Position Paper on Revised NHI Framework
Partnership and Collaboration in the Delivery of Universal Healthcare in The Bahamas
The National Health Insurance Authority (NHIA) formally issued a policy paper entitled National Health Insurance: A Shared Responsibility on October 23, 2018. The aforementioned policy paper outlines the proposed policy framework for the revamped NHI program.
The NHIA has commenced a 45-day consultation period during which it is anticipated that stakeholders will be engaged and feedback obtained. The expectation is that stakeholder feedback will be reviewed and where appropriate, incorporated into the policy paper before it is finalized.
Statement of Purpose
The purpose of this Position Paper is to provide feedback to the NHIA with a view to enhancing the proposed framework. This paper acknowledges the significant work that has been done by the NHIA and its consultants to develop a plan for the revamping of the existing NHI scheme. The BIA met with the NHIA on October 30, 2018, to discuss the Policy Paper for the first time and the feedback received during this meeting has been incorporated into this Paper.
It is our view that the contributions of stakeholders particularly the general public will be pivotal to the success of an overhauled NHI plan. The BIA has reviewed the Policy Paper in detail and has produced this document in good faith to assist the NHIA fulfill its mandate. For the purposes of this document, we have assumed that all references within the Policy Paper to private insurers are to be interpreted as private health insurers duly licensed by the Insurance Commission of The Bahamas under the Insurance Act, 2005 (as amended).
The BIA supports the concept of universal health coverage and shares the vision of the NHIA that residents of The Bahamas should not suffer financial hardship in gaining access to quality and affordable healthcare. We believe that universal access to healthcare in The Bahamas is a noble and attainable goal in The Bahamas. We endorse the NHIA’s philosophy of collective and shared responsibility while supporting the notion that NHI should care for those who need it most.
It is against this backdrop that the BIA and private health insurers welcome the opportunity to not only comment on the policy paper but also partner with the NHIA in the implementation of a viable and sustainable NHI plan. We have assumed that the NHIA’s request for feedback is genuine and does not constitute tokenistic engagement. Hence, we expect that comments, observations and proposed amendments to the Policy Paper will be considered, scrutinized and if considered prudent, utilized in the enhancement of the document.
We believe that it would have been in the NHIA’s best interest to have shared a draft of the Policy Paper with the BIA prior to releasing it for public comment. This would have ensured that any areas requiring clarification or revision within the document were addressed prior to being put in the public domain. Additionally, it would have mitigated against the risk of raising public expectations and subsequently having to temper the same with more realistic targets. Nevertheless, our specific comments are provided in the ensuing paragraphs.
Timeline for Launch of Standard Health Benefit
According to the Policy Paper, the Standard Health Benefit (SHB) is scheduled to be launched between April and July of 2019. It is our view that the proposed timeline is unrealistic and not feasible bearing in mind that the 45 day consultation period ends on December 7, 2018 or December 26, 2018 if this is construed to be 45 working days.
Once the consultation period ends, our understanding is that the feedback received from all stakeholders will be collated, reviewed and requisite amendments made to the Policy Paper before it is re-presented to the Government for approval. We presume that all things being equal, approval for the revised plan may be granted between December 2018 and January 2019. This leaves only three to five months for the design and roll out of the SHB by the NHIA. While this does not relate to the launch of the SHB by private health insurers, we recommend that the NHIA reconsiders the feasibility of this self-imposed timeframe.
It is imperative to note that from our experience as health insurers, the product development life cycle takes nine to twelve months provided there are no intervening unforeseen circumstances. We, therefore, propose that the launch of the SHB by private health insurers which is scheduled for January 2020 be contingent upon the finalization of the benefits package, costing of the SHB, agreement of a reasonable fee/reimbursement schedule with healthcare providers and the conclusion of the consultation process with private health insurers. We submit that a realistic timeline for the launch of the SHB cannot be ascertained prior to the aforementioned milestones. This will separate the NHIA from the historical government trend of introducing grandiose plans within unrealistic timeframes and without full consideration of meaningful dialogue with key stakeholders.
