Expect to see major increases in the cost of medical care and bigger deductions from your pay cheque as the Island undergoes a healthcare overhaul.

Driving the overhaul in large part, is the staggering projected statistic that within the next 20 years, close to a quarter of Bermuda's population will be over the age of 65.

The next decade is expected to usher in a $300 million upgrade and expansion of the hospital, two new urgent care centres (St. David's UCC opens next month) and an expansion of FutureCare, Government's new low-cost health insurance for seniors.

Hospital inpatient and outpatient fees are set to rise nearly seven percent this year, to cover spiralling healthcare costs and the King Edward VII Memorial Hospital expansion.

Healthcare experts say the fees traditionally set a baseline for how public and private premiums will rise across the health sector.

The rate for the minimum level of cover which employers must by law provide insurance for, (HIP premium/or standard hospital benefit) is being hiked more than 10 percent, outpacing inflation.

That means, as of April the premium will rise from $187 a month to $208.44. Employers can deduct from the salary of employees up to a maximum of 50 percent of that premium.

Back in 1990, the HIP premium stood at just $52 a month.

In addition, both employers and employees face at least larger hospital insurance contributions to fund FutureCare. (See Q&A on FutureCare funding and other issues).

"At present, each insured person has a deduction applied to their health insurance policy as a contribution to the Mutual Reinsurance Fund," Health Permanent Secretary Warren Jones explained.

"Of that amount, $4 goes to the Health Insurance Fund. In future years we will be reviewing that prescribed sum in order to grow the FutureCare Fund."

Another cause for concern is whether local companies, including banks, utilities, exempt and others, will continue their voluntary practice of allowing retirees to stay on company health plans, generally at a higher premium, though still less than what private insurance would cost.

BTC's recent decision to cut some 100 retirees from its self-costed health plan may set a precedent.

The company will now contribute $225 towards each retiree's premium with a new Argus plan.

The move caused an uproar among the former telephone company workers, who are seeking legal advice.

One BTC retiree was paying around $1,400 a month for BTC's plan, but now must pay more than $2,000 a month for a private plan for two.

"I am sure in this economy many employers are taking a good hard look at expenses," said former independent Senator Alf Oughton, who produced a health report for the UBP government that recommended better coverage for seniors.

He said Government "is to be commended for getting FutureCare off the ground".

"There is a dramatic change in benefits under FutureCare," he said. "It will help ease the pain for a lot of elderly people."

He said people with good employee benefits rarely see how much medical care and tests actually cost.

And Mr. Oughton said those costs will continue to rise annually.

"I don't see any time in the future where they will even hold level," he said. "They may rise around eight percent for years to come, worldwide, not just in Bermuda.

Local insurers say rising healthcare costs are indeed impacting premiums.

"There are numerous changes impacting health insurance premiums this year," the Health Insurance Association of Bermuda told The Royal Gazette.

Among them, the HIAB says, are the more than ten percent increase in the standard hospital benefit premium, the KEMH expansion and the new system that allows the hospital to bill in a manner that more accurately reflects the costs of specific cases.

"Many sectors of the population and business community are experiencing economic pressures due to the economy," HIAB said. "Private insurers are not exempt from these pressures."

"Over the last 12 months the HIAB has worked diligently with the BHB and Government to ensure our concern regarding economic impact to the healthcare consumer is considered as hospital rates are reviewed and accepted by Government for 2009."

Michelle Brock Jackson, vice president of Group Insurance for The Argus Group, said the cost of healthcare "has been growing at a rate much faster than inflation for several years".

"It is disappointing to see that a significant portion of the current increase is due to increased use of medical services," Ms Brock said. "This is why Argus feels that wellness initiatives are critical components in controlling the inflation of healthcare over the long term."

The Argus Wellness Programme provides a personal health assessment and information on what you can do to lower any health risks.

"Much of the increase in healthcare expenditure can be credited to factors such as increasing consumer expectations, an ageing population and more reliance on new medical technologies," Ms Brock said.

"Medical science now offers care for conditions considered untreatable just a few years ago. Although these are positive breakthroughs, these advances also mean increased health costs that somehow must be paid for."

Ms Brock said because of the 1971 Hospital Insurance Act, Bermuda's healthcare system actually provides almost comprehensive health insurance, covering most working residents for the high cost of medical care both locally and overseas.

"Bermuda is really far ahead than many other places, in terms of healthcare," Mr. Oughton agreed.

However, Ms Brock said the system is being challenged by an aging population.

She noted: "In the year 2000, 11 percent of Bermuda's population was 65 or older. This proportion is projected to increase to 22 percent by 2030."

She said FutureCare was a welcome initiative, adding, "While we recognise that FutureCare will be available this year only to those on the Government Health Insurance Plan, private insurers have been assured that in 2010 FutureCare will be rolled out to all seniors."

A representative of the charity LCCA says it is awaiting more details on what FutureCare will cover in terms of overseas care, and whether it's going to be similar to HIP, which covered overseas hospital bed nights and some procedures.

LCCA, mainly through Government grants, loans millions of dollars a year to people who cannot afford to go away for life-saving surgeries which cost on average, $75,000 a person. This past year they assisted around 125 people and the LCCA says the number is expected to grow every year.

FutureCare guidelines right now only say the plan will not cover elective surgery or medical procedures which can be provided in Bermuda. It will also not cover hotel expenses or airfare.

And it has not yet said what hospitals will be approved for treatment.

The Bermuda Health Council says it, along with the Health Ministry, is very concerned about the rising cost of health care.

"It is for this reason that the Council has addressed this concern in its 2009-2010 strategic plan," Council chairwoman Linda Merritt said. " The strategic plan will be published in the very near future for all residents to review.

"The Council is certainly concerned about the sustainability of escalating costs in the health industry and is seeking forward-looking solutions and approaches to influence the reduction of healthcare costs."