Private pensions and healthcare draining public coffers
Premier Alden McLaughlin in Finance Committee speaking about pension and health issues
(CNS): Premier Alden McLaughlin has made his most emphatic statement yet about private sector health insurance and pensions failing the people of the Cayman Islands, describing them during Tuesday’s Finance Committee meeting as breaking the government coffers. McLaughlin said government could not continue to carry people who cannot afford health cover when they retire because they are on such small pensions. He said he expected the Chamber of Commerce to have a stroke when they heard his comments but the public service pension scheme was far better than anything on offer in the private sector and government should have created a national plan from the start.
He said when it came to pensions and the health insurance firms, government has been sold a bag of goods that does not meet the needs of the community and the provisions are “grossly inadequate”.
McLaughlin pointed to the pressure from the Chamber against a national scheme when government moved towards introducing the mandatory pension environment, but if they had pressed ahead with that idea things would be much further ahead by now.
Members discussed the problems surrounding retirees from the private sector being propped up by government because of a combination of paltry pensions and ridiculously high insurance premiums for retirees, having been removed from their former company schemes regardless of years of service. The premier said that the more he was exposed to the effect of the current private pension and health systems, the more he realised “how terribly” they are failing the people.
“We were sold a bag of goods which just isn’t what we need,” he said.
The premier said the pensions that people will receive from the private sector are grossly inadequate and “there are those who will condemn what I have to say now… the Chamber of Commerce will probably have a stroke”
He continued, “But the reality is the public service pension scheme is far better than anything any of the private providers can even dream of. It is better run; it provides a much better return.
He added, “We would have been much further ahead as a country if the Chamber had not fought government at the time and allowed the pension to be a government-run scheme.”
The private health insurance situation is going to break government, not specifically his administration but the Cayman government in general, if the legislators did not find a way to address the problem, McLaughlin said.
The premier said healthcare was a human right in a modern developed country like Cayman, and therefore the system had to be fixed. He warned that if there was another financial crisis like the one in 2008, no matter the size of government reserves, the country would not be able to cope with the burdens created by the failing private health cover and pension schemes.
See the premier’s comments on CIGTV below.
Category: Government Finance, Health, Health Insurance, Policy, Politics
The first step, where possible, should be to keep patients away from US hospitals, such as the Baptist. A friend of mine ended up there for a total of five weeks. With no surgical operations, just cancer treatment, he died, with bills totaling $620,000. A few weeks earlier, a couple I know, had a premature baby in care at the Baptist for just 30 days. The bills totaled $418,000. I was personally shown the invoices.
At the time my mother was in a wonderful private care home in England, where the bills were less than $4,000 per month. I calculated that after 5 hours, 53 minutes and 40 seconds the baby had cost as much as one month in the care home.
In 2014 the British Medical Journal did a study in the States to discover the cost of a basic blood test for cholesterol in hospitals around the country. The cheapest was $32. The most expensive was provided by a hospital in California, which charged $10,169.
The second long-term aim should be for government to regulate against the use of hydrogenated fats used in cooking, as well to tax those foods that contribute to obesity in our youth and lead to diabetes, which is already costing our economy millions a year in medical fees and lost workdays. If 25% of our children are over-weight now and headed for diabetes, imagine this same conversation in 20 years time.
Since the U.S. leads in cancer survivability at the point of intervention, it’s the place to go if you want the best chance for survival. Unfortunately it’s also expensive.
I have been saying for a long time that the Chamber of Commerce being a special interest group does not care about the people of the Cayman Islands and here if further proof of what I have been saying.
You may be right, but they try to support growing businesses which benefit Caymanians and all workers, so what is your beef? Saying something don’t make it right…
The government should not blindly follow the recommendations of the CoC as those recommendations are not always in the interest of the people of the Cayman Islands. While the CoC has done some beneficial things over the years one must never forget that the CoC is a special interest organization whose first priority is to its members and not the Cayman people.
