Minister & PLP On Changes To Hospital Benefit

March 4, 2014

Saying the Ministry has to deliver budget savings of 7%, Health & Environment Minister Trevor Moniz spoke about the planned changes to the Standard Hospital Benefit, while Shadow Health Minister Zane DeSilva said these type of cuts affect a “segment of society that is often the most vulnerable financially.”

Speaking in the House of Assembly on Monday [Mar 3], Minister Moniz said, “I felt that it was important for me to provide some advanced notice regarding the necessary changes that will also be made to Bermuda’s minimum health insurance package: the Standard Hospital Benefit.

“The reality of the Government’s financial position and the fiscal space available to us is well known. We know that all Ministries were asked to reduce their budgets, and we know the reasons why: we simply don’t have the money to continue to spend today as we have in the past.

“In this context, there are tough decisions to be made. 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, sadly, a ‘no change’ position is simply not an option this year. Money doesn’t grow on trees, and we have to find ways to ensure that the funds that are available are dedicated to the most essential population needs.

The Minister said the changes that will be made to the Standard Hospital Benefit [SHB] in 2014/15 are:

  • 1. SHB portability will be abolished, including portability of subsidy
  • 2. Age Subsidy will be reduced to 70% for 65 to 74 year olds, and to 80% for persons aged 75 and over
  • 3. All MRF benefits will be transferred to SHB [i.e. kidney-related claims and long-stays]
  • 4. The transfer from the MRF to the Health Insurance Fund will be increased from $7 monthly per insured, to $14
  • 5. Likewise a transfer of $14 per month from the MRF to the FutureCare Fund will be established
  • 6. A transfer of $0.67 from the MRF to the Bermuda Health Council will be introduced.

In response, Shadow Minister for Health Zane DeSilva said, “We at the Progressive Labour Party are very concerned by the remarks in the House of Assembly yesterday from Health Minister Trevor Moniz that the Standard Health Benefit will be reduced causing even further cuts to Seniors. Seniors from age 65-74 will be cut by 10 percent to 70 percent and those over 75 by 10 percent to 80 percent.

“These type of cuts are affecting a segment of society that is often the most vulnerable financially. These are the people who have spent most of their life paying into government systems and working to build the infrastructure of our island. Prior to the Budget, we appealed to the OBA government to not make the Seniors the scapegoats. It appears that they have done just that.

“To make matters worse, seniors were given no increase in pension payments, which makes it now four consecutive years that they have had no increase. Fortunately, the Progressive Labour Party government had made it our mission to vastly increase their pension payouts in the early part of this century in order to make pensions somewhat respectable and to provide some financial security for our seniors.

“We ask that Minister Moniz, Minister Richards and the OBA Cabinet have a meeting of the minds on this and a rethink of the reduction of this benefit. Surely, cost savings could be obtained in a variety of other ways. We have heard of the excessive travel costs of Premier Cannonier. We know about the heavily salaried political advisors working for Premier Cannonier.

“We find it very hard to rationalize cutting the benefits to Bermuda’s seniors while others are showing little to no sacrifice in this economic climate,” said Mr DeSilva.

Minister Moniz’s full statement made in the House follows below:

Mr Speaker, during this Session, I will be bringing forward the usual legislative amendments to set the Standard Premium Rate. However, I felt that it was important for me to provide some advanced notice regarding the necessary changes that will also be made to Bermuda’s minimum health insurance package: the Standard Hospital Benefit.

I want to start, Mr Speaker, by setting the context of the changes. The reality of the Government’s financial position and the fiscal space available to us is well known. We know that all Ministries were asked to reduce their budgets, and we know the reasons why: we simply don’t have the money to continue to spend today as we have in the past.

In this context, there are tough decisions to be made. 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, sadly, a ‘no change’ position is simply not an option this year. Money doesn’t grow on trees, and we have to find ways to ensure that the funds that are available are dedicated to the most essential population needs.

Mr Speaker, budget reductions in the health sector necessarily mean reductions in benefits; and this is what I must explain to this Honourable House and to the public. I appreciate it can be highly technical, complex and unpalatable in some instances, but I trust that most will understand the difficult circumstances that we are in and the difficult decisions that have to be made – today and in the days to come.

