The Tribune

• ‘Resolution’ meeting planned this week

• Gov’t to consult wider healthcare sector

• Suggestion tax ‘status quo’ could remain

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government “may not” implement the new VAT treatment for medical insurance claims payouts by its April 1 target, it was revealed yesterday, with the decision hinging on a meeting with healthcare stakeholders later this week.

Simon Wilson, the Ministry of Finance’s financial secretary, told Tribune Business the Government is hoping to “have a resolution” after it meets with multiple industry groups over a proposed change many fear will increase medicine and treatment costs for patients while reducing access to, and the affordability of, private medical care.

Confirming that the Davis administration is seeking to meet with doctors, dentists and pharmacists, and not just health insurers and their representatives, he confirmed that the event is presently being scheduled for Thursday.

Asked by this newspaper whether the new VAT treatment’s implementation will be delayed beyond April 1, Mr Wilson replied: “It may be, but we’ll see after this meeting. We will have a discussion with a wider group. It will include medical persons, people from the business community, and hopefully we will have a resolution.”

The Bahamas Insurance Association (BIA), the industry trade body, has repeatedly warned that the proposed VAT treatment revision will harm patients who will now be responsible for paying the full tax on 100 percent of their medical care costs. Ar present, the change would mean that, from April 1, insurers will no longer be able to recover the VAT payable on the claims payout be treating it as an ‘input’ and netting it off against the 10 percent consumers pay on the premium.

This week’s meeting comes after several Tribune Business sources, speaking on condition of anonymity, revealed that medical providers were last week informed at a meeting with Michael Halkitis, minister of economic affairs, that the VAT “status quo” will remain come April 1 and the changed tax treatment will not be implemented on that date.

“Several of them met with Mr Halkitis regarding the implementation of the new VAT policy for health insurance companies,” one contact said. “They told the minister that it was not possible to be done and would have to be retracted immediately, and could not be implemented.

“And, if it was implemented, there would be serious consequences at all levels - with the patients, with the physicians and the health of the community... It would have a huge impact on patients, the cost of care and medicines, and the relationship between the insured, insurer and medical provider.”

The source was joined by another contact, also speaking on condition of anonymity, who said those who met with Mr Halkitis were informed that “it’s going to be status quo; nothing is going to change come April 1”. That, though, remains to be confirmed as there has been no official government announcement.

Doctors, medical providers, pharmacists, dentists, physiotherapists and all practitioners who accept private medical insurance will be key to implementing the revised VAT treatment. They will now have to adjust their computer and other systems to collect the tax paid on insurance claims payments, and then remit this to the Public Treasury, as insurers will no longer be able to recover this portion of the VAT.

Dr Cindy Dorsett, the Medical Association of The Bahamas (MAB) president, confirmed that she and the organisation’s representatives have been invited to this week’s meeting. She added that it will be the first time that doctors and medical providers have been formally engaged in talks over the revised VAT treatment given that discussions to-date had largely centred on insurers and the Government.

“They have sent me a note today [yesterday] asking me to attend a meeting this week. It will be the first time we’ve actually been engaged by the Government to tell us what their plans are,” Dr Dorsett said. “That’s late, but it’s important. All along they’ve been going on their merry way. This now is an opportunity. We will wait and listen intently to what they have to say.

“All of us will be in the room; the BIA, MAB and government officials. This will be the first time we will be engaged and privy to information from both sides. It’s late, but it’s a step in the right direction. They can have a plan, but we need to know what those plans look like to provide the service. That’s why consultation needs to start with the physicians, pharmacists, dentists and physiotherapists - all of us. We need to be able to sit at the table and have the input.”

Explaining that the MAB does not have a formal position on the VAT treatment change until it has “a better grasp” of the Government’s intentions and resulting healthcare implications, Dr Dorsett added: “We only have information from the BIA. We don’t know anything from the Government. It’s difficult to read when you only have half the story.

“We’ve heard nothing from the Government, nothing at all. This will be the first opportunity where we’re going to be engaged. We will get to her the actual layout, the story from both the BIA and the Government.”

Julian Rolle, BAF Financial’s managing director, told Tribune Business that he, too, has been invited to this week’s meeting and was waiting to see if it will be confirmed. While unaware that the Government may at least push back the April 1 implementation date, he revealed that the Prime Minister had requested a further meeting on the issue during the pre mid-year Budget roundtable that he attended with other business figures.

“The Prime Minister said that during the briefing with the business group that Monday morning a couple of weeks ago,” Mr Rolle said of the Government’s desire for a further meeting on the changed VAT treatment. “It was one of the very last issues raised at the very end of the meeting.” But, while the April 1 deadline may no longer be met, it does not necessarily mean the Government is abandoning the VAT treatment change.

Presently, persons with private medical insurance only pay VAT on the co-pay or deductible, which is typically 20 percent of the care or medication costs. However, the Ministry of Finance and Department of Inland Revenue are altering the VAT treatment of health insurance claims payouts such that insurers will no longer be able to recover the 10 percent levy by claiming it as an ‘input’, thus enabling them to net it off against the VAT consumers pay on their premiums

In practice, patients - as the end-consumer - will now also become responsible for paying VAT on the 80 percent share of medical costs paid by insurers such as Colina, Family Guardian and CG Atlantic. The latter will almost certainly pass this sum on to consumers, with the end result being that the proportion of medical costs borne by patients will now increase.

The Ministry of Finance is arguing that it is “clearly against the VAT Act” for insurers to claim back the 10 percent levy on medical claims payouts by netting it off against the VAT paid on the premium - a practice allegedly costing the Public Treasury millions of dollars. Its position is that VAT is payable on medical insurance claims payouts because these are being made on behalf of the end-user - the consuming patient - and thus should attract the tax.

Using the example of a patient purchasing $100 worth of medicines, where private insurance covers 80 percent of the cost and the individual is responsible for the $20 co-pay/deductible balance, only the latter presently attracts 10 percent VAT. This costs the patient some $2 in taxes and results in their total bill coming to $22.

But, from April 1, with insurers unable to recover the VAT payable on their $80 share, the client will now be responsible for paying the additional $8 in tax as well. This will take the sum due from the patient from $22 to $30, an $8 or more than 36 percent increase. Given that medications have to be refilled regularly, this represents a recurring and increased financial burden at a time when Bahamians are already struggling to make ends meet due to the cost of living crisis.

The Insurance Commission of The Bahamas’ annual report for 2021, containing the last set of available data, shows that almost $206m worth of health claims were paid by Bahamian insurers that year. That was split into $175.202m on behalf of group clients, usually businesses providing coverage for their employees, and $30.716m for individual policyholders.