The problem with both healthcare costs and poor pension performance is too much government regulation. There’s not enough choice i.e. competition. A 10 year mandatory degree is a form of government rationing. It is a government imposed barrier to treatment. The way healthcare is regulated now there is no way to control soaring costs (private) or rationing (public).
Healthcare needs to be radically deregulated. Specialized medicine needs to be introduced over time so that people can afford treatment for nearly all of the things that you need a doctor for. That way most people can pay out of their pocket and have insurance for only catastrophic events. With todays easy access to information most medicine should be taken from behind the counter and put on the shelf. We cannot afford to be treated like helpless children any longer. Health savings accounts can be created so that in the event that there is a catastrophic event, the money is there for the deductible. The government (tax payer) will still need to cover the indigent but that cost will be stable compared to “free”‘ government run healthcare.
Better and lower cost insurance is already available internationally, but we are forced into the local insurance pool. If we should say we have a right, it should be the right to buy from who we choose. The same is true for pensions. Mandatory contributions are fine, but let us at least choose who we buy our plans with because the current choices are a miserable failure.
People need to stop believing its either A or B, both choices currently are unsustainable. Sorry to sound cliché, but isn’t it time to think outside the box?
All ripoffs !
Another example of the private sector ripping us off and we have the nerve to complain about our amazing civil service.
If the civil service and government didn’t operate CINICO where would we be today.
Come on private sector try and so something good for the average Caymanian. At least try.
Tell that to the Caymanian owned gas stations, supermarkets, booze stores and so on…
I would happily contribute alot more to my pension if I had more say in what products my pension are invested in.
When the market tanks and its only a matter of time before wealth will be lost again and common people will have start over after the corrections, financial markets cycles like wars are inevitable, Caymanians losing wealth with no safeguards is unacceptable, how much longer do we have to be beholden to administrators who invest our pensions in “paper products” that aint worth the paper their printed on, yet they continue to collect their fees win, lose or draw?
The present administration should immediately direct CIMA and the Treasury to convert 20% of CIG cash reserves which are ironically ALL backed by “paper products ” to hard assets like gold and silver to hedge and minimize against future market disruptions, there are already laws on the books that allow CIMA to do this, why hasn’t it even been considered, this option should be given to the every pensioner as well in order to diversify their pension.
We should no longer put all of our proverbial eggs in one basket, the big fat cats cover their butts in times of market turmoil, so its time we do the same for the common man.
Are you all educated yet? You’ve allowed these insurance companies to charge insane amounts to insure people during their work lives only to then have their premiums increased significantly during their retirement years to the point that only the rich could afford such schemes. It is outright extortion to the benefit of the insurance companies then Government has to step in a cover people who’ve been robbed by those same insurance companies. Worse is that it is mandatory extortion under the law! It is time to nationalize health insurance and have everyone on Government arranged/administered heath insurance schemes like the Canada and the UK. The insurance providers could always offer the ‘top-ups’ in coverage as optional extras for those who can afford it. Please act soon and not let it continue. It is an unfair system.
Resistance to a public pension plan may have been based on a concern that the then and future governments might have seen the pool of pension contributions as a convenient piggy bank from which to borrow for their own financial agenda.
Thank you. My chambers pension was abysmal. I’ll keep my private pension plan thanks. It makes money, not loses it. Once bitten twice shy.
And idiot Tara passed this new Pension Law. Who is she to decide if I am going to live till I am 65 and collection, maybe $100.00 a month of my money??? THIS IS MY MONEY I WORKED FOR. This country is going to be in a mess by the end of the year and in future years. Do you think Lawyers aren’t leaving? They want their pension, they aren’t going to leave $100,000-$200,000. in the Cayman Islands. Get rid of the pension for work permit holders Alden like you mentioned a few months ago. What sense does it make. Half of them are losing money anyway. Health Insurance another story, pre existing conditions aren’t covered so what are you expected to do die…..
True Dat. In the ‘lean’ years there were rumors of eyes being turned on the CIG Pension fund. ‘How can we ‘creatively reinvest’ this money? Maybe a nice IOU, I mean CIG Bond.’
