The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Health insurers have yet to meet the Prime Minister over VAT reforms that threaten to increase medical bills and healthcare costs, with the Government yesterday accused of “adding insult to injury” for thousands of Bahamians.

Kwasi Thompson, the Opposition’s finance spokesman, responded to exclusive Tribune Business revelations on the Davis administration’s plans to change the VAT treatment on private medical insurance claims payouts by warning that it will “mean extreme hardship for Bahamian families at a time when they can least afford it” with soaring inflation widespread.

The east Grand Bahama MP, in a statement, also questioned why the Prime Minister had not addressed the issue in any of his three Budget debate contributions despite it being a tax-related change that the Government wishes to implement with effect from next Friday, July 1. As a result, he accused the Government of trying to “sneak” in a change that could impact over 100,000 Bahamians.

The Bahamas Insurance Association (BIA), in a June 15 letter to Philip Davis QC, had sought a meeting to resolve health insurers’ concerns over changes that will prevent them obtaining VAT deductions on claims payouts when the new 2022-2023 fiscal year starts. They fear this will result in increased premiums for both groups and individuals with private health insurance, increasing medical treatment costs and making coverage increasingly unaffordable.

Bahamian health insurance executives yesterday could not be reached for comment on the status of talks with the Government, and how they were progressing. However, Tribune Business sources said the meeting with Mr Davis, who is presently away in Rwanda at the Commonwealth Heads of Government conference, has yet to take place. It is understood the sector may issue a formal statement to the media on the VAT issue today.

One contact, speaking on condition of anonymity, said there was concern among health insurers that the Government’s plan could lead to “double taxation” on elements of their reinsurance treaties. “It’s ongoing,” they added of talks with the Government. “I know they’ve been back and forth. What they’re arguing is it’s tantamount to double taxation on certain revenue streams.”

Michael Halkitis, minister of economic affairs, did not respond to Tribune Business messages seeking comment while Simon Wilson, the Ministry of Finance’s financial secretary, could not be reached. However, Sandy Morley, the BIA vice-chairman, previously said consumers will “bear the brunt” of the new VAT ruling on input tax deductions for healthcare insurers.

Mr Thompson yesterday said the potential fall-out created “grave concern” given that Bahamian businesses and consumers are already grappling with widespread inflation, and the Government’s action threatens further price increases in another sector.

“This would have the effect of adding costs to Bahamian consumers already burdened with skyrocketing medical costs,” he added. “The insurance industry has indicated that come July 1 they will not be able to claim their VAT payments made in settling the medical claims of their customers. This revised ruling by the Ministry of Finance will mean that insurance companies will reportedly have to pass these costs on to the consumer.

“With some medical bills and procedures running into the hundreds of thousands of dollars, this will mean extreme hardship for Bahamian families when they can least afford it.” The Ministry of Finance and Department of Inland Revenue (DIR) are understood to have taken the position that medical bill payments are made on behalf of the end-user, or insured consumer, and as such should be treated as a VAT-able activity rather than deducted by insurers from the taxes they collect on the health insurance policy’s premium.

But Mr Thompson, noting that neither the Prime Minister nor any of his ministers referred to the health insurance VAT reforms in the Budget debate, added: “At no time did he [Mr Davis] advise the public of the massive new costs that will be put upon the public. It is shameful that the Government would try to sneak this on the Bahamian people.

“We call on the Prime Minister to meet with the stakeholders with a view to immediately reverse this heartless policy position. The Government has already put VAT back on medicine. It is adding insult to injury to add costs to medical bills by virtue of a shift in this VAT policy.”

At present, the health insurance industry can deduct, or offset, the VAT portion of patient care bills submitted to it by doctors, hospitals and other medical facilities against what it pays to the Government from the 10 percent levy imposed on client premiums.

However, the BIA’s Mr Morley said the Ministry of Finance and Department of Inland Revenue - with effect from July 1, 2022 - want to change this treatment such that health insurers are no longer able to deduct/offset the VAT charged on their clients’ medical bills against the taxes collected on the premium.

With the industry no longer able to treat medical bill VAT as an ‘input’ deduction, the BIA vice-chair warned that consumers will “ultimately” pay the price through having to absorb the levy on their patient care expenses - something that will effectively increase health treatment costs by 10 percent at a time when Bahamians are grappling with soaring inflation and the continuing fall-out from the ongoing COVID-pandemic.

Given that some medical costs can be substantial, reaching into the hundreds of thousands and even millions of dollars, the potential revenue boost for the Government could well be significant. Yet, if implemented, the increased cost could be just as impactful for both individuals and employees who presently enjoy private health insurance under their company’s group policy, potentially making quality healthcare less affordable and accessible when COVID-19 remains a threat.

Should the revised VAT treatment become law, Mr Morley said previously that insurers would likely be forced to alter their pricing while providers of medical care would need to adjust their services.