PAC queries health insurance sector profits
(CNS): The private health insurance sector in the Cayman Islands made profits of well over CI$50 million in 2016 while many people here struggle to access insurance, can barely afford it or are inadequately covered, which was a key item on the Public Accounts Committee agenda Wednesday, when the health insurance commissioner appeared as a witness. Mervin Conolly said the insurance industry had generated that profit largely from supplementary policies, not standard health insurance contracts (SHIC), but he revealed that his commission has no power to regulate those contracts.
The topic was under discussion as the PAC examined CIMA’s 2016 report, which outlines some of the details of the sectors it regulates from a finance perspective.
Conolly, who heads up the Health Insurance Commission, explained that under the law the insurance companies can charge what they want for supplementary policies and the HIC had no control over what the benefits were, unlike the SHIC plan, where the rates and benefits are fixed in the law and regulated by his commission.
The sector’s increase in profits stems from a significant growth in premium rates, from some $4 million in 2011 to more than $51 million, which is due to the freedom they have regarding these additional policies. Conolly revealed that almost 80% of workers in the private sector who have health insurance cover have a supplementary policy of some kind.
It is understood that many are paying for it themselves because employers are only obligated to pay 50% of a basic SHIC plan.
As a result, PAC queried the lack of fair protection for the customers who are paying these heavy premiums in order to get adequate cover while insurance companies are “laughing all the way to the bank”, according to opposition MLA Chris Saunders.
The Bodden Town MLA said that he was uncomfortable seeing the “profits jumping… on the backs of the consumers”, and asked what could be done to address the issue.
“What is really happening with health care in this country… when we are made to believe it is supposedly not a profitable industry?” Saunders asked, pointing out that the public purse is paying for indigent cover as well as fuelling the sector’s huge profits. “We can’t have these massive profits,” he added.
Conolly said it was disconcerting for the commission when it looks like things are trending towards significant profits for insurers. He said the nine approved firms have been increasing the premiums they collect year on year. But he explained that beyond the SHIC plan, the commission has no power because it is stated in law that employers and clients are free to go to an approved insurer and buy whatever additional cover they want.
“We are confident we supervise and regulate the premiums collected for the SHIC contract,” he said, but more and more people are opting for supplemental plans to get better cover and “they are subjecting themselves” to rates that are unregulated, with premiums increasing annually.
The PAC chairman asked why HIC has not been advocating to regulate the supplementary health insurance plans. Connolly said that the old legislation did cover more plans but it was removed in a 2013 amendment. He said there does need to be some powers to monitor the rates but his department would require more resources to supervise that.
See proceedings of PAC on CIGTV below:
Category: Health, Health Insurance
Our politicians continue to equate insurance with health care. If you want affordable and complete health care for your people you have to socialize that health care and not mandate insurance. That is why all major 1st world countries in the world, with the exception of the USA, have some form of socialized medicine. And in the USA, medical care is the single cause of bankruptcy among its citizen.
Wouldn’t it be nice to have enough money to know you can go to the doctor and get care as opposed to passing on necessary care because you cannot afford the co-pay.
It’s time for someone to tell the true story. It’s the private sector refusal to cover their retired employee health care costs that has created governments health care liability.
The premiums paid on behalf of Healthy civil servants is keeping CINICO afloat.
CNS – for clarity, since the report is not attached, when your reporter says profits of $50m, do they mean profit i.e net of all costs and expenditures, or do they mean revenue? And if it is bottom line profit, how is that split between standard and supplementary policies? It seems unlikely that if the supplementary policy premiums were $51m the statement that most of the profit was generated by supplementary premiums is also true. Surely cannot be the case that they are making nearly $50m off $51m in premiums? Knowing the total revenues for premiums, including SHIC, and confirming what the bottom line profit is would be helpful.
CNS: I’ll ask her to clarify when she gets time but in the meantime, here’s the link to the CIMA report – does that help?
It’s completely ridiculous that the Government passed legislation to make medicinal cannabis oil legal but the insurance companies refuse to cover the medication and want to play the role of “Medicine Expert” and tell you that you do not need the oil and they are not covering it, regardless of having a letter from your doctor. Is this not against my right? Do i not pay HEALTH insurance premiums monthly to be able to have my medical costs taken care of? It should be illegal for the companies to chose what they want to cover! If it is prescribed then that should be all that matter.
