A special reserve fund could help to balance the risk in one of two “transformational” health insurance options being considered by the Government.
The reserve would allow funds to flow between insurers with relatively healthy policyholders, who take little out of the system, and those whose members put greater demand on services.
In the other option, a single body would manage standard package payments for everyone in Bermuda and only supplementary benefits would be covered by private companies.
Kim Wilson, the health minister, outlined the schemes after a Throne Speech pledge to develop a national plan that will put all island residents into either one of two health insurance pools.
She told The Royal Gazette that a change was needed to balance the provision of a good standard of healthcare at a reasonable cost.
Ms Wilson said: “One is we need to reduce premiums. Two is we need to ensure that everyone in Bermuda has affordable insurance coverage. Three we need to improve basic coverage to help promote health; and then, finally, of equal importance, is to contain costs.
“At this point we spend over $700 million a year on healthcare. Obviously, that’s not sustainable.
“In order to draw that in, we need to find a better way in which we are collecting the money and how that money is spent with respect to the provision of healthcare; that’s where health-financing reform comes in.”
Better use of resources was one of 14 goals listed in the Bermuda Health Strategy 2014-2019, which also included regulation of clinical care standards and the encouragement of healthy lifestyles.
Ms Wilson explained that thousands of health insurance pools are operated in Bermuda.
She said the smallest groups would feel the effects of major demands made by their policyholders, for example in the case of a catastrophic injury or illness, more than if they were in larger groups.
Ms Wilson added: “We’re looking at pooling all 65,000 people; all of the population will be pooled in either one of two pools so that we’re spreading the risk.”
She added: “We would also be looking at introducing a benefits package that would include things like hospitalisation, medication, long-term care, preventive care ... that particular benefits package would be costed out and we do believe it would be more economical than what is the current position.”
The minister added that a bipartisan committee carried out “extensive work” in 2012 and came up with two financing options.
One was the unified model, where a single insurer provides the standard health benefit, a basic package expected to include medication as well as long-term and preventive care, and distributed payments to providers.
This is a similar approach to Canada’s and would mean private insurers offered supplemental benefits.
Ms Wilson said there were three options to manage the basic package payments — a private insurer, quango or, maybe the “least desirable”, a government department.
She explained: “If the decision was to go with a private insurer there would have to be a request for proposals and a very comprehensive procurement and competition to decide who was going to get such a large package, because we would be talking about hundreds of millions of dollars.”
The second proposal is a dual model, which would include a large public insurer covering standard benefits and ensuring provision for government-led schemes such as the Health Insurance Plan and FutureCare.
Private insurers could also sell the standard health benefit as well as their supplementary coverage.
Several European countries, including Switzerland, manage healthcare financing under similar schemes.
Ms Wilson added: “The difference here between this and what happens now is that currently insurers have to include standard health benefit in any package by law but they don’t actually have to insure anyone, so they can deny you for pre-existing conditions, they can deny you if you’re over 75, which they all do universally, so they have flexibility on what risk they take on. So if you’re bad risk, they don’t accept you.
“In the dual model, that wouldn’t be allowed, you would have to take whoever came to you at any time, in whatever state they’re in.”
Ms Wilson said a “very significant” aspect of the dual system would be the inclusion of a “risk equaliser” that acts like a funds reserve or cash pot.
She explained: “If any insurer ends up with a very healthy pool and they ended up making money off SHB — if they paid less in claims than the premium they collected — then they would have to give some money back to the risk equaliser, so that the other insurer that wound up with very sick people — spending more than they collected — then they would have to get the money back from the risk equaliser.”
A consultation group that included employers, unions, insurers and medical representatives recently reviewed the 2012 recommendations and submitted responses.
Ms Wilson started to look over the submissions last week and said she planned to make recommendations to Cabinet this month so that ministers can decide which of the two options should be chosen.
She added more work and further public consultation will follow, with town hall-style information meetings possibly “in the first quarter” of next year.
Ms Wilson said a new system could not come soon enough.
But she added that the effects of a change would be seen by 2020.
Ms Wilson said: “This is a huge process and a huge shift from how we’ve been doing it heretofore, so I have to learn to be patient.
“This is truly transformational.”