Household finances take hit from healthcare
All Bermuda residents trying to maintain a reasonable budget for their families, along with saving for a rainy day, continue to cope with more cost of living challenges going forward. This time it is another increase in healthcare.
Effective June 1, 2019, in an extraordinary, arbitrary government announcement, there will be significant changes (and financial increases) in how medical care will be administered in Bermuda.
The debate on this initiative by government and corresponding statements from our health insurers has been discussed and commented on all last week relative to the reallocation of the proceeds of the SHB (Standard Health Benefit) and MRF (Mutual Reinsurance Fund), so it is redundant of me to elucidate on the same.
It is very clear that there are numerous issues:
• Health insurance premiums are increasing again — is this the second time this year alone?
• Under the new system, due to take effect on June 1, more than nine tenths of the SHB previously managed by health insurers, will go straight to the Government in the form of the increased MRF contribution.
• The increase will fund the Government annual grant of a capped $330 million to the Bermuda Hospitals Board, but no mention is made whether the annual payment in excess of $30 million per year to Paget Health Services is included.
• The changes will mean the Government is taking over responsibility for the administration of hospital benefits, after more than 40 years of joint collaboration between the insurance industry and Government.
• The disruption and loss of the claims process by health insurers in the traditional healthcare supply chain will mean far less independent checks and balances for care provided. Further, little disclosure as to how pricing is established, when, where, and how medical care is apportioned, and no independent third parties to monitor accountability of the Government and the BHB while assuring that every dollar paid in is fully utilised in a caring, cost- efficient manner.
• There appears to be no provision as to how an annual audit will be timely performed, or when, or even whether, this new administrative process will be included in the Bermuda Government Consolidated Financial Statements. The Bermuda Hospitals Board Audited Financial Statements are still in arrears, with fiscal year 2014, a mere five years late, tabled just last week.
The mandated increases in MRF (up 225 per cent) that must now be deducted from our health insurers (and linearly to subscribers) will impact everyone who pays into the health insurance system.
Private insurance and its insured clients will see the highest increases, with government civil servants the least.
Private health insurance in Bermuda is estimated to cover, according to one commentator, 33,000 individuals. Based upon Government’s own gross income statistics (2016), somewhere between 45 per cent and 55 per cent of 33,000 are in the middle-class category, we can assume that once again the middle-class bears the brunt of these increases. Some commentators last week publicly provided personal information, indicating that their annual estimated increases may be anywhere from $2,500 to $5,000 range, annually.
How Bermuda’s resident working people and businesses will handle this new financial challenge given that the access to good, affordable healthcare is extremely important to everyone, we can only speculate at this juncture.
• Families will restrict their spending further: less shopping, less dining out, less entertainment, tighter food control, less of everything that is superfluous to economic survival.
• Others may elect to exit the pay health system, and “go bare” (without insurance).
• Or, switch to cheaper alternatives.
• Businesses may curtail hiring of new employees, and/or reduce existing payroll tax expense as well — by taking on just-in-time employees where mandated health insurance is minimal, or not required; may postpone or completely shelve plans to invest in infrastructure, or adequate inventory; may reduce their existing employee count, or in a worst case, simply wind up. Certainly, no one wants to see this happen, but increased costs in a constrained market can cripple profits.
• For some families, this may be the tipping point. They may leave, further decreasing the health pool.
• Businesses may transfer more back office administration overseas — as it may still be more cost effective to pay the new foreign services tax rather than the high overhead costs of local employees.
• The health insurers themselves may find reorganisation necessary. And by the way, comments are rampant regarding insurance company profits. Yes, they have made profits — on their whole multiple business lines. Reviewing consolidated reports broken down by lines of business, the betting is that health insurance coverage is costly, and barely above break even.
And no, I do not receive any compensation from insurers, nor have I spoken to any insurers, nor do I own or pay health premiums to local insurers.
Healthcare is very personal.
Without the independent oversight of the Bermuda health insurers to fully assess hospital fees and claims, it is now up to you, the health subscriber, to know what you are taking, what medical procedures you are having, how much they cost, why they are necessary, and how the entire new government system will work under full transparency and disclosure of your medical issues.
It is your full responsibility now to monitor them.
Is the MRF transfer increase another tax in disguise? Time will tell as households adjust to the “new health insurance benefits scenario in Bermuda”. However, if it fits the bill as predicted, we’ll just add it to the chart published last year on December 8, 2019 in The Royal Gazette article entitled, “There is nothing zero about taxes in Bermuda”, by Martha Myron. (http://www.royalgazette.com/martha-myron/article/20181208/there-is-nothing-zero-tax-about-bermuda )
And if this all sounds confusing, I apologise, because it is. Certainly, statements from the various spokespersons indicate that it appears that no one really knows how all this will work.
Bermuda resident individuals and families saving for future goals must feel frustration at yet another financial hurdle in the increase in cost-of-living.
Those families just getting by, may have reached the tipping point.
Adding irony: last week as well, along with this increase in health premiums notice, a local bank announced an increase in fees on cash deposits, foreign exchange, and related services. Next week: further discussions on this issue.
Readers, please write to me! Let me know your worries and your calculations as to your future health insurance costs! Confidentiality always!
• Martha Harris Myron CPA CFP JSM: Masters of Law — international tax and financial services. Dual citizen: Bermudian/US. Pondstraddler Life, financial perspectives for Bermuda islanders and their globally mobile connections on the Great Atlantic Pond. Finance columnist to The Royal Gazette, Bermuda. All proceeds earned from this column go to The Reading Clinic. Contact: email@example.com