The Tribune

A 3 per cent payroll tax will not be sufficient to cover the proposed National Health Insurance (NHI) scheme’s total costs, the private sector yesterday warning that sticking to a January 2016 implementation will create a “challenging sprint to the finish”.

Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, told Tribune Business that the Government needed to explain where the “balance” of NHI funding would come from if it went with a payroll tax.

And he warned that the Bahamian business community needed to be “absolutely comfortable” with NHI and how it will work before the scheme is implemented.

Speaking after Dr Glen Beneby, the chief medical officer, gave an extremely vague Monday presentation on how NHI will be financed and structured, Mr Sumner said there “too many unknowns” for the private sector to provide proper assessments and feedback to the Government.

Emphasising that it was “still too early to tell” whether the Government would opt for a payroll tax as its main NHI financing mechanism, Mr Sumner said questions also remained over the rate and who would pay it - employer or employee, or a combination of both.

“The other question is if we’re potentially raising taxes from payroll, what is going to account for the balance of monies required to finance NHI,” the BCCEC chief executive said, adding that a payroll tax by itself would not be enough to cover the projected costs.

The Government’s Costa Rican consultants, Sanigest Internacional, recommended a payroll tax of between 1-5 per cent as the key NHI financing mechanism in their report to the Christie administration last year.

Sanigest also gave the Government three NHI options, ranging in price from $362 million to $505 million and $633 million, depending on the breadth of the benefits package to be offered.

These figures were challenged by the Bahamas Insurance Association (BIA), which said that based on claims and membership data submitted by five of its health insurer members, the figures provided by Sanigest were likely a gross underestimate of NHI’s ultimate cost, and the burden it will impose on working Bahamians and their employers.

It pegged the total cost of the most comprehensive package at nearer $1 billion, saying: “The health industry believes that Sanigest’s NHI cost estimates may be as much as a third below the actual cost - a significant difference of some $300 million.

“Based on our analysis of insurance industry data and administrative costs for the National Insurance Board (NIB) in 2011 and 2012, we have estimated that the Government’s proposal will cost between $895 million and $965 million to implement, with the higher number being the cost to cover the entire population,” the BIA said.

Mr Sumner, meanwhile, yesterday reiterated that Bahamian employers and workers would be concerned about “having to come up with any extra funding” from their own pockets should the Government forge ahead with an NHI payroll tax.

This was especially so given the recent introduction of Value-Added Tax (VAT), the BCCEC chief added, and its impact on consumer disposable income and business sales.

The 3 per cent ‘maximum’ payroll tax suggested by Dr Beneby is less than that called for by the initial NHI proposal, which was developed under the 202-2007 Christie administration and suggested the scheme be funded by a 5.9 per cent increase in National Insurance Board (NIB) contributions - split 50/50 between employer and employee.

That would have financed a scheme priced at $235 million, yet the Government appears to be suggesting a lower rate payroll tax for an NHI plan that will cost between $362 million to $633 million - sums 50 per cent to almost three times’ as much.

Hence Mr Sumner’s concern over what will need to accompany a payroll tax in financing NHI. He yesterday pointed out that the economic environment faced by the first Christie administration was completely different to today’s, as unemployment was relatively low and the 2008-2009 recession had yet to hit.

“We know in the past that a payroll tax was identified as one of the most viable options,” Mr Sumner told Tribune Business.

“Things were different back then, the economy was different, an we were not having to deal with VAT and the shift in taxation structure.”

He added that he would be “interested in finding out” NIB’s position on the new NHI plan, given that it was being driven by the Ministry of Health, and seemed to be focusing on healthcare as opposed to its financing.

And, with Sanigest having recommended that the Government assess increased tobacco/alcohol and cruise passenger taxes to finance NHI, Mr Sumner said the private sector urgently needed answers from the Government on what the chosen funding structure will look like.

Without these, he warned it would be impossible for the BCCEC and private sector to provide accurate, informed feedback to the Government on NHI’s likely economic impact.

Mr Sumner said another key issue was whether the Government’s January 2016 target for NHI implementation was realistic.

“We have to determine if this timeline is reasonable,” he told Tribune Business. “The Government has missed some of its key deadlines to implement this, and to go to a sprint to the finish is going to be a challenge.

“Obviously, to launch in January is certainly going to be a challenge for this economy.”

And Mr Sumner added: “Nothing is set in stone, nothing is definitive. Right now, there are still too many unknowns and too many variables.

“The private sector has to be absolutely comfortable with this before we move to implement.”