Cuts in health spending totalling $17.6 million will cause some to “suffer distress”, Health Minister Trevor Moniz told MPs.

Mr Moniz was speaking as he announced that subsidies for Standard Hospital Benefit (SHB) — the minimum cover in any health insurance policy sold in Bermuda — would be reduced.

Now the SHB portability — overseas coverage — will be abolished, which includes portability of subsidy, in order to save around $9.6 million.

And special age subsidies for seniors will also be cut.

For those aged 65-74, the subsidy will be cut by ten percent to 70 percent and for those aged 75 and over by ten percent to 80 percent.

Mr Moniz told MPs yesterday after being questioned by PLP MPs on the changes: “The whole community is going to suffer distress as a result of the situation we found when we came into office ... that’s situation we are stuck with.

“No one wants to see public benefits reduced and I, in particular, would prefer to see no reductions in health benefits as I’m too aware of the potential impact on patients and the public.”

But Mr Moniz added that the Ministry had to reduce its budget by seven percent — which meant a choice between cuts in public health services or reduced spending on subsidies and grants.

Mr Moniz added that SHB covers most local hospital services and some diagnostic imaging procedures outside the hospital, as well as some overseas hospital treatment.

“Through a separate fund, the Mutual Reinsurance Fund (MRF), the coverage also includes kidney-related claims and long-stay costs,” he said.

Mr Moniz explained the premium for the SHB and MRF package was priced annually by actuaries — but as Government paid for the subsidised population, including a 100 percent subsidy for children, part of the cost of SHB came out of the Consolidated Fund.

And he said that bill had amounted to around $115 million in recent years for local and overseas claims.

“However, if the overseas subsidy is removed, but SHB remained portable, the Standard Premium Rate would increase significantly as the cost of this coverage would be transferred from the Government to the insured population,” Mr Moniz said.

“This was not deemed affordable for employers or employees at this time so to abolish the portability of subsidy, we also had to abolish the portability of SHB.”

Mr Moniz added that all health insurance policies sold in Bermuda have benefits which included overseas costs, while SHB-only policies are sold only as an exception when supplemental benefits are covered elsewhere.

“HIP and FutureCare certainly have overseas coverage and this will be maintained regardless of the changes to SHB portability,” he said.

“So, while SHB will cease to be portable overseas, the majority of the population will continue to have overseas coverage and this will be managed as it is now by individual insurers.”

Mr Moniz said that the impact of reductions in subsidies to seniors was “two fold”.

He explained the move would transfer more of SHB costs from the Consolidated Fund to the insured population.

“Insurance plans with a high concentration of seniors such as GEHI and FutureCare will be impacted more by this change as they will no longer benefit from the subsidy,” said Mr Moniz.

“However, the impact on seniors is minimised because the premium continues to be community rated, so the cost of claims is spread across the population.”

“Second, the reduction in subsidy levels result in significant budget savings for the Government amounting to $8 million. Given the current financial space, this has been a necessary measure.”

He added that transferring MRF coverage of dialysis, anti-rejection drugs, kidney transplants and long-stay hospital treatment from the MRF to the SHB would mean insurers would “retain the premium to cover these claims.”

Mr Moniz added that insurers would also play the claims directly, as with any other SHB claim, rather than the Health Insurance Department adjudicating the claims and paying them from the Mutual Reinsurance Fund.

He added that the MRF transfer to the FutureCare and HIP plans would increase from $28 a month from $7 “to offset the reduction in subsidy and the other changes taking place.” And Mr Moniz said the MRF would also transfer 67c a month for every insured pension to the health service watchdog the Bermuda Health Council to help offset its $1.3 million budget.