Expansion of NHI
The Policy Paper acknowledges that the current scope of services that NHI provides is limited by economic constraints but proceeds to propose an expansion of the program consequently increasing the annual cost from $30 million to $100 million. It is the position of the BIA that the expansion of benefits under the NHI plan must be measured, calculated and pragmatic based on the fiscal challenges faced by the nation.
In the wake of an increase in the Value Added Tax (VAT) rate and in the midst of a modest growth in the economy and persistent high unemployment, we advise the Government to proceed with caution. We recommend that the proposed schedule of benefits be adjusted to reflect the fiscal realities of the country.
High Cost Care (HCC)
The Government has stated its plan to provide catastrophic care coverage under a revamped NHI plan that is sustainable. This plan appears to have been covered under the HCC program as articulated in the Policy Paper.
It is common knowledge that while primary and preventative care should form the foundation of a universal healthcare system, secondary and tertiary care constitute the account for the larger expenditures within the healthcare system. Hence, the BIA appreciates the NHIA’s rationale for seeking to cover conditions that are likely to incur significant costs for treatment.
It is unclear however, whether the financial projections and assumptions underlying the HCC are reliable and realistic. Additionally, the current state of infrastructure within the public healthcare system is of great concern insofar as the proposed HCC program is concerned. It is important that the Public Hospitals Authority (PHA) and the NHIA work in tandem to upgrade the quality of care and service at the public facilities that will deliver care under the HCC.
We note that the burden on the public healthcare system can be reduced by the delivery of care within private facilities. We understand that the NHIA has taken the position that the majority of the services are to occur within the public system and that Public Private Partnership (PPP) arrangements will be negotiated only for certain services to allow the overflow of patients to a private entity only where capacity at the public facility may be limited.
Supplemental Coverage for Seniors
The Policy Paper notes that the NHI intends to work with private health insurance companies to provide cost effective supplemental coverage for the elderly population. The Paper indicates that “coverage under this plan may include private services at public hospitals, private providers and overseas care”. The NHIA foreshadows that the additional premium charged under such a plan “will be affordable, significantly less costly than any alternative.”
There has been no preliminary or exploratory discussions between the NHIA and private health insurers on the proposed supplemental coverage. It is therefore conceptually unclear how the NHIA plans to reduce medical insurance premiums for seniors. We note that this will require that the NHIA engage local and international healthcare facilities or professionals with a view to agreeing on fees that can significantly bend the healthcare cost curve. However, we are not privy to any such discussions or fees and it is difficult to determine the basis on which the NHIA has made this pronouncement.
Private Insurance Standard Health Benefit (SHB)
It is our understanding that the SHB plan constitutes the minimum degree of coverage that employers and individuals must procure from private health insurers. The SHB as proposed will cover the expanded primary care program and HCC.
In order to properly assess the SHB, we request that the NHIA provide the details of the covered procedures and the cost structure underlying the SHB. Details on the facilities and providers that will form a part of the network for the SHB should also be provided. More specifically, it should be clearly stated and communicated to the general public that the NHIA envisages that the HCC program will be mainly or solely administered via the public healthcare system. This is important if we are to manage the expectations of the general public and beneficiaries under the plan.
The Policy Paper proposes that the bundle of benefits be reviewed by the NHIA board of directors, Minister of Health and Minister of Finance. This approach does not embrace the collaborative mantra envisioned by the Minister of Health and omits key private sector stakeholders from the review process of the product they are required to sell and administer. We recommend that the review process and review panel be revised to include the healthcare professionals, private health insurers and the business community. This review should include a detailed financial impact analysis, actuarial review and economic assessment.
Exclusions and Exemptions
The BIA concurs that the expansion of universal health coverage in The Bahamas must be phased in to minimize disruptions to commerce and the overall economy. We note the initial exemptions from the first phase of the employer mandate and presume that these were guided by benchmark studies by the NHIA. However, it our view that the thresholds established for part-time employees and annual revenue are quite low. The NHIA should provide details of its supporting analysis of employers based on number of employees and projections to justify what is being proposed.
