New standard health insurance plan to be implemented by March

A new standard health insurance plan will come into effect on 1 March next year, after legislators voted in favour of passing amendments to the Health Insurance Law and associated regulations last week.

Health Minister Mark Scotland, who presented the amendments to the Legislative Assembly, said the existing basic plan of benefits had become “inadequate” to meet rising costs of healthcare, driven up by the aging population and improved medical technology.

One of the major changes in the revised law and regulations is that private health insurers must present a case to the Health Insurance Commission when refusing to insure a person.

At the moment, if two insurance companies turn down a person for insurance coverage, that person is deemed be an “uninsurable person” and is then liable to be covered under the government’s Cayman Islands National Insurance Company, with his or her insurance benefits being covered by public money.

Under the revised law, the definition of “uninsurable person” has been changed, the health minister said, “to discourage the practice by approved insurers to cherry pick their clients for health insurance coverage”.

“It will minimise the number of persons deemed uninsurable by private health insurance providers,” Mr. Scotland told legislators.

In the new clause to the health insurance regulations, a private insurer must give a reason to the Health Insurance Commission why a person seeking insurance coverage has been turned down. The insurance company must notify the Health Insurance Commission within 15 days of the decision and seek approval from the commission, providing relevant documentation and information, including an actuarial assessment.

If the commission disagrees with the insurer, it can, within 15 days of receiving the insurer’s decision, order the insurer to cover the applicant or a variant of the decision. The commission’s ruling can be appealed through the Grand Court, which can confirm or discharge the order of the Commission.

The Cayman Islands implemented mandatory health coverage for all employees in 1997.

Under an earlier amended version of the Health Insurance Law, done in 2010 but which came into effect in recent weeks, four standard health insurance contracts were replaced with a single contract.

Under the regulations, private insurers cannot turn down an individual because of pre-existing conditions, but can provide coverage under supplemental plans.

People deemed to be “high-risk” individuals must be covered by insurers either under the standard plan or, with the permission of the Health Insurance Commission, under supplemental plans with increased premiums that exceed 200 per cent of the standard plan.

Under the regulation amendments, employers must offer health insurance coverage to employees for up to three months after they leave their job or for a shorter term if those employees are employed, and therefore insured, elsewhere in the meantime.

The annual maximum benefit for individuals has been increased to $100,000 and the individual maximum lifetime benefit is $1 million.

The amendments also brought higher fines for employers who make unlawful deductions for health insurance from their employees.

The amended law also makes it an offence for an insurer to reduce supplementary benefits for insured clients, except in the cases of non-disclosure or misrepresentation by the insured person. Mr. Scotland said this would help protect against an insurer reducing supplemental benefits to a person who reaches retirement age. Such an action could result in a fine of $10,000.

The law also allows the Health Insurance Commission, which has often been described as toothless, Mr. Scotland said, to enforce administrative fines on insurance companies that do not comply with the Health Insurance Law.

The regulations also include a stipulation that, to help cover medical costs of indigents in Cayman, the Health Insurance Commission on behalf of the government will collect from insurers $10 per month of each standard health insurance contract premium provided by insured people with no dependents and $20 per month for an insured person with dependents.

Mr. Scotland said that once the bill is passed, the new standard health insurance contract, commonly known as SHIC, would commence on 1 March. In the interim, there would be a public education process to ensure that both insurers and the insured would be prepared for the transition.

Legislators last week voted through the second reading of the bill. The next step is a committee stage study of the bill, with each individual amendment being voted on, and then a third and final reading.

North Side independent legislator Ezzard Miller said he wished to see the removal of two proposed amendments to the law concerning the definition and inclusion of “high-risk” and “uninsurable” people.

He said that by including those two definitions in the law, it still allowed private health insurers to choose who to cover.

“This bill … in my view, continues to allow the private health insurance companies to cherry pick because group health insurance does not exist in this country in the private sector… [The insurance companies] come to a company with a couple of hundred employees and they will sell the company individual health insurance discounted on volume … they often require the employee to have a medical check up prior to putting them on insurance.

“In true group health, they take the group and spread the risk. In most companies in the Cayman Islands, the employees are young and healthy by a great majority, even in government, in the civil service. What the insurers do is take all the healthy ones they don’t have to pay insurance claims for and they reject people with pre-existing conditions or they deem them to be at high risk because they’re overweight and they tell them to go to another company, get turned down and the government will provide you with insurance through CINICO. It’s madness and we are exposing the government’s treasury to unjustified liability that should not happen,” Mr. Miller said.

He referred to recommendations from consultants he worked with while he was minister for health in the early 1990s, who said each private insurer should put 10 per cent of every premium sold into a fund which they would manage, which would help pay for any large medical bills for high-risk individuals.

“I think that’s a better solution than paying the government $10 per premium and government accepts the total risk. Health insurance companies are laughing all the way to the bank …”, Mr. Miller said.

Mr. Scotland, in his closing remarks about the amendments, responded to Mr. Miller’s comments by saying that if the definition of “high risk” and “insurable” individuals were removed, private insurers would be required to provide health insurance coverage for every person without assessing the risk involved.

“The assessment of risk is required so insurance companies can manage the risk,” he said.

Regarding creating a fund containing 10 per cent of premiums, Mr. Scotland said this would not be sustainable as “one big case a year could wipe out that 10 per cent 
set aside”.

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