Universal Healthcare for Bahamians

Transcription

1 Bahamas Insurance Association Universal Healthcare for Bahamians Options for An Effective Solution April 2015 The Goal In 2012 the United Nations unanimously adopted a resolution urging member states to ensure universal access to healthcare, with financial risk protection for all citizens. The Bahamas Insurance Association supports this goal. Key elements of a universal healthcare system are: Equal access to a basic level of medical services for everyone BIA Universal Healthcare for Bahamians 1

2 No significant direct payments at the point of delivery A mechanism for pooling risks to avoid catastrophic spending and impoverishment Equity in health implies that ideally everyone should have a fair opportunity to attain their full health potential and more pragmatically, that no one should be disadvantaged from achieving this potential, if it can be avoided. World Health Organisation The Path The UN also recognized that the path to achieving universal health coverage is complex with no single formula. Member states were advised to adopt solutions appropriate to their own circumstances. Various combinations of user fees, insurance and general taxation provide funding for universal healthcare in different countries. "Good health is essential to human welfare and to sustained economic and social development. World Health Organisation The Current System The Bahamian healthcare system includes public and private sectors. The government regulates and finances the public sector (including primary care clinics). Management of three government hospitals (with 1,000 beds) and related services has been devolved to the Public Hospitals Authority, a statutory body. This public system provides free healthcare to indigents, prisoners, civil servants, pensioners and others. Public sector charges to those who are ineligible for free care are relatively low. The private system includes a 72- bed hospital and two small inpatient facilities, as well as more than 70 clinics. Over 800 physicians are registered per 10,000 population. The total inpatient bed availability (public and private) is about BIA Universal Healthcare for Bahamians

3 In 2013 total health spending was estimated at 9.7% of our $8.3 billion Gross Domestic Product, or $810 million. This includes capital spending on infrastructure. Private health insurance represents 25.4% of total health spending, out- of- pocket payments are 22.6%, and government accounts for the rest of total spending. Private care is mostly funded by four large and three smaller insurers, which collect and administer $270 million in health policy premiums. However, this figure includes significant government taxes. Private insurers pay out more than 75% of the remainder in claims. A third of the Bahamian population of 367,000 is covered by private health insurance, mostly paid by employers. When health plans for civil servants are included, the private health insurance sector covers more than half of the total market. The total number of employees working in the Bahamian insurance sector was 1365 in 2013, according to the Central Bank. Fees and taxes paid by the insurance sector to the government amounted to over $37 million. The Bahamas Insurance Brokers Association, which includes 27 member companies, supports an additional 185 employees, not including independent salespeople and agencies. (The level) of private health insurance coverage (among Bahamians) is unique amongst most of the countries moving towards a universal healthcare system, where the majority would have very low penetration of private health insurance. That has consequences in terms of expectations, as well as implications for human resources employed in the private health insurance industry. Sanigest report, August 2014 BIA Universal Healthcare for Bahamians 3

4 The Government Proposal Successive governments in the Bahamas have been working towards the implementation of expanded and improved healthcare coverage since the 1980s. A comprehensive National Health Insurance Act was passed in December 2006 (but never implemented), following several years of policy development. In 2014 the government commissioned Costa Rican consultants to provide updated recommendations for a universal healthcare system in the Bahamas. Although not officially published, this document is in the public domain and it informs the latest government thinking on the issue. This report provides both an analysis of the current health situation in the Bahamas, and based on that, recommendations on the package of benefits, the cost of those benefits, the recommended payment mechanisms to providers for those mechanisms, and options for the financing of the services. Sanigest report, August 2014 The Core Issues Role of Private Insurers Private health insurance has protected a large proportion of the Bahamian population against losses resulting from sickness or injury over the past 60 years. The sector has facilitated access to modern medical services, provided prompt payment to medical practitioners, and implemented effective training and health education programmes. Insurers and brokers have deployed significant resources to promote healthier lifestyles. These have focused on maternity and fitness programmes, as well as the monitoring and management of chronic illnesses. These important social contributions have been made without drawing on public funds. In fact, the sector has been a net contributor to public revenue in the form of taxes, fees and other economic overheads. It is also safe to say that the rate of mortality in the country would have been much higher if it were not for the private insurance sector. 4 BIA Universal Healthcare for Bahamians

