Cayman Islands public sector entities will lose a combined $38.5 million over the next three years, largely because the government insurer expects to pay much more to cover future healthcare premiums for uninsured residents.
According to budget records released last week, the Cayman Islands National Insurance Company estimated its premiums will rise due to ever-increasing costs associated with providing healthcare to the territory’s indigent population, civil service retirees, seamen and veterans.
The costs of providing those benefits is borne entirely by the government, which funds CINICO.
The increased costs are anticipated to be the main contributor to overall operating losses for government statutory authorities and companies of $12 million per year in 2018 and 2019, and more than $14 million in 2020.
That means when the earnings and losses of all 16 statutory authorities and government companies are pooled together, health insurance premiums overrun any profits made in those years.
The problem, according to Premier Alden McLaughlin, is one that is often described by legislators addressing healthcare costs: Private sector insurance companies cover the working-age population, leaving government to pick up everyone else.
“At the moment, it falls to CINICO to cover those who are unable to afford private insurance cover – essentially with government picking up the full cost,” Mr. McLaughlin said last week. “This is unsustainable.”
Mr. McLaughlin said in order to combat the rising costs, government intends to make CINICO a more active player in the health insurance market, allowing it to cover a broader section of the market.
“The increasing cost of CINICO premiums [is] in large part due to government providing insurance cover to the market segment that the private sector will not serve,” he said.
Typically, healthcare premiums shared across a larger number of insured individuals lead to reduced costs for those covered.
Although it is generally known as the government insurer and covers civil servants in their working years and in retirement, CINICO currently does not even cover all employees of the separate statutory authorities and government companies. For example, one of government’s largest outside authorities, the Health Services Authority, does not use CINICO to insure its employees. It is just one of 15 outside authorities that opted for private insurers as of last year.
CINICO Chief Executive Lonny Tibbetts told the Cayman Compass at that time the insurer estimated there were 3,000 people – including children and spouses of public sector employees – who were receiving insurance coverage from somewhere else.
There are various reasons why the public sector healthcare insurer is not used by certain authorities. In the case of the Health Services Authority, it’s a “moral hazard,” according to Mr. Tibbetts.
“They could potentially treat their staff to profitability,” Mr. Tibbetts said. “It’s always a [healthcare] industry dilemma.”
In the case of other public agencies, particularly those with larger numbers of employees, private sector insurers are used by the public authorities because they offer a wider selection of healthcare providers.
“The majority of them … felt they wanted choice,” Mr. Tibbetts said. CINICO-insured patients, who may get waivers to receive treatment at other hospitals or medical facilities, must use the Health Services Authority as their first “point of contact” for healthcare.
Currently, civil servants insured by CINICO do not pay anything for their healthcare, either in monthly premiums or in co-pay costs for a doctor or clinic visit.
A plan to require those employees to contribute to monthly premiums has been under discussion since 2014, and was planned for implementation next year. However, civil servants have said they would want any such plan to provide choice of service providers, similar to private sector health plans.