The Cayman Islands National Insurance Company received a CI$9.2-million letter of credit from the government in a motion put forward by Financial Secretary Kenneth Jefferson and passed on Wednesday in the Legislative Assembly.
The bailout will permit CINICO to maintain compliance with its Class ‘A’ insurance licence, which requires that it hold a minimum positive net worth of CI$3 million.
‘CINICO since its inception has accumulated net losses of CI$18.1 million and it had a negative net worth of CI$6.2 million at the 30th of June 2007, which is CI$9.2 million less than the minimum required to maintain its licence,’ said Mr. Jefferson.
CINICO’s five plans cover 12,730 civil servants, civil service pensioners, employees of other government entities, seamen, veterans, and persons with low income, impaired health and the elderly.
In his statement before the house, Mr. Jefferson outlined a spate of reasons that have contributed to the insurer’s massive shortfall.
He said the company, which formally began doing business in February 2004, had immediately been faced with a disadvantage because statistics on health insurance were non-existent for the Cayman Islands, which affected its ability to set premiums.
He also cited the requirement to set annual rates six to eight months in advance in order to meet budget requirements hindered the company’s ability to keep on top insurance trends.
Another problem Mr. Jefferson cited was the costs of the large numbers of overseas referrals because certain types of care were not available on-Island, and the record low number of specialists currently practicing on-Island also was contributing to an unprecedented number of overseas referrals.
The list continued, with Mr. Jefferson also blaming global medical inflation, which ranged from eight to 10 per cent in 2006-07.
Another major cause for the shortfall, Mr. Jefferson said, was the lack of a cost sharing arrangement for subscribers. In a system lacking co-payments and deductibles, Mr. Jefferson said patients were systematically seeking out the costliest treatment options, further burdening the already stretched system.
He also said that in 2006-07 the types of cases CINICO had to pay for involved some procedures, including a kidney transplant, a number of cardiovascular cases, which include stroke and heart attack as well as heart disease, and nine neo-natal cases that led to an unexpected spike in costs.
While CINICO CEO Gordon Rowell would not further elaborate on the size of the debt, Health Ministry Deputy Chief Officer Policy and Planning Leonard Dilbert later observed that the issues plaguing the insurer are nothing new, and rather systemic within Caymanian society and which can best be remedied with a focus on a range of preventive health strategies.
CINICO’s continued good health has major implications not only for its subscribers, but also for the Health Services Authority. Mr. Jefferson revealed health insurance accounts for nearly 80 per cent of the HSA’s revenues.