The limited grandfathering of existing insurance plans may require the unbundling of these plans which would increase administrative costs for private health insurers. This is exacerbated by the fact that the proposed risk equalization contribution is very high; as proposed by the NHIA, this may actually increase premiums for existing health insurance plans. We propose that it would cause less of an administrative burden if current health insurance plans be pre-approved provided they meet the benefits specification of the SHB.
In this vein, we also recommend that the NHIA’s narrative surrounding the availability, affordability and procurement of supplementary or top-up health insurance policies be moderated. At this time, neither private health insurers nor the NHIA has assessed this matter sufficiently to make informed statements about the impact of the NHIA’s proposal on the cost of supplementary insurance policies. Factors such as the mechanics of the risk equalization fund and administrative costs associated with the carve outs may in fact put upward pressure on the premiums for such policies.
The Policy Paper proposes that the annual premium for the SHB will be around $1,000. While this is a noble objective, the rationale and support for this regulated premium amount should be shared with private health insurers for review. Based on the limited details on the proposed schedule of benefits, we had assumed that the healthcare facilities and healthcare providers within the SHB network have reached an agreement with the NHIA to significantly discount their fees. However, we have since been advised by the NHIA that the negotiation of fees with healthcare providers under the SHB plan has either not commenced or not been concluded.
The Appendix section of the Policy Paper notes that “Private insurance premiums for the SHB, of which all insurance providers will be required to offer is calculated based on anticipated costs to providers allowing for an appropriate margin.” This implies that the anticipated costs to (healthcare) providers have either been agreed or pre-determined in order to arrive at the proposed annual premium of $1,000. The BIA requests that these anticipated costs be shared with us to enable us to conduct our independent actuarial analysis and opine whether the premiums are reasonable and realistic.
As the NHIA is referring to the contributions as insurance premium, will the premium attract the 3% premium tax and VAT that currently apply to private health insurance premiums?
Additional details are required on the proposed “qualified independent body” that will be responsible for setting the range of premiums that can be charged by private health insurers. The proposal that requires the involvement and approval of premiums by Ministers inserts the risk of political interference and expediency into the process. The proposal to regulate co-payments and deductibles is also lacking in relevant details which are vital to the pricing of the SHB and insurance products in general.
Based on the challenges within the proposed framework and the questions surrounding its sustainability, it will not be surprising if some health insurers do not deem participation in the NHI scheme to be in their best interest based on their risk appetite. Private health insurers are subject to statutory solvency and capital requirements which are determined by their financial strength. Is the NHIA proposing that all private health insurance companies will be forced to offer the SHB whether their business model and financial capability makes this a viable option or not?
Medical Provider Fee Schedule
The BIA has maintained that there is a strong correlation between private health insurance premiums and healthcare costs. The delivery of affordable quality healthcare via the SHB with an annual premium of $1,000 may only be achievable if the facilities and providers’ fees are materially lowered.
The NHIA has informed us that at this time, it has not determined that its medical fee schedule will apply to the reimbursement of care covered by private insurers. As the cost of medical services is a key driver of insurance premiums, it cannot be determined at this time whether their anticipated $1,000 annual premium for the SHB may be applicable to employers. In that regard, the BIA’s position is that the agreed fee schedule for the SHB will be adopted as the national fee schedule for The Bahamas and will guide the reimbursements of private health insurers for all healthcare provided in the country. We request that this agreed fee schedule be shared with the BIA and subsequently published for public reference for transparency purposes.
Based on the proposed sources of funding for the revamped NHI program, the Government is expected to increase its direct allocation to NHI directly and/or via earmarked allocation of VAT collected on private health insurance premiums among other taxes.
It is the BIA’s position that healthcare and health insurance products should benefit from the country’s tax system. We believe that VAT ought not to be levied on an essential service such as healthcare and its funding mechanism – health insurance. The Policy Paper seems to perpetuate the imposition of VAT on essential services to the detriment primarily of individual consumers.
Risk equalization has been touted as an integral part of the revamped NHI framework aimed at “keeping premiums affordable and maintaining the insurance industry’s focus on innovation and delivering effective models of care.”
