EDITORIAL – Civil service co-pays: Insuring the health of Cayman’s finances

“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,
May 2016


“[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.


  1. “Health cost co-sharing, will occur, regardless of which administration is in control” I support that move by Minister Archer. It should have been done long time ago, because I think it is fair if you are working in the Civil Service making a salary every two weeks or month, that you can, and should be willing to contribute some thing towards Health Care. You will not realize it until you become ill, and then you will realize that health care is better than a meal.
    In Cayman we have persons on work permit and persons who have gained PR and SG, their families and children accompany them and is put on government payroll with free medical. That can’t work. If you bring your family here and you are in a civil service job, you must be required to contribute to health care no matter how old they are. So it should go straight across the board for all except the elderly Caymanians and those indigent person.

  2. I think that the government need to understand that the Cayman Islands is too small for some to have to pay into the Healthcare system and some don’t.


  3. It’s important to separate the emotions from the math and the math looks downright ugly.

    In 2004 when the Govt doubled down on the national debt an actuarial report was compiled (in order to comfort bond holders) pegging the heathcare bill for the retired civil service at $654m.

    Rolling the $654m forward using a 5% healthcare inflation rate (PWC (US) has indicated that the U.S .has been running at 7-8% for the past 10 years or so), brings that liability to $1.12b in 2014 all coming due by 2039 (2014 + 25 yrs).

    Problem 1 – $1.12b x 5% inflation each year means the problem is growing by $55m each year just to remain as is.

    Problem 2 – if one was prudent one would spread the cost evenly over the next 25 years so the next generation was not unduly penalized or more importantly that the country did not go bankrupt at some point. $1.12b x 5%)/ 25 years = $100m should have been set aside in 2014 and similar amounts each and every year for the next 25 years.

    Problem 3 – each year we sit on our hands and do nothing that $100m (from the current year) gets spread over the remaining years. In 2017 we now need to set aside $115m each and every remaining year, and by the next election in 2021, we will need to be setting aside $150m each and every remaining year.

    Problem 4 – The amount we currently need to set aside is approx. 15% of gross revenue and as the snow ball continues to grow that amount will be 20% of gross revenue in no time flat (and that is assuming that revenue grows at least 5% each year).

    Problem 5 – These amounts are just rolling a 2004 actuarial amount forward for inflation. But since 2004 the civil service has grown by 40% according to the ESO. So these guesstimations are likely greatly understated.

    Problem 6 – as we do nothing the amount will become so unmanageable the Govt will be forced to slash the civil service retiree entitlements at the worst time possible for those past employees not making good on their commitment to their work force, draconian tax raising measures will be further required for the rest of us penalizing business/growth/opportunities, capital will flee, and we will force the UK Govt to become more involved in our financial affairs.

    Unfortunately I do not see that co-pay alone is going to lick this. A dent perhaps but much more will need to be done. Or alternatively the retirees will be greatly penalized, the next generation of all Caymanians will be much worse off, and we may end up losing certain autonomys of our country to the mother ship.

    A very difficult task with massive implications for the country so we should support Mr Archer in any way we can.

  4. The major problem is that free health care is included in the employment contract of each civil servant. What I cannot understand is why Government has not excluded this provision from the contracts of new hires. This should have been done years ago when the problemswere identified.