The future amount the Cayman Islands government estimates it will have to pay to provide retired workers and other citizens with healthcare coverage has grown by an estimated $500 million in the last two years, according to government’s own estimates.
A valuation completed in September 2016, but which was not made public until last week, estimated Cayman’s total post-retirement healthcare obligation at $1.7 billion as of June 30, 2016. That is the present-value figure that Cayman’s government expects to pay out for healthcare coverage over the next 20 years.
Similar valuations done in mid-2014 put the 20-year healthcare liability at $1.18 billion.
The figures, contained in government’s pre-election economic and financial update, also note the following: “For all intents and purposes, the government is on a ‘pay-as-you-go’ plan in respect of post-retirement healthcare liabilities. Currently, no long term assets have been established to start offsetting the government’s post-retirement healthcare liability.”
Finance Minister Marco Archer has pushed for the public revelation of these healthcare liability figures which – before 2014 – had not been released in more than 10 years by the government.
Mr. Archer has often cautioned that the estimates of $1.18 billion or even higher do not represent money owed immediately and that larger amounts would only come due if Cayman “does nothing” about its current healthcare costs.
However, the pre-election finance report also seeks to place a current value on the post-retirement healthcare costs for the last government budget year.
“The post-retirement medical expense total[ed] $141 million for the year ended June 30, 2016,” the report stated.
Certain changes to lessen the blow of healthcare costs over the next 20 years have already been made by the government, including increasing the retirement age for civil servants to 65.
Another major change, expected to be put in place this year and to take effect in early 2018, is a requirement that civil servants contribute a portion of their salaries to monthly healthcare premiums. Mr. Archer said in late 2016 that the move was “unavoidable” – regardless of which political group might win the May 24 general election.
However, the Cayman Islands Civil Service Association has noted that its membership has not agreed to any such co-payment without choice in healthcare providers being offered to plan participants.
Neither retired civil servants nor active government workers are required to make co-payments; their monthly premiums are paid by government.
Both civil service plans under the Cayman Islands National Insurance Company have a $5 million maximum “lifetime limit” for healthcare coverage. There are no limits on prescription drug purchases or inpatient or outpatient care. Overseas accommodations and airfare for covered government workers or retirees who must fly off island for treatment are covered 100 percent.
The Cayman Islands government is obligated to provide civil service retirees, veterans and seamen a certain level of healthcare benefits during their later years when they are no longer working. The liability figure represents what government is expected to pay over a specified period for these healthcare services, which include, to some extent, payments to current civil servants whose retirement is expected during the period.