Bermuda's system of health care is in jeopardy, and is already starting to "fray at the edges,'' the new CEO of Argus Insurance Group, Gerald Simons, has said.

He warned health insurance claims could consume as much as nine-tenths of the money paid in premiums and authorities, he said, need to address the issue of spiralling health care costs -- and they need to do it now.

Mr. Simons, a former Cabinet Minister, took over the chief-executive role at his long time employer this week, at the start of the group's new financial year. He promptly declared it in excellent health.

But he urged Government to move on a long-advocated Argus concern about issues of health-care reform that have been recognised and acted upon in other western countries.

Mr. Simons warned, "Health insurance premium rates have been going up considerably faster than the rate of inflation. For example, the Government last increased the premium for the standard benefit in HIP (Hospital Insurance Plan) by 10.5 percent. Our health premiums in the last four or five years have gone up between five and 10 percent a year. Inflation has been two or three percent.

"This growth in the health insurance premiums has been a real concern of the Argus group for years. The problem is that the cost of health care in Bermuda is rising much faster than the rate of inflation. The percentage of Bermuda's Gross Domestic Product going into health care is rising, and is now around ten or 11 percent.

"We, as a community, need to reign in that problem. We have called for years for a mechanism which only the Bermuda Government can establish, that would cause the principal players on the delivery, financing and regulation of health care services to get together to study the issue.

"Insurers, physicians, Bermuda Hospitals Board, the Hospital Insurance Commission, the Ministers of Finance and Health & Social Services must get together. It is increasingly becoming an urgent issue.

"We see it when we're obliged to put up premiums and the deductions from employees' pay goes up. The overwhelming percentage of a health insurance premium goes right out to pay claims.

"Out of every dollar, 80 to 90 cents goes to doctors and hospitals. And the value of those claims are rising faster than wages, faster than inflation.

There are costs for lab work and pharmaceuticals.

"You look at some part-time retail workers, where it makes no sense to work three or four hours a day, two to four days a week, because the deductions for their health insurance and Government pension will eat up so much of their pay.

"We need to find a mechanism to control those costs and that's why we say it requires a degree of collaboration and cooperation which we haven't seen before among the Health Insurance Association, the hospitals, the Hospital Insurance Commission, etc.'' One of the implications of this rapid rise in health care costs relates to insurance premiums for the elderly. Many older people on fixed incomes are finding it increasingly difficult to maintain their insurance coverage.

And insurers find it difficult to offer coverage to the elderly at reasonable rates, because actuarially, people over 65 will incur claims about four times higher than the rate of people under 65.

Mr. Simons said, "No individual insurer can afford to subsidise health care for the elderly, because it would make the premiums on its major block of business for the working population uncompetitively high, so they would lose business.

"Argus has long-advocated that we need to address the health care of the elderly as a community problem, and perhaps pool the experience of all people over 65 and develop some form of community rating.'' Argus' core business is in the employee benefits area, including group life, group long-term disability, workmen's compensation, health insurance and pensions.

Their fastest growing line is group pensions, in light of the impending National Pension Scheme proposed by Government. The Government's intent to improve the pensions of Bermudians has led to significant developments.

"Lots of companies don't have pension plans,'' he said. "Government has expressed an intention to make pensions mandatory. Many of our health clients who don't have pensions, have approached us.

"But in an unanticipated development, many firms are also approaching us to look at their existing pension plans. They want to tidy up the details, and better position them to be in compliance with the new requirements.'' Argus has a strong reputation for pension expertise, financial strength and an `A' (Excellent) rating from A.M. Best Co.

In the year to March 31, 1997, Argus' Bermuda Life Insurance Co. Ltd. managed 120 plans, an increase of 15 percent over the year before.

There are health insurance opportunities to expand market share and to grow the benefits of the existing clients. There are some who would like to upgrade their level of coverage.

Even in the property and casualty area, there have been identified opportunities to grow the coverage of existing clients.

Centurion Insurance Services was appointed last year as the broker of record for the Government's business. That's the Commercial Union (CU) agency. CU has insured a number of Government risks for a number of years.

Mr. Simons said, "They are now providing in a separate contract, broking services together with the risk management services it has previously provided. Commercial Union Risk Managers (CURM) is being used.

"A significant part of the success of Argus has been the successful management of our investment portfolio ($213.1 million), taking advantage of opportunities here and abroad.'' PREMIUM ADVICE -- Former Government Cabinet Minister, Gerald Simons urges a community response to spiralling health-care costs.

HEALTH HTH