from an insurance company, where your policy is individually underwritten. That means that you're essentially a "group of one" when the health insurance company determines how likely it is to take in more premium dollars from you than it pays back to you in benefits. It is, in essence, making a bet on whether you will get sick. If you appear to be a "bad bet", they must charge a higher rate, or they simply won't make the bet at all.

Anatomy of a self-funded construction industry health insurance plan - names, places - changed for confidentiality. Why tell this story, because it is a perfect example of health plans gone badly wrong? It was also an example of complete confidence in a system where the originators of this idea did not have the long-term industry competency, while along the way the plan suffered highly catastrophic events before it could accrue a high cash premium pool. Long-term highly rated insurance companies - survive for a reason. They spend actuarial assumptions combined with real life documented experiences to proactively calculate the odds of maintaining a healthy insurance pool. They maintain conservative investment reserves to carry them through breakeven or loss years. They know what they are doing. To ignore their advice is to only benefit them.

The self-funded health insurance plan for a construction trade association (SEHP) started up with a high degree of participation. They felt that by using their very, very large group of construction related industry businesses, they could save money on everyone's health premiums - over and above the commercial industry rates - while building a cash fund for future investments. They also decided to take almost everyone, even those employees with pre-existing conditions.

Construction industry employees in large groups tend to be fairly transient in nature, moving from job to job, they tend to be younger and generally healthier, and it was assumed they would not make as many claims. Hundreds of businesses signed up; the plan was working, very well, and it quickly built up a fairly large contingency fund.

Then, two things happened. The bottom fell out of the economy, and one health care member fell gravely ill, requiring several years of extraordinarily expensive continuing care.

As employers, trying to stay in business, found they were unable to afford health insurance, they started cutting back on benefits. The economy worsened, the younger healthier workers were made redundant, the premiums in the SEHP were raised again and again to compensate for the loss of the healthier workers who left. The commercial insurers, in the local market place, could offer better rates in a competitive market, further depleting the workers who made few or no claims, leaving the older less healthy industry groups in the SEHP pool.

The decline was then incredibly rapid. Less than two years after the successful launch, the SEHP declared bankruptcy. Could it have been prevented? Possibly, but the combination of the conditions at the time weighted fate against this particular plan.

It was a terrible lesson on bad luck in life, planning gone wrong, and awful market timing.

Can self-funded plans work, along with commercial insurers? There are success stories on both sides. The very successful self-insured businesses focus extensively on loss prevention. This being just another expression to cost containment. They perfected the message of taking charge of one's lifestyle, by inducing the employers to not only encourage good health living habits, but rating them higher (lower premiums) for a healthier employee pool.

Bermuda has had incredible luck for a long time. With a once booming economy, many employers could offer the best benefits for their employees. while having less permanent healthy workers to spread the cost of insuring the whole health pool. According to the industry itself, we are seeing changes and must adapt to a different expectation of what being insured will mean.

Health insurance has always thought to be a God-given right for 99 percent of the working population, yet in the US, the participation rate has never been above 50 percent.

What might we see? Some of the same messages that other countries struggling with huge health care costs have disseminated through their populations for some time .

The fancy major medical plan may become a distant memory for most of us, unless we are willing to pay more.

Catastrophic insurance may become a viable alternative.

Less expensive health hospitals may be on the menu?

Less choices in general, from kinds of treatment to types of medication?

The responsibility for your health will be placed squarely on your shoulders.

Those who continue to ignore good lifestyle practices may find themselves up against more bureaucracy when requesting coverage.

Insuring a population pool for health care is the challenge of this decade for Bermuda.

Cross Border financial planning warning. It is imperative that you understand the coverage that you have now, whether it is portable, whether it is sustainable, whether it could potentially be denied based upon residency, or domicile, or whether you can even purchase it.

These questions are more important that deciding which cute little vacation cottage you are going to call your 'second home.'

Sources: www.healthinsurance.org/riskpools

The Royal Gazette

Bermuda Sun

Martha Harris Myron, CPA, CFP(US) TEP(UK) JP - Bermuda is an independent fee-only cross border planning specialist in investment, tax, estate, and strategic retirement planning services for Bermuda residents with cross-border and multi-national connections, internationally mobile people and US citizens living abroad. For more information, contact martha.myron@gmail.com">martha.myron@gmail.com or 296 3528 at Patterson Partners Ltd.

The article expresses the opinion of the author alone, and not necessarily that of The Royal Gazette. Under no circumstances is this advice to be taken as a recommendation to buy or sell investment products or as a promotion for financial plans. The Editor of the Royal Gazette has final right of approval over headlines, content, and length/brevity of article.