The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Insurance Association’s (BIA) chairman yesterday said healthcare provided by National Health Insurance (NHI) was set to benefit “selectively and partially” from the removal of the 3 per cent insurance premium tax.

Emmanuel Komolafe, in an interview with Tribune Business, revealed that NHI permanent secretary, Peter Deveaux-Isaacs, had confirmed in writing to the BIA that the 3 per cent tax would not be levied on NHI “distributions” to private health insurers.

Questioning why the Government would elect to remove the premium tax, but not the 7.5 per cent Value-Added Tax (VAT), from being levied on healthcare services, Mr Komolafe suggested the policy outlined by Mr Deveaux-Isaacs was discriminatory.

This was because the 3 per cent premium tax will still be levied on the supplementary, or ‘top-up’, insurance that private underwriters will be allowed to sell in addition to the NHI coverage they will be mandated to provide.

And Mr Komolafe pointed out that the “distributions” referred to by Mr Deveaux-Isaacs did not represent premiums as defined by the Bahamian health insurance industry currently.

These ‘distributions’ are in fact payments that will be made by the NHI Commission from the funds allocated by the Government to the scheme, which in turn are supposed to finance the Vital Benefits Packages that private insurers will now be required to sell.

The amount of ‘distribution’ made to each private insurer will in turn depend on how many Bahamians and residents they are providing NHI coverage to.

“The reality is that under the proposed model, it seems that private health insurers will be reduced to administrators for the Government insofar as NHI and mandated benefits package are concerned,” Mr Komolafe said.

“Hence, it follows that the NHI distribution referenced will not constitute premiums in the strict sense of the word to which premium tax will normally apply.”

Mr Komolafe then read out Mr Deveaux-Isaacs’ recent written response to the BIA word-for-word, which said: “There will be no premium tax on NHI distribution to the insurers. This will create a considerable reduction in tax burden as a large share of revenues will be tax free. Supplemental policies are likely to maintain the premium tax.”

The BIA chairman added that maintaining the 3 per cent premium tax on supplemental or ‘top up’ insurance would further discourage Bahamians from purchasing such coverage, due to the additional expense.

This, in turn, would act as a disincentive for Bahamians to seek healthcare, and Mr Komolafe said: “The repercussions of the proposed treatment of supplemental or top-up private health insurance policies for tax purposes are apparent.

“Currently, medical services are only exempt from VAT when provided by a public health care facility and provided to a public patient. At the time VAT was introduced, several concerns were raised that this position could negatively impact individuals’ ability to access and afford healthcare.

“The potential for this policy to drive more persons to the public healthcare system was also a subject of much public discourse at the time.”

Health insurance premiums are currently subjected to both the 3 per cent premium tax and 7.5 per cent VAT, with the latter also applied to healthcare and medical services.

Mr Komolafe said: “It is unclear why it is being proposed that healthcare under NHI would selectively and partially benefit from the tax system via the elimination of premium tax, but not VAT.

“However, we are hopeful that their stated position on premium tax will not be reversed and further consideration will be given to the removal of consumption tax on an essential service such as healthcare in totality, and consequently private health insurance premiums, in order to increase access to quality healthcare in the Bahamas.”

Mr Komolafe said the BIA and its members had taken note of the comments by John Rolle, financial secretary, rejecting the removal of VAT on health insurance premiums and private healthcare services on the grounds it was difficult to compensate for the revenue foregone.

“While it is disappointing, and we remain of the view that healthcare should not be penalised by any tax regime, their clarification is appreciated as it ensures that the expectations of stakeholders are properly managed in the aftermath of our meeting with the NHI Secretariat,” the BIA chairman added.