5 However, private insurers have not been consulted on healthcare reform, even though the sector has actuaries, underwriters, claims adjudicators, nurses, physicians, and executives with years of experience in health coverage locally. With half of the population already covered by some form of private insurance, and serviced by private medical providers, effective health reform will depend on authentic collaboration among a broad range of national stakeholders - including regulators, insurers, intermediaries and providers. Implementation Challenges New public infrastructure is being proposed to administer the National Health Insurance system (NHI). This would, in many respects, duplicate existing resources, as private insurers already have in place actuarial, pricing, product development, case management and network provider services. The insurance sector has also invested heavily in systems to support enrolment, eligibility and claims administration. Brokers are integral in the dissemination of information to consumers, and play an important role in monitoring and regulating market practices. Rather than seeking to disrupt an entire economic sector, the government should focus its limited resources and attention on those individuals who are currently uninsured and work with the private sector to achieve the best outcome. There are huge financial, legal and structural challenges, as well as political implications, associated with the comprehensive change that is now being proposed. Financing The Bahamas Insurance Association has collated claims submissions and membership data from five of its member health insurance firms. This has enabled us to evaluate the potential cost of the proposed NHI system in the Bahamas. Differences in benefits, underwriting and claims control practices, and the size of the population covered, will cause these estimates to vary. However, the BIA has BIA Universal Healthcare for Bahamians 5

6 prepared them in order to engage in a constructive dialogue regarding the form and timing of NHI implementation. As limited details have been provided regarding the proposed NHI schedule of benefits, we have assumed that it will be comparable to what is currently offered by private health insurers, and we have extrapolated from the insured population to the entire population of the Bahamas to derive an estimated claim cost for NHI. We have adjusted this estimate to exclude illegal immigrants. The 2010 Bahamas Migration report indicated an immigrant population of 18.4%, but 21% of those were born here. This leaves 14.5% of the population as true immigrants. Public information regarding the number of legal immigrants is not readily available, so we have provisionally assumed a 50/50 split between legal and illegal immigrants. The health industry believes that Sanigest s NHI cost estimates may be as much as a third below the actual cost a significant difference of some $300 million. Based on our analysis of insurance industry data and administrative costs for the National Insurance Board in 2011 and 2012, we have estimated that the government s proposal will cost between $895 million and $965 million to implement, with the higher number being the cost to cover the entire population. It must be taken into account that the above calculations are based on coverage in a controlled environment, whereby insured individuals are subject to underwriting rules as well as pre- existing condition clauses. Even with provider fees controlled through capitation, the estimates in the Sanigest report are too low. It is clear that a minimal level of coverage will have to be offered in order for NHI to be affordable. Therefore, individuals will presumably have to pay for a government- mandated basic plan, as well as for private insurance, in order to achieve the same level of benefits they currently enjoy. And it is not clear whether such private coverage will be financially feasible for insurers. 6 BIA Universal Healthcare for Bahamians

7 Value Added Tax Healthcare is an essential service and should be a beneficiary of VAT, as it is in other jurisdictions. Why should healthcare be made more expensive than it already is, if our objective is to expand access? We presume that this thinking guided the government s initial decision to exempt healthcare and health insurance products from VAT. The BIA s recommendation during the consultation period for VAT also reinforced this treatment for health services, and was initially accepted prior to the government s change in position. Applying VAT to rising private healthcare costs will hurt an increasing number of insureds and lead to a sicker population, which contradicts the key objective of NHI to provide universal healthcare and improve health. Health insurers have appealed to the government to reverse this decision on the basis that it is not in the public interest. Based on the challenges within the existing framework for the provision of healthcare in the Bahamas, and the increasing cost of healthcare, which is driving the cost of health insurance, the imposition of VAT is expected to further reduce public access to quality healthcare and make health insurance less affordable. Administration Costs It is a mistake to think that low administrative costs are always conducive to low overall costs. Much depends on the effects of less administration and the level of fraud and abuse. According to the 2014 Sanigest report itself, the disadvantages of a single- payer system seem to outweigh the advantages for the Bahamas, including a reduction in private insurance employment; the risk of an inefficient monopoly purchaser; and the increased risk of inefficient provider payment practices. Administrative costs for existing institutions are high. However, for a variety of reasons, the cost of conducting business in The Bahamas is also very high, compared to other countries. BIA Universal Healthcare for Bahamians 7

