The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Family Guardian’s president fears the “worrisome and distressing” National Health Insurance (NHI) uncertainty will threaten a business that accounts for 60 per cent of his top-line.

Lyrone Burrows told Tribune Business that it was currently impossible for the BISX-listed insurer to restructure its health policy benefit packages, and adjust premium pricing, because there remain too many ‘unknowns’ with NHI.

This, in turn, is making it difficult for Family Guardian to budget and predict its 2016 financial performance with any certainty, as much depends on how the Christie administration proceeds with the NHI “roll out”.

“It’s a bit of a worrisome position that we’re in right now,” Mr Burrows told Tribune Business. “We have to play the hand we’ve been dealt.

“We’re still trying to get clarification on timelines for completion, and what aspects of health services the Government intends to nationalise. Until that time, it’s difficult to quantify the impact on our health portfolio.”

Mr Burrows said he was “comfortable” in predicting that Family Guardian, and its BISX-listed parent, would achieve a 2015 performance that was “pretty much in line” with the $6.365 million profit generated last year.

He added, though, that 2016 was much more difficult to forecast. “On the health side, a lot depends on how the NHI roll-out occurs,” Mr Burrows told Tribune Business.

“Health represents 60 per cent of our revenue, so any time that is affected it has a trickle down effect throughout [the company].

“Until we know that amount, we can’t adjust the health product in line with what’s going into the medical package [benefits], and make any adjustments as it relates to administrative costs, staffing and overheads.”

“It’s a bit distressing from our point of view,” the Family Guardian president continued. “Until the Government determines what these initial benefits will be, there is nothing we can do as an industry to respond on pricing and a cull of benefits that will not be part of the product line.”

Mr Burrows said the uncertainty was not just confined to the life and health insurance industry. He emphasised that it would affect all companies, and self-employed Bahamians, who were due to either renew an existing health insurance plan or considering investing in one.

“We have current clients and prospective clients wanting, and needing, the information,” Mr Burrows said. “It’s not only impacting us; a lot of companies and individuals that have health plans or prospective health plans don’t know what to budget for next year. You don’t even know how to budget for it. It’s a bit of a challenge.”

NHI’s planned introduction also threatens the investments and returns for numerous Bahamian institutional and retail investors who own shares in BISX’s two listed life and health insurers.

A Tribune Business examination of the recent annual financials for Colina Holdings (Bahamas) and FamGuard (Bahamas), the listed parents for Colina and Family Guardian respectively, reveals the extent to which their continued profitability hinges on the Government’s NHI scheme.

In Colina’s case, its health insurance business generated an astounding 92.7 per cent of its net income for 2014 - $13.1 million out of a total $14.126 million.

The pattern was repeated, to a slightly lesser extent, in the two preceding years. Colina’s health business accounted for 71.3 per cent of its total net income in 2013, or $10.4 million out of $14.594 million, a drop from its 83.1 per cent in 2012 - $10.2 million out of $12.271 million.

In Family Guardian’s case, health insurance has produced two-thirds of its top-line revenues for the last two financial years.

In 2014, $58.585 million worth of health insurance premium revenues were equivalent to 67.4 per cent of the insurer’s $86.91 million top-line, up slightly from 66.7 per cent in 2013.

As for the bottom line, the $7.040 million in profits generated by Family Guardian’s health insurance business for 2014 exceeded its total net income for that year.

And in 2013, health insurance accounted for 62.3 per cent of Family Guardian’s net income - $3.537 million out of $5.676 million.

This suggests that NHI, as envisaged by the Government and its consultants, Sanigest Internacional, will have a dramatic negative effect on the Bahamian private insurance industry.

And the impact on its Bahamian shareholders is potentially another unintended consequence of the Government’s move, depending on how wide-ranging NHI is when finally implemented.

Mr Burrows, meanwhile, said the industry - through the Bahamas Insurance Association - was still “engaged” with the Government over the scheme, and continuing to meet with the newly-appointed NHI permanent secretary, Peter Deveaux-Isaacs.

He added that the sector was “fairly close” to providing the PricewaterhouseCoopers (PwC) accounting firm with the data necessary to undertake its second NHI-related study.

Mr Burrows said the insurance industry was “fine tuning” its numbers, and was seeking to release them so PwC could proceed at “an accelerated pace” and complete its work prior to NHI’s first phase launch.

With the NHI implementation date now just one month away, the Christie administration has yet to tell the Bahamian people how much the scheme will cost and the benefits/health services to be covered.

Many observers have expressed amazement that the Government is racing to launch the scheme with these and other vital questions unanswered - not least when, who, and how much Bahamians may have to pay in taxes to finance NHI.

The Christie administration has pledged that no new taxes are necessary to finance NHI’s initial phases. It is hoping to enroll 85 per cent of Bahamians and legal residents in the scheme between the launch date and April next year.

The next steps involve allowing NHI participants to select their primary healthcare provider, with the provision of catastrophic coverage rolled out alongside this.

It is then that the so-called Vital Benefits Package (VBP), or the basic level of NHI coverage, will be introduced.

The second PwC study will compare Sanigest’s cost estimates for NHI with those produced by the BIA.

Its first report hardly provided a glowing assessment of Sanigest’s work, suggesting that there was a potential $110.5-$134.3 million ‘funding gap’ between the Vital Benefits Package’s $362.6 million ‘price tag’ and the available public funds to finance it.

PwC recommended that the Vital Benefits Package either be cut down to size, or new taxes and increased spending be allocated to finance the initial NHI phase.

Differences over how much NHI will initially cost exploded into the open earlier this year, after the BIA used the Ministry of Health’s own example of Aruba to estimate a $947.3 million price tag - a figure squarely in the range of its initial estimates.

This produced a sharp riposte from Sanigest president, James Cercone, who accused the BIA of “comparing apples with oranges” because it had based its estimates on Aruba’s Expanded Benefits Package - not the smaller, less costly Vital Benefits Package that NHI will initially employ.

The Government expects to finance the Vital Benefits Package from existing tax revenues in its Consolidated Fund and the ‘re-purposing’ of existing spending.

Mr Cercone previously told Tribune Business that the $400 million would come from the $260 million allocated to the Public Hospitals Authority (PHA) in the 2015-2016 Budget; the $30-$40 million received by the Department of Public Health; and the $60-$70 million currently spent by the Government on insurance premiums for civil servants and public sector workers.