Mr Speaker, the Standard Hospital Benefit (SHB) is the minimum benefits package that must be included in any health insurance policy sold in Bermuda. Employers are mandated to provide at least this level of coverage for their employees and their non-employed spouses, and the Government subsidizes specific population groups for the hospital portion of this insurance at the following rates:

  • Children at 100%
  • Seniors aged 65 – 74 at 80%
  • Seniors aged 75 and over at 90%
  • and the indigent at 100%

Currently SHB covers a majority of local hospital services and some diagnostic imaging procedures outside of the hospital, as well as some overseas hospitalization. Through a separate fund, the Mutual Reinsurance Fund (MRF), the coverage also includes kidney-related claims and long-stay costs. The premium for this SHB & MRF package of benefits is the Standard Premium Rate (SPR); it is actuarially priced annually, and set in law by this Honourable House. However, because Government pays for the subsidized populations, part of the cost of SHB coverage is borne by the Consolidated Fund. In recent years, that bill has amounted to approximately $115 million for local and overseas claims.

This year, the Ministry had to deliver budget savings of 7%, Mr Speaker. In order to achieve this, the options were few: we could reduce public health services, or we could reduce the amount spent on subsidies and grants. With great difficulty, Mr Speaker, we chose the latter. Allow me to explain why and what this means.

Public health services target prevention; they are essential to maintain a minimum level of health for a majority of the population. For example, they ensure communicable diseases are not spread; and they ensure a minimum standard of safety in our supermarkets, restaurants and other such establishments frequented by locals and visitors. In addition, public health services have had to fill the gaps for the uninsured or underinsured with recent trends. Significantly, however, public health services represent only 14% of the total health budget ($27.4m of $195.2m in FYE2014). Mr Speaker, while we did make savings for the coming fiscal year, we could not realize the required savings just from the Government Departments.

Conversely, the total spent on subsidies provided some scope for change; but changes to Government subsidies necessarily impact the Standard Premium Rate, as the two are inexorably connected.

By way of summary, the changes that will be made to the Standard Hospital Benefit in 2014/15 are:

  • 1. SHB portability will be abolished, including portability of subsidy;
  • 2. Age Subsidy will be reduced to 70% for 65 to 74 year olds, and to 80% for persons aged 75 and over;
  • 3. All MRF benefits will be transferred to SHB (i.e. kidney-related claims and long-stays);
  • 4. The transfer from the MRF to the Health Insurance Fund will be increased from $7.00 monthly per insured, to $14.00;
  • 5. Likewise a transfer of $14.00 per month from the MRF to the FutureCare Fund will be established; and
  • 6. A transfer of $0.67 from the MRF to the Bermuda Health Council will be introduced.

Allow me to elaborate on the impact of each of these changes.

1. Changes to SHB and Subsidy Portability

As I said earlier, Mr Speaker, the Standard Hospital Benefit has, to date, included some overseas coverage, or “portability”. This has applied to subsidies too, so Government has paid millions of dollars each year to cover claims for seniors and children who are eligible. Removing the portability subsidy will save the Government an actuarially estimated $9.6 million this year alone.

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

In reality, Mr Speaker, the vast majority of health insurance policies sold in Bermuda have supplemental benefits that cover overseas costs. SHB-only policies are rarely sold, and if sold, are normally 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. 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.

2. Changes to Age Subsidy

As I explained earlier, Mr Speaker, currently the Government subsidizes 80% and 90% of SHB costs for seniors aged over 65 and 75, respectively. The change we will be making is to reduce the subsidy level to 70% and 80%, respectively. The impact of this change is two-fold:

First, it transfers more of the 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 to the same extent. However, the impact on seniors is minimized because the premium continues to be community rated, so the cost of claims is spread across the population.

Second, the reduction in subsidy levels results in significant budget savings for the Government, amounting to an estimated $8 million. Given the current fiscal space, this has been a necessary measure.