8 To measure the potential administrative costs of the NHI proposal we reviewed the National Insurance Board s 2012 and 2013 annual reports. As both years contained restatements of expenses as a percentage of gross contributions, we have used the 2011 and 2012 restated values, which reveal that NIB s administrative expenses averaged 24.65% of gross contributions. This supports the position that a monopolistic arrangement will reduce rather than improve efficiencies. Choice and Competition Competition between private health insurers (with individual mandates, controls on benefits, elimination of exclusions and standardized premiums for a basic plan, plus the availability of supplemental plans) will allow Bahamians to maintain choice and benefit from responsiveness to consumer needs. As the Sanigest report noted, the current Bahamian health system is highly mixed (both public and private). Therefore, a regulated, multi- payer, universal health insurance system would be an appropriate choice for our national circumstances. Governance One of the key recommendations of the Sanigest report is to separate the Ministry of Health from direct service provision. In other words, the government would provide stewardship only. The BIA supports the transformation of the Ministry of Health into a public regulatory agency, and believes that private health insurers and healthcare providers should be actively and substantively involved in the provision of healthcare services. Comparative Examples The BIA notes that no small regional countries similar to the Bahamas were discussed in the Sanigest report. The experience of Switzerland and the Netherlands in achieving universal healthcare within a multi- payer system, with a vigorous private sector, is also important to this discussion. 8 BIA Universal Healthcare for Bahamians

9 Bermuda, with a population of 65,000, relies on a mix of social and private insurance. Public hospital services have been devolved to the Bermuda Hospital Board, and there is an active private medical sector. A national health plan was considered, and deferred due to cost. In 2013, Bermuda s health minister said there were many facets of healthcare that needed to be addressed as a precursor to implementing anything that resembled a cogent and equitable plan. She added that universal coverage could not be implemented against the backdrop of a fundamentally dysfunctional system and that the system would have to be fixed before sugar- coating our needs with an overarching plan that could become unwieldy and expensive. The BIA submits that these comments are consistent with the concerns raised regarding NHI proposals in The Bahamas. The Cayman Islands has a population of 60,000. Public health services are funded from the government budget and by private health insurance, with a separate scheme for government employees, and there is an active private medical sector. The Cayman Islands has a framework for universal healthcare that incorporates the public and private sectors. The framework includes a public insurance company and private insurers, providing a standard benefits package governed by legislation. Every legal resident is entitled as a basic minimum schedule of benefits, and all insurers must provide the minimum plan. Approved private insurers must offer the basic plan in the marketplace and can also provide residents with higher coverage plans. Switzerland and the Netherlands implemented health insurance systems that provide universal coverage through multiple private insurers in regulated competitive markets. These systems have many features in common: an individual mandate, standardized basic benefits, a regulated insurance market, and funding schemes that make coverage affordable for low- and middle- income families. Switzerland s population is 8.1 million and the population of the Netherlands is 16.1 million. Both countries have achieved universal health coverage via a multi- payer system with patient choice, broad access, and low disparities. Risk Adjustment The 2013 Household Expenditure Survey indicates that 6% of Bahamian BIA Universal Healthcare for Bahamians 9