It appears as if the proposed risk equalization program seeks to equalize premiums and not claims. As an illustration, if a private health insurer insures several high health risk beneficiaries and experiences excess claim of $10 million under the SHB, the insurer will not be reimbursed in full or part from the fund. Further consultation and analysis on this point is required if private health insurers are to have any confidence in this mechanism.
The Policy Paper proposes that at the onset of the employer mandate, 50% of the SHB premium would be considered “at risk” and used to form a risk equalization fund. This leaves private health insurers with 50% or $500 of the proposed annual premium of $1,000 which we believe may already be a gross underestimation of realistic premiums to cover the conditions outlined in the document.
Denial of Coverage
It is not apparent whether the insurance reforms contained in the proposal have been designed to mirror the employer mandates. The Denial of Coverage section in the appendix indicates that all “individuals who are not mandated to purchase private insurance may choose to purchase insurance and be guaranteed issue or be guaranteed issue through NHI”.
We note that a guaranteed issue provision in the absence of a mandate will create an extremely unstable insurance market as persons can wait until they are sick to purchase coverage. No private insurer would participate in such a market and the NHI system would suffer severe “budget-busting” losses should it do so.
During our discussion with the NHIA, it was made clear that as an individual mandate is not being proposed, private health insurers will not be mandated to cover individuals outside of the employer mandate. Hence, the decision to insure unemployed individuals and individuals working for exempt employers will be subject to discretion and underwriting requirements of private health insurers.
Legislative and Regulatory Framework
The BIA has indicated on several occasions that the NHIA continues to be in contravention of the legislation that governs the organization as well as the Insurance Act. Specifically, we have raised questions about the functioning of the NHIA as a Regulated Health Administrator (RHA) albeit RHAs are required to be licensed as an insurance company by the Insurance Commission of The Bahamas and jointly regulated by the NHIA. This legal issue remains unresolved to date.
It is proposed that the NHIA act as a public payer. Does this mean that the NHIA will be a de facto public insurer? Will the legislation be revised to reflect this new role of the NHIA? The Paper seems to support the operation of the NHIA as both a regulator and payer/insurer. What will be the checks and balances on the NHIA? Will the NHIA regulate itself? In the era of fiscal prudence and financial discipline, has the NHIA determined that the creation of another bureaucracy and expansion of government via the NHIA’s structure is the best option given that the IT and human resources within the private sector will be duplicated? The specific role of the ICB should also be further clarified.
Based on the framework outlined in the Policy Paper, the NHI model is expected to change significantly. This suggests that a new legal and regulatory framework will be implemented to facilitate the proposals within the Paper. However, stakeholders have not been provided with the draft legislation for the revamped NHI program. We recommend that the NHIA and Government release the draft legislation for consultation and feedback.
The following points ought to be considered by the NHIA as well:
- Functionality and capabilities of the NIB Smart Card. It is unclear whether the card will only be used for identification of beneficiaries or whether it can be swiped and will contain data that will allow for the electronic processing of claims.
- How does the NHIA envisage administering the revamped program given the many complexities involved and the limited resources available?
- Has the NHIA determined that its risk adjustment proposal is desirable for group health insurance policyholders? An explanation of the rationale for adopting this approach for this group will be helpful.
- Perhaps it would be more pragmatic and a more measured response to the difficulties the nation faces as regards universal healthcare, to have the NHIA consider phasing in both the contributions (e.g. .5% y1, 1% y2 & 2% y3) aligned with corresponding phasing in of benefits (e.g. add labs & diagnostics y1, add 2 Catastrophic diagnoses Y2, and the balance of Catastrophic diagnoses y3).
The BIA has taken the time to thoroughly review the content of the Policy Paper to provide measured and factual feedback for the NHIA’s consideration.
It is the view of the BIA that the Policy Paper attempts to involve the private sector in a meaningful way albeit there are a number of fundamental issues with the framework as proposed. The consultation period and process present an opportunity to revise the proposal based on technical and expert advice from professionals within the private sector.
We believe that the challenges within the proposed framework are not insurmountable and with collaboration with stakeholders, the overarching objectives of universal healthcare can be achieved.