I think the point being made above is that beyond the SHIC plan you are personally responsible for negotiating what is covered under your plan and for what price… Have you checked with all the providers (they say their are 9 of them) over whether any of them cover your needs in any of their plans?
Another option might be to take the SHIC plan and then look for an insurer outside Cayman that can cover your supplemental needs.
Private Health insurance is one of those public goods that needs strong regulation to work for everyone. Insurer’s should of course be able to make a profit but it should come from efficient management and innovation and not simply on raising prices on the same product.
All coverage needs to be regulated and price bargaining should not be left to individuals or companies (they are too small here to have enough leverage). Regulation and control on behalf of all citizens required asap across all plans.
In addition to this, regulators need to pay some attention to the property insurance fiasco. How can your building replacement be more than your market value? You pay a high premium on the replacement value yet when you try to sell, you have to sell at the market it value. Isn’t the price of a (market value) block the same price as the cost to replace the block?
Market value can be less than replacement cost due to a number of factors such as poor condition, poor quality or lower value surrounding properties. If you build a $750k property in a neighbourhood of $250k properties then what do you expect? It will still cost $750k to replace but the considerations for appraising (land value, neighbouring property value, etc.) will most likely negatively impact the market value. You should always get a valuation carried out before you commence building to estimate the market value upon completion, most banks will make this a requirement for lending. They aren’t going to lend you $500k to build a property that will only be worth $450k market value upon completion, it doesn’t make sense.
Honestly, it sounds like you made a poor investment or haven’t maintained the property if your market value is now lower than your replacement cost, it should always be the other way round.
No fiasco here, probably just a lack of understanding or time asking the right questions to the right people.
Market value is the cost that someone will pay for your house + the land… If your house is not in a great location, is out of style, needs work etc then it is unlikely that someone will pay you the cost of building the exact same thing again – essentially it has depreciated in value (this is normal).
For example if you bought a dress today, wore it for a week and then tried to sell it on do you think you would get the same price you paid for it? No of course not! It has depreciated in value.
With property insurance you are insuring the building not the sales price… i.e. if the building gets damaged, provided your building had been insured for the full replacement cost then your insurer will give you the funds to replace or fix the building…
They are discussing gross profit. Not net profit which will be a much lower figure.
In what way? There is no tax to take from the gross??
Wow, $50mil!!!! These premiums are outrageous, you pay a lot of money and when you submit a claim all you hear is sorry you’re not covered for that!!! I paid $800 a month for my son and myself (my contribution as my employer paid a portion for me), and NEVER have I got back $1 from them!!! These companies need to be properly regulated and premiums looked into.
You never got $1 back from them! Wow! So I assume you gave birth to your son at home, by yourself, had no prenatal care, and that you and your son never got sick or needed antibiotics. If that is the case, you are one lucky person.
For my part, while I admit the premiums we pay are quite high, I am happy to not have had to pay the full cost of my cesarean section, for my son’s two week stay in the NICU and a recent unexpected surgery after a few months of medical tests and attempted treatments.
One thing you should be aware of is that most insurers here price by group. So if you have your insurance through your employer and someone who works with you had a very expensive year – eg someone has surgery or baby needs to spend time in NICU – then that cost gets passed onto your colleagues/employer when they price out the following year. Its completely ridiculous!
There needs to be standardization of plan pricing across the whole island and regulators should be brought in to introduce risk equalization across all private insurers.
Good behaviors (not going to the Dr for every cold) and low claims can be rewarded in ways other than at the standard pricing level.
Exactly!!!!
It was in the early 90’s when I gave birth and health insurance was NOT mandatory. I was insured with Aetna back then and I was covered 100% for pregnancy/delivery etc and the premiums were a quarter of what they are today. However to make it clear for you I’m speaking about 2006 -2011.
It time to open up and bring more insurance companies from overseas to crush premium costs from cayman insurance companies.