Alden need to ask why the insurance companies need CI$17k a year plus to insure a family and still demand a deductible of 1.5k to get some benefits from it along with coverage of only 50 percent for lots of the claims categories and this is for the premier plans god help you if you’re using a SHIC version, what money does a family have after paying $17k in Health then been forced to pay life insurance for a mortgage, car insurance to drive, all of these are mandatory and drop in the pension there is nothing left once you start paying all these must pay bills to live in this country.
We are being charged CI$36,000.00 a year, simply because we are retired.
Yes, We have been sold a bag of goods that are inadequate for the people of the Cayman Islands but that is because the people in the Healthcare system are inadequate, incompetent and generally lacking in the knowledge of how to run a healthcare system.
We have no one to look out for the People or care for their Healthcare needs.
I completely agree with Mr McLaughlin on this one!
Yes, Health Insurance AND Pensions should be Government-run; the private sector schemes are obviously in it for profit and I know persons who have lost as much as $20,000 or more dollars through their pensions with private pensions companies investing the funds in to bad markets.
A national pensions scheme similar to the social security plan in the USA would be best – shut these greedy pensions companies down. Of course the chamber of commerce would not have wanted Government to take over – is there any reason for them to encourage pension to become a public matter?
A National Health insurance scheme and a National Pension scheme is the only way to go.
Sad that it wasn’t done from the beginning and not listened to totally absorbed scare tactics from the CICOC and other vocal critics like Billy Adams.
Agreed
Regarding pensions, we are failing ourselves by simply not putting enough into the plans. 8% contribution is simply not enough. Probably should be doubled. That has been indicated for a LONG time. I know that it may be difficult for persons to contribute more but is not more important that “wasting” the money on non-essential meterial things? Like fancy: cell phones, clothes, hair styles, shoes, cars, etc., etc., etc.
We all need to take stock and make tough decisions. Sacrafice during our working lives so we don’t starve when we retire.
The problem with that is you will be taking another 8% or thereabouts out of the economy and this will affect local businesses. Are you prepared for business closures? Think about the impact on the Pension sector in terms of loss of jobs. What about the slowing of the economy and businesses closures and how many people will be unemployed. Are we prepared to deal with that when we have so many issues now with our unemployed?
I am not saying it must not be done but it needs to be thought out carefully so we can deal with repercussions of such events.
If you’re on 8% (total) then double-check because AFAIK the law is 10% total. (Civil Service exceeds the Law at 12% total, 6% employee & 6% employer, not enough but better than private.)
The point was simply not enough is being put away to look after ourselves in old age. Ten or twelve is also not enough. I think sixteen to twenty would be OK. If young folks start this early they will be OK when they reach retirement. Presuming that they work hard and keep their job. It’s amazing what an extra $50/$100 per month over 40 years will result in.
So why’d you choose 8%? Easy enough to use 10% in your post.
What happens when you have already given up all the little luxuries in life – what more is there to give up?
The premier is increasingly sounding like a man on a mission to fix the bad things in Cayman, which may indicate he is not planning to run again…normally fixing bad things means that you have to make unpopular moves. However in Cayman, some of this is so bad that fixing it, however painful, might just make him more popular. Only in Cayman.
I agree and it’s a good thing. I have always said a politician should work in office like it’s only time there making the right decisions come what may. You should never work like there is a 2nd term.
The Premier has the power and majority votes in the LA to change the situation not just talk and complain about things. This is more politics and rhetoric to deflect from the real issues.
Cayman needs to judge the government by collective their actions not the words as the tongue can say anything. If the government want to amendment legislation they have the numbers to do so and to make the necessary policy decisions while providing directives to the regulatory agencies.
This government is effectively the same PPM led government & cabinet that passed the National Pensions Law and took all credit for doing so. I wonder how Minister Rivers feels in light of these comments?
Is this another policy reversal by the Premier. First it was the National Conservation Law. Now it’s Pensions & Healthcare.
Sounds like a bit of Political Bipolarism.
The real issue is the Government’s constant inability to enforce the laws they create. My pension is doing just fine and thank God I transferred my funds out of their joke scheme. If you think your money is safe in their hands I have a free cruise ship pier I’ll build for you.