10 households have health spending that is greater than 25% of their non- food spending. This equates to over 6,100 households. Pooling accumulates and manages health revenues so that members of a community collectively share health risks, protecting individual pool members from catastrophic health expenditures. By 2016 the Sanigest report estimates there will be 132,000 private sector employees contributing to NHI, as well as 20,000 government employees, 9,000 self- employed persons, 32,000 NIB pensioners, and 3,800 other flat- rate contributors (such as foreign workers on individual work permits for households) for a total of almost 200,000 contributors out of a total projected population of 370,000. To achieve universal healthcare access, some form of risk equalization system will have to be devised to provide equity for non- contributory, lower- income and less healthy individuals. In the Netherlands, a risk equalization system is used to distribute the central pool of funds created by the income- related contributions for basic coverage paid by individuals and/or their employers. Insurance company revenues are adjusted based on enrollment and underlying risk factors. Improving access to health services and restraining the growth of health spending through a more cost- effective universal system has benefits that could yield savings for consumers and achieve a healthier population. The BIA Position The fundamental principle underlying a universal healthcare system is noble, although implementation must be carefully considered and timed for economic and practical reasons. In this sense, the insurance sector supports the concept of universal access to healthcare by Bahamians and legal residents. As regards the proposed benefit schedules, we are concerned that the currently proposed NHI plans leave no room for private health insurers and intermediaries to operate within the market. And, as presently proposed, the market for supplemental coverage may not be financially feasible for private insurers. 10 BIA Universal Healthcare for Bahamians

11 Based on industry experience, the BIA also believes that the proposed timeline for implementation of NHI is overly ambitious. The industry recognises the fiscal constraints faced by the government and is of the view that the NHI proposal is both costly and unrealistic. The members of the BIA are good corporate citizens who make significant contributions to public revenue and to civic life. As a major contributor to the Bahamian economy, the BIA expects to be included in any project to reform and redefine the healthcare sector in order to ensure the best outcome. The Alternative In light of the foregoing, and based on the government s stated intention to promote public- private partnerships, the insurance industry recommends an alternative approach to achieve universal health coverage that is not only less costly but also leverages the existing infrastructure, distribution channels, personnel and expertise to achieve national goals collaboratively. Our approach was developed after benchmarking the existing and proposed national health systems of Switzerland, the Netherlands, Canada, Bermuda and the Cayman Islands. The experiences of other jurisdictions were also considered. The fundamental basis of the BIA s approach is that it must not be disruptive of the existing economic framework, and must involve active collaboration among key stakeholders. Additionally, the focus should be on the uninsured population, which includes individuals who may or may not be able to afford health insurance. The BIA proposes the following outline of an alternative approach: 1. Health insurance will be mandatory for all legal residents. 2. The content of a basic benefits plan will be determined and legislated. 3. Individuals will be able to keep their existing private plans. BIA Universal Healthcare for Bahamians 11

12 4. All private insurers will be required to offer the basic plan. 5. Private insurers will be unable to deny coverage for pre- existing conditions. 6. A maximum premium price will be mandated for the basic plan. 7. The existing healthcare administrative infrastructure will be upgraded. 8. Fees for medical services will be capped. 9. The plan will be administered by the private health insurance sector. The cost to implement this alternative approach will be substantially lower than what the Sanigest report has proposed, while using realistic claims assumptions. Implementation of this approach will avoid economic disruption while achieving the goal of universal coverage. Conclusion It is not known at this time what benefits NHI will cover, so it is possible that the actual cost of the government s proposals may end up being significantly higher that the estimates we have discussed, due to lower cost sharing with the insured (i.e. no or low co- pays, deductibles and co- insurance). Non- medical and medical underwriting, and pre- existing condition limitations, may also increase the cost. In addition, benefits may be significantly less comprehensive than private insurance or result in a greater cost sharing with the insured. Payments to medical providers may also be reduced, which may lower overall claims costs. The insurance industry has produced this issue briefing for review by the government and other stakeholders, as well as to stimulate public discussion. Further dialogue is needed to refine, develop and finalize these recommendations. 12 BIA Universal Healthcare for Bahamians

13 Collaboration of the private sector with the government and statutory bodies (e.g. the Ministry of Finance, Ministry of Health, National Insurance Board, Department of Statistics, Department of Public Health, Public Hospitals Authority and the Insurance Commission) will be critical to the successful development of a comprehensive universal healthcare system. Edited May 10, 2015 Bahamas Insurance Association (242) Mackey Street, Nassau, Bahamas BIA Universal Healthcare for Bahamians 13