Residents will face a hike in health insurance premiums this spring to help to cover back pay increases to hospital staff to the tune of almost $40 million.

The salary uplift and cost-of-living allowance negotiated with unionised hospital staff will have a ripple effect on hospital budgeting and, in turn, the standard premium rate — a mandatory government-run feature of health insurance.

Retroactive payments to staff by Bermuda Hospitals Board, announced last month, total $38 million owed to staff with the Bermuda Public Services Union.

The payments cover the period April 2022 through October 2025. Although no figure was given at the time, the salary increase of 18.23 per cent was described as a significant one.

Originally two instalments were planned: January 31 and April 30 of 2026.

Now the full payment is due at the end of next April, a government spokeswoman said.

Although $11 million has already been set aside, she said the remainder would have to be met through an SPR increase along with a “government reprioritisation”.

“We have one acute care hospital, and we must ensure its stability in serving the needs of the people of Bermuda,” she said, adding that it was “vital” for dedicated frontline staff providing essential services to be fairly compensation to maintain a strong healthcare system.

There was no indication as to the extent of the impending increase envisaged for the rate. The Ministry of Health has been asked for detail.

The SPR was increased to $400.31 on November 1, 2021, with the figure made up of the $23.34 Standard Health Benefit premium, retained by insurers, and the $376.97 Mutual Reinsurance Fund fee, which is collected on behalf of the Health Insurance Department.

It has remained unchanged since then. The spokeswoman said that a “multiyear payment schedule was originally anticipated”, but added that retroactive payments would be “fully met by the required deadline” of April 30, 2026.

She added: “This SPR increase is part of the previously announced plan to provide adequate and stable funding for the hospital amid rising global medical costs.

“Medical inflation, forecast to exceed 10 per cent this year, has significantly increased the cost of care, equipment and pharmaceuticals.

“Through the tough economic aftermath of the pandemic, the Government dictated that there would be no traditional increases to the SPR.

“The rate has been frozen for four years, since November 2021, during which the Government used allocated funds from the Excess Borrowing Fund to shield residents from increases.

“With costs continuing to rise, and with the new union agreement now requiring permanent funding, maintaining the SPR freeze is no longer sustainable.”

It comes on the heels of an enhanced coverage package for Health Insurance Plan and FutureCare policyholders, announced in the House of Assembly on December 5 by Kim Wilson, the Minister of Health.

The reforms include one free annual health exam, expanded prescription drug coverage and the removal of the 12-month waiting period for the personal home care benefit.

The extra benefits were aimed at covering preventive care and addressing the island’s rising costs of medication.

The One Bermuda Alliance said that Government had failed to tackle rising healthcare costs and said revenue from the Corporate Income Tax should be used to provide healthcare for those without insurance.

Saying he welcomed increased funding for the hospital, shadow finance minister Douglas De Couto added: “However, we note that this increased funding will come from increased healthcare premiums, and that Government has not made progress in reducing the underlying healthcare costs.

“In addition, while we welcome the recently announce benefit increases for those who already have insurance, there is still no progress on healthcare for those who are not insured.”

He said one of the uses for CIT funds could be to provide healthcare for the uninsured.

“In addition we would work on improving the underlying issues that drive up healthcare costs in Bermuda for a more sustainable future,” he said.