Concern over healthcare reform plans
The Bermuda Government's plans for an overhaul of the healthcare financing system will effectively shift costs from government-backed insurance schemes to private healthcare insurance.
The likely result is that employers and the more than 33,000 employees who pay for private-sector insurance will shoulder more of Bermuda's healthcare cost burden, insurance sources said.
Public reports show that government-backed healthcare programmes pay out more in claims than they collect in premiums. For private health insurance, the opposite is true.
The Government is planning to pool private and government sources of funding to spread out the cost of heathcare across the entire population.
Kim Wilson, the Minister of Health, outlined plans for this fundamental change to healthcare financing in the House of Assembly this month, stating that the plan entails the Bermuda Hospitals Board receiving a $330 million block grant, replacing the “fee-for-service” system.
The grant will be capped and the Government claims the change will lead to $20 million of hospital healthcare cost savings.
Health insurers are understood to have expressed concerns over the pooling proposals to the Government. One industry source said insurers were informed of the plans only in late January and that the feeling was the financing reform was being rushed through, as more research needed to be carried out on the ramifications for the entire healthcare system, including the impact on employment costs.
Employers saw their healthcare obligations increase by 78 per cent in the decade from 2008, research by The Royal Gazette found.
Pooling the sources of funding effectively means private insurance will be subsidising government plans, a source added.
An actuarial report for the Bermuda Health Council shows that 48,145 people had health insurance in 2017 — 70 per cent of them covered by private insurers and 30 per cent by government plans.
Based on the standard health benefit, the portion of the premium allocated to hospital care coverage, private plans had a loss ratio of 89 per cent, meaning that 89 cents on the dollar were spent on claims and benefits. Government plans had a loss ratio of 143 per cent, meaning premiums fell well short of what was needed to pay claims.
On average, private insurers make a profit of about five cents per premium dollar, with about 85 cents going on claims and a further ten cents on operational expenses.
The new system will inevitably slash this margin, one source said, meaning health insurers would have to either increase premiums or exit the healthcare business, as continuing to underwrite unprofitable lines of business is not in the interests of shareholders.
Detail has not been given, for example, on where the $20 million in cost savings will come from, given that the actual drivers of healthcare cost increases are not being addressed by the reform, the source added.
Under the new system, the hospital will no longer need to file claims for treatment of patients, a source said, removing the opportunity for insurers to check the appropriateness of treatments and procedures. This will effectively remove one of the current system's checks and balances.
Claims provide an important source of data on medical trends that help insurers to structure and price coverage to meet changing client needs. Whether the data will be shared across the industry was another source of concern, on which insurers say they have not been given guidance.
Ms Wilson is due to give a presentation on healthcare reform to members of the Bermuda Human Resource Association this morning, an event hosted by the Association of Bermuda International Companies at the offices of Axa XL.