3. Transfer of MRF Benefits to SHB

The next change, Mr Speaker, involves the Mutual Reinsurance Fund (MRF). This change simply transfers the claims payment of dialysis, anti-rejection drugs, kidney transplants and long stays from the MRF to the SHB. This means that, first, insurers will retain the premium to cover these claims; and second, insurers will pay these claims directly as any other SHB claim, rather than the Health Insurance Department adjudicating the claims and paying them from the Mutual Reinsurance Fund.

The transfer of these benefits is consistent with the reported original intent of the MRF as an experimental fund. There are now years of claims experience for these benefits and it is prudent and reasonable to download them to the SHB.

4. Transfers from the MRF to the Health Insurance Department

Mr Speaker, A second role of the MRF is to provide a transfer to HIP and FutureCare to compensate them for the higher risk profile of the populations they insure. Unlike private insurers, HIP and FutureCare do not turn anyone away, so populations with higher risks are shifted to these plans. The MRF transfer serves to compensate the plans for this higher risk.

To assist the plans with projected increases in claims, the transfer to the plans has been increased from $7 to $28 per month, to offset the impact of the reduction in subsidy and the other changes taking place.

5. Transfer from the MRF to the Bermuda Health Council

Lastly, Mr Speaker, a new transfer has been introduced to reduce the burden on the Government’s consolidated fund. Namely, the MRF will now transfer 67 cents per insured person per month to the Bermuda Health Council, to enable it to carry out its legislated functions as health system regulator and watchdog.

The Health Council is fully funded by the Government, and has an annual operating budget of $1.3 million. The grant in the upcoming year will cover some of these costs, and the balance will be raised through the MRF transfer. The transfer was agreed so that Health Council could continue to operate at current levels while easing the financial burden on the Consolidated Fund. It should be noted that this transfer mechanism was originally recommended in the 1996 Oughton Report.

Mr Speaker, this concludes the explanation of the changes in benefit provisions that have impacted the Standard Premium Rate, and enabled savings of $17.6 million dollars to the Government’s consolidated fund.

I cannot stress enough, Mr Speaker, that these changes were necessary in the current economic situation we face, and we have done everything possible to assess the risks of a number of alternatives, and deemed these the least painful changes.

The reduction in aged subsidy will be offset by the Standard Premium Rate picking up the difference. The transfer of MRF benefits is simply administrative for most plans. And overseas cover will continue to be available, as it is now, under supplemental benefits, including for HIP and FutureCare.

Thank you, Mr. Speaker.

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Comments (17)

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  1. Paul says:

    We need a national health care plan !!!!! to hell with these insurance companies ripping us off….

    • Kangoocar says:

      @paul, yeah great idea??? Along with that nonsense we need, the government to pay for everything in our lives and we just travel when we want, work when we feel like it and every time we feel like eating we should be able to email government and order exactly what we feel like eating at that moment and within 15 mins Government should deliver to our paid for by the government, big totally updated houses our meal!! Get real!! We cannot afford a national health care plan!!!!!

      • moms says:

        kangaroocar—–you need to get real. the government relies on US! the private sector to support them, we built the hospital and pay taxes on it and support the one in process. the insurance companies merely take our money and gamble it as they please and we are not allowed to pass it on to ourselves, rather they own our taxes even if we don’t use it all, if we had a national helth plan there would be no insurance companies to rip us of and we could all benefit by shared profit or what is callked social insurance… the government survive off our labour.

        • enough says:

          to support a national health plan we would have to pay taxes, or do you have a better idea of where money would come from to fund that. I am actually a believer in a National Health plan as they have in England and Also New Zealand and I am sure many other countries but as I said we would have to pay taxes to cover this.

          • Kangoocar says:

            @enough, thank you!! It is unbelievable that people just think they can have it for free???

  2. Kangoocar says:

    Message to Zane, if you are so concerned about the senior citizens that are being effected by this, why did you NOT do your part when you were in power to stop the money disappearing and say something when YOUR party were racking up un sustainable debts that now the OBA have to deal and work with???? You are polotricking as usual, give me break!!!

