Proposals sought for revamp of CINICO

Approval of new CEO pending

The CINICO headquarters on Dorcy Drive in George Town. - Photo: Stephen Clarke

The Cayman Islands government has issued a request for business case proposals to reform its health insurance provider, CINICO.

One of the options on the table would be to make the Cayman Islands National Insurance Company the sole provider for all Cayman Islands residents. Currently, membership is limited to categories including civil servants, civil service pensioners, seamen and veterans, staff and dependents of certain statutory authorities and government companies, and low-income residents, among others.

CINICO has long been a financial predicament for government, as it grapples with substantial healthcare liability estimates in coming years.

Healthcare costs represent 17% or $114.2 million of the core government budget for fiscal year 2019, according to the request for proposals.

While that percentage is down from previous years – such costs represented 19.3% of the 2015-2016 budget – government must still contend with billion-dollar healthcare liability forecasts over the next two decades.

The current request for proposals, due by noon on 30 Aug., seeks analyses of viable, short-listed options for CINICO, first identified in a September 2014 review by EY. These recommendations were used to create a strategic outline case approved by Cabinet in September 2016.

There are five short-listed options identified in the request:

  • Status quo: Government remains CINICO’s primary customer, providing discounts and premiums to CINICO. CINICO continues to operate at a deficit.
  • Outsource to private sector: CINICO’s health insurance business is outsourced to the private sector over the next 24 months. CINICO no longer exists as a government-owned company, “thus enabling the Government to receive better health insurance premiums and value for money”, according to the request for proposals.
  • Partial outsourcing: Coverage of some member categories is outsourced to the private sector to reduce operating costs. Services that are not outsourced are assessed to determine viability.
  • Financial sustainability: CINICO becomes more commercially viable and is given the power to eliminate premium discounting, improve premium collection methods, expand products and services, and increase membership.
  • Sole provider: CINICO becomes the sole national insurance provider for all residents of the Cayman Islands. This option was approved by Cabinet following the September 2016 strategic outline case, according to the RFP.

Business problems

The 2014 EY report identified premium discounting by government as one of the key business problems facing CINICO.

“Discounting health insurance premiums reduces the revenue that is available to CINICO for the prompt settlement and administration of medical claims and case management and results in operating deficits, the reduction of CINICO’s cash flows and the exposure to operational, credit and liquidity risks,” the report states.

CINICO’s limited membership and scope of products was another problem that EY identified. “Expansion would give CINICO an opportunity to earn additional revenue, reduce outpatient costs and unnecessary utilization services, reduce the Government’s healthcare costs and respond to the changing needs in the healthcare market in the Cayman Islands,” EY states.

The 2014 report called the identified problems a matter of urgency due to the impact of CINICO’s operating deficits on core government’s financial performance.

Currently, $75.7 million of government’s $114.2 million total healthcare spending goes towards insurance premiums for civil servants, civil service pensioners, seamen, veterans and their dependants, according to the RFP. An additional $28.6 million is paid to the Health Services Authority for indigent care and uninsured children. The remaining $9.9 million is paid to overseas institutions and local private sector healthcare providers for tertiary care provided to indigents, uninsured, seamen and veterans.

Vacant CEO position

In October 2018, CINICO’s CEO Lonny Tibbetts was fired without public explanation. Since then, two individuals, Chief Financial Officer Frank Gallippi and General Manager Dana Brandon, have been acting in the role, according to the Ministry of Finance of Economic Development.

While the CINICO Board of Directors has selected a CEO to replace Tibbetts, the decision is pending regulatory approval.

“As CINICO is a regulated insurance company, the appointment of the CEO requires the approval/support of CIMA [Cayman Islands Monetary Authority]. The Board is currently in the process of obtaining CIMA’s approval and providing WORC [Workforce Opportunities & Residency Cayman] with the necessary requested information for immigration purposes,” a ministry statement said on Monday.

“Upon the approval of CIMA and Immigration, the Board aims to appoint the selected CEO – hopefully for 1 August 2019.”

For more information about the request for proposals, visit government’s public purchasing portal at https://cayman.bonfirehub.com.

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