Not enough Caymanians or residents to justify it, a market of 60,000 is peanuts. Whilst I don’t believe the insurance companies make that much out of health insurance ( it needs and independent study by people who understand insurance, not MLA’s many of whom have few qualifications or understanding), it is clear the cost is too much for most and a central health system for all paid out of salary contributions is probably the way to go. Control of drug prices, number of drugs prescribed and doctor costs are necessary. When I got prescribed 9 drugs for a simple throat infection I understood the game. Don’t blame the insurance companies too much, they have to respond to idiocy and rip off doctor moves and charges, that is what drives up the price.
Bringing in more insurance companies will not help. They will just collude and rip us off like they are doing now. These companies do not care about health, just another way for them to make millions.
…why don’t more people take the SHIC plan and seek supplemental coverage from overseas?
touchy topic, and agreed with the other commenters that this is an industry that should be relatively “social” and less “profit” driven.
However, with regards to Saunders statement, “The Bodden Town MLA said that he was uncomfortable seeing the “profits jumping… on the backs of the consumers”, and asked what could be done to address the issue.”…. is he advocating for the end of capitalism? profits are reliant on consumer spending…. Government regulations usually fuel another aspect of the private sector… not sure how/what he is suggesting here other than taxation?
Presumably the answer is to open the market to better competition to reduce what is obviously oligopolistic profiteering.
Anothet private sector rip off . Thankfully I work for an employer who cares about me. I am proud to be a civil servant.
Then you are employed by the very same people that are getting screwed on the back end, in many cases, by the health insurance companies leading to the topic of this story. Are you really that dim? You as a civil servant are employed by us the tax payers, and that includes your good self as a tax payer too, I’m sure that’s not lost on you, no?
I am not sure that this story is reported correctly. The article states that the insurance industry generated a profit of over CI$50 million largely from supplementary policies. It then goes on to imply that premiums from supplementary policies were $51 million in 2016.
It is not correct, they heard what they wanted to and are trying to make headlines as “caring” MLAs. If they understood the way it works they would see that the pricing is driven by the charges medical and drug providers charge.
There is something wrong with the system when patients are routinely shaken down for residual uncovered balances on what should have been fully-covered previous doctor and dentist visits. Who do you call when the insurance company deems the standard Cayman rate sheets to be too much for them to honor?
i wonder if it is even legal to demand payments for invoices that were sent out to patients more than six months after the insurance companies refused coverage. I was told by someone that they cannot force you to pay. Can anyone shed any light on this.
Government should control medical Insurance. By collecting premiums from the population for medical, dental and eyecare.
Slippery slope, let them get away with 50 mill profit and then next year it will triple. Why am I paying as much as I would in the US for insurance and the hospital is falling apart? Time to fix this and put some caps on prices.
Just let me buy international insurance from a respected international provider (blue Cross/Blue Shield/BUPA etc.) and the local insurers would have to compete on price, or die.
I feel raped on a monthly basis by the health insurance fees I have to pay. I could buy a new car on an annual basis yet am interrogated like some war criminal every time (maybe twice a year at that) I submit a claim for what is a pittance.
Universal health care is cheaper and better.
Try getting a routine Xray, MRI or CT Scan in Canada…I’ll wait…
CT scan wait time average, 4.1 weeks, less for medical need. MRI scan wait time average 10.8 weeks. Less for medical need. Canada is ranked higher than the US in the WHO health league tables. But then so is Costa Rica and Chile.
Waot time in Cayman – < 24 hrs
No person or company should be permitted to make a profit out of illness or disease. Health-care ought to be free just like education or the services of the police.
Nothing is ‘free” bobo but I agree we should have a NATIONAL insurance scheme instead of these private insurance pirates ripping us off.
We already have a national insurance, Cinico was set up to be just that, now it needs to be fully implemented and many of these cartels should be disposed of. Every man woman and child should be enrolled into Cinico,. If anyone wants to top up their insursnce they are free to do so.And please no one from the private insurance companies should be placed on any medical boards/ commission. They are only ensuring that their companies prosper. That defeats the purpose.
Dont tell me some people still believe that there is a free lunch.
Not free but I wouldn’t say no to a hot lunch.
Well we have probably 10,000 civil servants including dependants and retirees who are all getting a free lunch paid for by taxpayers who don’t get one.