Thank you. I transferred out too. My private plan completely outperforms it.
i was told the ammendment to the pension law coming into effect in january only applies to private pension and not public? so foreigners will continue to deplete govt pension?
If they put their money in, how on earth do they deplete it by taking their own money out? You think you should get a share of their contributions? Get a life pal, you would be up in arms if someone decided to take your contributions out…
Your statement is completely false. I have a Chamber pension and a public pension account. My chamber account almost always underperformns compared to the public service plan return. One thing the CIG plan has is great investment managers. Seriously. You should look into it. It would surprise you.
CNS: could make an interesting article.
The Chambers plan is appalling. I was losing money too. But I am extremely pleased with the private plan I transferred out to.
That wasn’t my point at all, but carry on anyway.
Thank you Alden, you couldn’t have said it any better and to get a nod from the opposition bench means you are on the right track. Far too long we have been suffering under this so-call private pension and insurance scheme (scam) and believe it is by time that the country look at pulling these away from the private sector, and placing it under a proper government run pension and medical health care. I am 40 now and by the time I reach 65 Lords willing, I might not get anything or if I do, might get driblet from the private pension scheme I am on, because from what I understand (correct me if I am wrong) they all are trading on wall street and our money is trading daily. So if there was another recession then there goes our hard earned cash and we’ll be right back to post 1998, relying on government assistance. This was a risky move by the government at the time to bend to the pressure from the chamber of commerce and now the chickens are finally coming home to roost. Please Alden and Ezzard, work together on this and come up with an cohesive plan for these Islands where pension and medical are concerned, as I could see where these two present schemes are headed, and it wont be good for these Islands within the next 10 to 20 years, if that much.
“they are all trading on Wall St…” what do you think the government are going to do with your pension contributions? Put it in a shoe box with your name on it marked not to be opened before x date?
What Fred Said. What you’re talking about is the need for your pension/investment holdings to change risk as you mature. Generally speaking high risk/reward when young, low risk/reward when old so even if the economy tanks your holdings are more likely to still be there so you can spend the capital when you retire. (Of course, with retirement being 20+ years its not a zero-sum balance.)
What the pension plans should be doing is having a mix of investments in their portfolio to match the mix of pension holders so their return (in my simplified example) is always medium from their mix of high and low risk/return investments. What they were probably trying to do was have a broad enough mix of high risk/return assets to achieve a high-medium return for their pension holders with only a moderate downside risk. But got caught out by the broadness of the global recession. (Which caught out even some low risk investors when the credit agency low-risk rankings turned in to high-risk holdings overnight.)
It’s your money, if you are only saving a ‘driblet’ you will only have a ‘driblet’ in retirement. I guess you missed the bit about the current Government scheme being underfunded, which means they are paying out more than they are paying in, if they don’t change that the fund goes broke. I wouldn’t be surprised if this was just a way of keeping the ponzi scheme going a bit longer.
The CIG Pension is not currently underfunded. (They pay out less than they take in.) What they have is a ‘contingent liability’. At some point in the future they will pay out more than they pay in. This is because they have essentially two streams of pensions both drawing from one pool. The ‘defined benefits’ stream is the old system whereby you are contractually guaranteed a certain pension payment every month after you retire. When that system was set up it was intended that the stream would be funded by the Government’s recurring revenue, i.e., there would be a ‘pension payments’ line in the budget every year payed for by that year’s income. At some point it was decided to change the system. A second stream, the ‘defined contributions’ stream, was created. At the same time ALL civil servants, regardless of pension type, began paying in to the pension pool. Government also began putting in additional monies (most years) in order to build up the fund in advance so they wouldn’t have to pay as much in that ‘pension payments’ line item in the future because the fund would be able to pay some of the ‘defined benefits’ payments each month. Currently the pool – with 6% contributions from Civil Servants, 6% matching from Government as employer, and additional ‘contingent liability’ contributions from Government, and the interest those invested pensions monies bring in – is big enough to pay all of the monthly pensions. As more of the ‘defined benefit’ group of employees reach retirement age however there is a mathematical future point where the pay-outs are greater than the pay-ins. At which point Government will have to begin making pension payments out of recurrent revenue, i.e., honoring their contractual obligations. Things like raising the retirement age, and making additional payments into the fund in advance of that date, pushes the ‘underfunded’ date further into the future.
