Column: Kempe On Insurance, Taxes & Fees

[Opinion column written by OBA Chairperson Catherine Kempe]

“Mr. Speaker, there are no other meaningful increases to the cost of government services or other fees and taxes. There is a fragility to local finances that cannot be further strained by increased taxes.” – Curtis Dickinson, Minister of Finance, Budget Statement February 26, 2021.

Let’s start by being very clear about this discussion; a tax is defined as “a compulsory contribution to state revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions.”

Since 1971, every employee who is considered full time by government standards, must be issued with at least the Standard Health Benefits [SHB] as per the law. Each employer buys this from an insurer [either via the government’s Health Insurance Department, or a private company] and up until 2019, every policy also had a tax on it called the Mutual Reinsurance Fund. Yes… a tax…

The MRF paid for items such as dialysis, anti-rejection transplant drugs, a subsidy to the government health insurance department, fees to the Bermuda Health Council, just to name a few items. This was historically a low tax in relation to the total cost of the SHB that the government set each year.

But in 2019, the government changed how the hospital receives its money. Rather than the hospital billing each insurer for the care they gave to people, they increased the MRF to $331.97 per month and just paid it directly to the hospital for services, so the insurers don’t see the majority of bills from the hospital.

There were concerns by insurers and by private individuals with this change in 2019 and one insurer in particular made sure that their customers knew that government was increasing the MRF tax significantly.

Rather then being accused of raising taxes so much, in 2019, the government changed the law so that the MRF is no longer allowed to be called a tax, but a premium.

Pretty sneaky.

Fast forward to 2021. The hospital has seen major cuts in the money coming in as they can’t just bill or increase their charges like they used to. They rely on the money coming from each individual insurance policy. As people were laid off, told to leave Bermuda and Bermudians became unemployed, there is approximately 3000 fewer people paying into the MRF pot each month.

I’ve done a lot of math with my kids recently with virtual schooling, so 3,000 people x $331.97 = $995,910 a month x 12 months = $11.9M dollars a year.

Rather than admitting that the change in the funding model wasn’t great, especially during a pandemic [and there are no audited financials since 2016 for the hospital] they are proposing to increase the MRF by 13% to keep the hospital afloat. That’s $45 more on every person over the age of 18 [who is not a student in Bermuda] a month to help pay for the hospital. That’s a bill for the standard benefits at $400.31 a person a month. You want more coverage, it’s going to be a lot more money.

Now, I love our hospital. I’ve had both of my children there. I used to work at the hospital as a nurse. Family members have had surgeries there and they’ve cared for dying family members of mine at the hospital.

We need to protect King Edward VII Memorial Hospital just as we need to be able to rely on quality health care at home.

Let’s be honest with each other about this. Government raised a tax that each senior, employee and employer is mandated to pay during a time when the Minister of Finance indicated that there would be no meaningful increases. This amount a money a year per adult seems pretty meaningful to me.

- Catherine Kempe

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