    • Unbelievable says:

      I think Zane knows that this is probably the only way to go but he’s just responding because he knows he has to. The hospital runs the risk of going bust by the end of the year and he knows that too but a politician has no choice but try to appeal to his base.

      It’s all just part of the political game in Bermuda.

  3. nuffin but the truth says:

    zaney on running his mouth about the OBA spending…he has a very short memory..which was a requirement for the failed and defunct plp.

    • NOT TT says:

      Short term memory comes from both sides, OBA quickly forgot their campaign promises.

  4. Bull in a hurry says:

    Zane put a great health care plan in place. He just forgot to tell the country how we should pay for it ! Like many of their ideas such as Grand Atlantic, free bus and ferry for kids, free tuition to BDA college, Beyonce! Cut the BS a******!

    • enough says:

      it’s not that great, don’t be fooled just ask some of the seniors that are enrolled inm senior care….

  5. JUNK YARD DOG says:

    I post on Bernews always with a positive attitude with encouragement and hope for a better life for all.

    I maintain calm and show respect for my fellow man ,now I find my self having to vent my anger in support of all seniors who have made enormous contribution to the well being of this country.

    If, I could only tell you all what my wife and did and the sacrifices we made for Bermuda ,there would not be a dry eye.

    We, and many other like us have given over and over now we are facing………….

    Take! Take! Take!

    “Never put your hands in another mans pocket”.

    Mr. Politicians just you wait a minute , let me remind you that you represent each and every one of us young and old rich and poor and what do we get for it increased cost for every commodity.

    You Tax the dirt on our shoes to pay for a pie in the sky.

    I have seen Government make one blunder after another , some laws are passed and policy enacted with out regard for the consequences.

    Government manifest hardship with ridiculous policies the cost of which is without regard for inevitable price increase,the health cost ransom has more than doubled.

    People don’t get sick because they want to and only visit the hospital as a last resort.

    Senior citizens have paid millions into one medical plan and the other, we seniors all live on tight budgets, we go without, we sacrifice and our reward is hopelessness and despair.

    We did not create the public debt and for that blunder.

    The entire Bermuda Government is responsible.

  6. Coffee says:

    Is it that Min.Moniz will authorize medical marihuana for our seniors .

  7. bluebird says:

    Bermuda owes other people $2.324Billion dollars and it is costing us $120Million in interest every year or $10Million per month that could be spent in BERMUDA so thank you PLP.
    The OBA has “CUT” $70Million out of the BUDGET but we are still borrowing $267Million dollars per year to live on.
    So which part of that don’t you get?????.
    Most of the Carabbean is “BROKE they cant borrow anymore of other peoples money to live on.
    IS BERMUDA HEADED THE SAME WAY????????

    • Sandy Top says:

      The OBA added 800 million to our national debt increasing our debt from 1.5b to 2.3b their first year in office. Not to mention the OBA still managed to go 45 million over their budget for 2013/2014. Please add that to your rant as well.

      • Kangoocar says:

        @sandy top, what the empty vessels like you fail to realize or admit, the former is probably more true, is the fact that the borrowing was necessary to pay for you plp incompetence / commitments into the future, the new hospital comes to mind!!! You do realize we are facing over $300 million of debt on that one alone don’t you?? Also the $45 million over spend, you seem to have forgotten the fact that the Heritage wharf had to be repaired at a sum that reached $40 million or a little more!!!! Now can you stop with your nonsense and put the blame were it belongs??? And that would be the plp, so with that said, who has hurt the seniors more than the plp?????

  8. Batty Tramp says:

    PLP spent all our money and we are broke. Now it appears they are going to complain at every moment about any cutback OBA wants to make to correct PLP’s gross mismanagemnet of our money.

    And this is Zane – he’s the guy who charged different people a different amount for Futurcare depending on when they signed up. An awful error since corrected by the OBA. It was so idiotic, a 5 year old child could see it was wrong – but not Zane.

    He certainly didn’t mention that in his interview. certain people simply should not be allowed to open their mouths – Zane is one such person.

    Better to stay quiet and be thought a fool, than open one’s mouth and remove any doubt.