Even when the Govt. hits ‘underfunded’ in the future it is only the ‘defined benefits’ portion that is unerfunded. By definition the ‘defined contributions’ portion cannot be underfunded (as long as they do not spend from the ‘defined contribution’ portion to pay the ‘defined benefit’ portion; or make such bad investments that they lose or spend on fees more than they gain in interest) since all you get back is your principle plus interest, i.e., its just like a private pension fund.
FYI – the better description is to call it a government sanctioned Ponzi scheme
You can not be sold something that you are unwilling to buy.
Or from another angle, why is the Government pension scheme so much more generous than private. Oh that’s right, the Government pension scheme is funded by other people’s money and is broke, The Cayman private pension has only been required since 1999, most people in the rest of the world need at least 10% of salary paid in for 35/40 years in order to get anywhere near enough money to live on. When you factor in Cayman is so much more expensive, this problem won’t start getting better until about 2035. People don’t save enough for retirement, they don’t plan where there money will come from or how they will live, Having said all that, health insurance is a big issue, but not just for retirees.
Alden now you sounds like a premier with balls. I love your tune
Let’s see what he actually does about it. It’s called POLITRICKS for a reason
Is the shoe on the left foot now? When Ezzard had gone to great lengths initially, with an plan that could’ve worked, the pig-headed individuals rejected it. Now, everyone from far and near, who cannot/will not pay for health insurance jumps through loopholes to seek coverage. Stop letting the Chamber of Commerce dictate to government, they are covering their backs and the government is being fleeced.
So, Alden has lost his blinders and he is seeing the light. Hope he will see through and address the bigger elephants in the room.
Well lets see if he goes thru with this because finally he sees what the fat cats have been doing all along; cheap labor and crappy benefits except for the “privileged class”. It needs to be a national health & pension fund and stiff criminal penalties for employers who do not pay. Example; how can one contractor who had not paid pension and health payments last year for over 100 employees then be on this new builders board? Kind of like the fox watching the henhouse door. Tighten it up Mr. Premier and do not bow to the Chamber or the money crew who want things to continue as is.
If healthcare is a human right, forcing doctors to work for you for free, then so is food. make the groceries feed everyone for free.
Never write comments at 4.48 in the morning, they read like a script from Dumb and Dumber.
Dumb & Dumber 4, Communism: A Good Idea That Went Downhill Quickly
Which would be fine if that was what we or he was talking about…he wasn’t, try reading it again. Or have someone that can read properly read it to you.
If everyone is working ‘for free’ because everything they are producing, from health care to groceries, is a human right, then you’ve pretty much achieved basic communism. We work to the best of our abilities and our output is shared equitably throughout the society. One works as a doctor, treating patients for free, then walks in to the grocery store and collects their bread and milk for free. Another works for free stocking the bread and milk on the grocery store shelves, then walks in to the hospital for triple-organ-replacement-surgery for free.
When we get to pure socialism I don’t want to be in construction anymore, I want to be a full time baseball player.
the chamber lives in the real world…..cig(civil service) is a wonderland of incomptence bailed out on a yearly basis by the private sector.
hey alden….just look at the civil service pension/health care liability that will soon bankrupt cayman…..
but hey…that will only be the second time the ppm has bankrupted cayman…
idiot… the chamber of commerce, like the private sector, lives in the real world….
what would alden know about that…..?????
Alden, all good points, but stopping the mass importation of poverty would help more than any one single thing.
Most defiantly bringing in all the most economically depressed people from all over the world would be a major step forward. Of course we all know that is really going to piss off the big guys!
That would require him to implement rollover on the civil service and require expat civil servant children to pay for their education, just like other expat kids.