By NEIL HARTNELL
Tribune Business Editor
Employers may have to fill a $70m funding gap if the “worst case scenario” for National Health Insurance (NHI) becomes reality, the Chamber of Commerce’s top executive revealed yesterday.
Jeffrey Beckles told Tribune Business that the private sector’s “biggest fear” remains that it will be used as a financial lifeline, or bail-out option of last resort, if the NHI Authority gets its sums wrong and the scheme requires more financing than initially thought.
While NHI Authority executives last week pegged the total cost at around $130m when the scheme “matures”, Mr Beckles revealed that the Chamber had been told this figure could soar to at least $200m at the top end.
Should that occur, he argued that the government/NHI Authority were almost guaranteed to turn to the private sector for extra funding given that increasing the burden on individual employees was unlikely to play well in a general election.
The chamber chief executive said concerns over ever-increasing taxation, in a sluggish economy that has already had to absorb VAT increases and other rate rises in recent years, were beginning to impact business confidence and undermine potential job-creating investments.
While praising the NHI Authority for making “some key adjustments” to its initial proposal, Mr Beckles told this newspaper: “Nevertheless, there are still some fears from the private sector.
“The additional burden of the cost is still a huge, huge issue. The private sector is going to be bearing quite a bit more of an expense burden once this programme is rolled out.”
Graham Whitmarsh, the NHI Authority’s managing director, last week said the Minnis administration’s initial proposal had been priced at $106m. This was split where 50 percent, some $53m, would have been generated by employer contributions; another $33m was to come from the employee “payroll tax”; and the $20m balance from government.
While the revised proposal was set to increase the Government’s contribution slightly to $22m, Mr Whitmarsh said the overall burden on employers and employees would decrease. He added that NHI’s total cost was estimated to eventually grow to around $130m, a similar price tag to that suggested by the former Christie administration.
“We estimate that our programme, it’ll grow overtime. It won’t actually have a cost but the kind of mature programme that we’re looking at here with the amended policy, we think it’s around $130m, but we’ll refine that as we go forward,” the NHI Authority chief said.
However, Mr Beckles revealed: “It’s wise to promote the $130m low side. We asked them what the worse case scenario was, and they said: $200m. That is a big gap. By default, the only people who can reasonably make this up is the employer, as they will not go back to the employee.
“The biggest fear right now is another tax, another tax. How much more can we take? The fear of that is growing. By default, if there is any shortfall, they are coming to me as an employer.”
Mr Beckles even suggested that between $200m-$300m “has to come from the private sector” to meet NHI’s financing needs. “If you look at our business environment, even on the low end $200m is still a bit much to exact from employers,” he added. “That came from their comments It will probably cost another $200m-$300m in total from the employer to manage the system.
“It’s not as if many companies are bragging about double digit revenue increases over the past few years; they’re trying to stay afloat. It’s a little rough. We’ll see where we go. The greatest concern is whether the private sector is going to be used as a funding gap. Who is going to fill that gap?”
With medical costs increasing every year globally, and the Government having previously admitted that $100m of its annual healthcare budget is lost to waste and mismanagement, the private sector has long-feared that NHI - the chosen method for financing universal health coverage (UHC) in The Bahamas - will become an ever-growing financial drain they must finance.
While the NHI Authority has long argued that Bahamian worker productivity will improve through the better healthcare access provided under the scheme, Mr Beckles said employers cannot “hang their hats” on this offsetting the increased taxation burden.
Pointing out that there was no data to support the case for improved productivity, he added: “If their argument is you’re going to get a better performing employee, that’s nice to say but it’s never been proven in the Bahamian workforce.
“While we believe generally that a healthier workforce will end up being more productive, there’s no data to say that as an employer you can hand your hat on there being a net gain. There is nothing to promise that.”
The reforms unveiled by the NHI Authority last week aimed to make the tax/contribution structure more progressive, with higher-earning workers funding as much as 100 percent of their monthly premiums for the $1,000 per year Standard Health Benefit (SHB) - NHI’s minimum level of care - depending on which income bracket they fall.
Only senior management and other executives earning more than $66,667 per year will have to finance their premiums solely from their own salary, as the NHI Authority seeks to link contributions to ability to pay. However, all Bahamians and legal residents earning $35,000 per annum and upwards will now have to pay more to NHI than under the first proposal.
The changes, which shift the tax/contribution burden from low income workers and small businesses to higher salaried employees and larger companies, result from a removal of the $500 “cap” on annual worker payments together with a reduction in the contribution rate from 2 percent of wages to 1.5 percent.
The initial NHI contribution structure would have seen workers earning $25,000 and up paying 50 percent of their monthly premium - a figure of $41.67 per month, which would have been matched by their employer.
The revised structure, which will be presented to Cabinet for its approval, tears that plan up. Employees earning $35,000 annually will now have to pay $43.75, or 52.5 percent, of their monthly SHB premium with the employer contributing the minority balance.
Workers earning $45,000, $55,000 and $65,000 annually will have to pay 67.5 percent, 82.5 percent and 97.5 percent of their NHI health insurance costs, respectively. In contrast, employers will have to pay 92.5 percent of the premium cost for workers earning less than $5,000 per annum.
Employer contributions will also increase for workers earning $10,000, $15,000, $20,000 and $25,000 per annum when set against the initially proposed fee schedule. For these income categories, companies will be contributing between 85 percent and 62.5 percent of the premium cost.
The NHI Authority’s reforms will increase labour costs associated with lower and middle income workers, which may discourage firms from hiring them and/or result in lay-offs and reduced work weeks at businesses struggling to survive.
Mr Beckles said companies were especially concerned that employees earning $66,667 and over will “feel like they are being penalised because are going to pay an inordinate number, 100 percent” of their premium”. However, such high-earners were likely to use NHI the least, whereas the biggest ‘consumers’ would probably be lower and middle income workers.
The Chamber chief executive also warned that middle class Bahamians, especially those earning between $35,000 to $65,000 annually, were now being required to pay more - and finance the majority of their NHI premium - despite being the segment most affected by the economy’s stagnation and recent tax rises.
“You’re making them take more of the burden, and that group is the hardest hit with all the taxes in recent years,” Mr Beckles told Tribune Business. “There’s been a concern over the last 10, 15, 20 years about the obliteration of the middle class.
“That goes right to them. If we’re going to preserve and strengthen the middle class, we have to be reminded there is a real risk of putting any more burden on those middle class employees right now.”
Mr Beckles said most Chamber members understood the importance of health insurance and universal coverage, and knew The Bahamas had to “start somewhere”. Yet many felt a better, more “holistic” solution that addresses health concerns from all angles can be developed, and are hoping that talks with the NHI Authority and government can continue.