“It has already been pretty much accepted that the civil service will move to a co-pay [for health insurance coverage] by 2018. It is the final details that are being worked out. It is accepted that they will move to co-pay with choice [of healthcare providers outside the Health Services Authority].”
Finance Minister Marco Archer, April 2016
“We don’t know who this has been pretty much accepted by, but no, the Cayman Islands Civil Service Association has not been asked, formally or informally, to accept anything of the sort.”
Civil Service Association President James Watler,
“[Healthcare cost-sharing] will occur regardless of which [political] administration is there.”
Finance Minister Archer, November 2016
“Members have been asking … if there are plans to reduce the civil service remuneration packages by reducing their healthcare benefits. The short answer is no, we know of no such decisions.
“The long answer is more complex.”
Civil Service Association memo, February 2017
No one ever said that pushing significant fiscal reform through government would be easy … or that attempting to rein in the runaway costs of civil service benefits would be politically popular.
That being said, we would argue that on issues concerning the future health of the public treasury, there exists a proportional relationship between the necessity of an initiative and the amount of pushback it sparks among the relevant union … or, in this case, a Civil Service Association, that walks and talks like one.
Let’s cut to the heart of the matter. Over the next 20 years, the Cayman Islands is expected to amass a $1.18 billion public healthcare liability. That’s the equivalent of $60 million per year, or $1,000 per year in additional tax obligations for every man, woman and child living in Cayman — just to break even.
In other words, it’s a massive expense that needs to be tackled now, not later. One way to reduce that huge number is to introduce co-payments into civil servants’ CINICO healthcare plans. (Unlike private sector employees, civil servants don’t pay a portion of their salaries toward healthcare coverage.)
Understandably, civil servants interpret co-pays as a hit on their overall remuneration. The spoonful of sugar in the medicine, then, is the accompanying proposal to expand civil servants’ network of healthcare providers beyond the public hospital and HSA. (Again, bringing CINICO into greater alignment with private sector norms.)
While adjusting civil servants’ healthcare policies isn’t a panacea for woes in the public healthcare system or future governmental debt, we think introducing co-pays is a necessary (but not sufficient) step toward greater fiscal responsibility, and, concomitant with introducing choice of healthcare providers, may eventually prove popular among a great number of civil servants.
We cannot emphasize enough the existential threat that out-of-control public healthcare and pension obligations can pose to governments big and small, across the world. The good news for Cayman is that, while our problem with unfunded liabilities is certainly significant, it could be far worse.
For example, our North Atlantic colonial cousin, Bermuda, currently faces long-term public sector obligations that may total as much as $7 billion (or more than $100,000 per resident). Not coincidentally, one of the major differences between Bermuda and Cayman is that Bermuda is teeming with powerful union organizations.
As a class, accountants aren’t known for being “risk-takers.” Quite the opposite. However, by stating (and refusing to “un-state”) the obvious and the unavoidable — that co-pays for civil servants’ health insurance plans must be instituted by 2018 — Finance Minister Marco Archer is taking a substantial political risk, that is, of alienating the single largest voting bloc in the country.
However, the risk is far outweighed by the potential rewards — improving the outlook for Cayman’s fiscal future, and securing the support of the majority of the electorate, who work in the private sector and who are paying for those public benefits.