Without effective regulation of medical-services providers and moves to cover the sizeable minority who have no health insurance, healthcare costs are likely to keep spiralling.

That is the view of executives at BF&M Ltd, a major health insurer on the island. They said the failure to address the drivers of high costs, combined with the ageing population and a shrinking working-age population paying into the system amounted to a “ticking time bomb”.

John Wight, the insurer’s chief executive officer, and Michelle Jackson, senior vice-president, group lines, health and life, said in an interview the Bermuda Government’s proposals to reform healthcare financing was “the wrong starting point” for the changes needed.

Government’s plans to increase cross-subsidisation of costs from the healthy to the sick amounted to effectively shifting costs around, they said.

Mr Wight said that change was needed “to address the high cost of healthcare, rather than who pays for healthcare”.

He urged employers to be more outspoken about the financing reform plan.

“We need to have more employers weigh in on what this initiative means to them,” Mr Wight said. “They are going to be the ones bearing the cost of it. There is a better direction for Bermuda to take and that’s to address the drivers of increasing healthcare costs.”

Ms Jackson said one such driver was the growing number of uninsured people. “More than 8 per cent of the population is not employed and without healthcare coverage,” Ms Jackson said. “They are not getting regular medical treatment and some are turning up at the emergency room with long-term care issues.”

The use of the hospital as a primary source of care by the uninsured was hugely expensive for the system as a whole, she added, and drove up premiums.

“We have to address the situation that more and more people are finding themselves in,” Ms Jackson said. “Many people are hurting and something has to change.”

More long-term care solutions were badly needed, particularly with Bermuda’s demographic pressures, she added.

Government population projections estimate that 10.8 per cent of the population will be over 75 by 2026, when one in four will be over 65.

Meanwhile, Ms Jackson said the island had lost about 6,500 people since 2010, many of them healthy, working people aged between 25 and 55, who were paying more into the system than they were taking out, thus helping to subsidise older people who used more health services.

“We have not got the long-term care services we need,” Ms Jackson said. “We have not planned for the number of people who will need these services.”

Mr Wight said it had been 48 years since the healthcare system had seen serious reform with the Bermuda Hospitals Board Act 1970 and the Health Insurance Act of the same year. The system was overdue for change, he said.

“We insurers are regulated and the medical-services providers should be regulated as well,” Mr Wight said. “Without regulation, it’s difficult to see how we are going to be able to contain costs.”

The Fiscal Responsibility Panel report, released this month, backs up Mr Wight’s view.

It states: “The private medical care sector in Bermuda is largely unregulated, raising concerns about both the cost and quality of the care provided, of diagnostic testing and of pharmaceutical products.

“Further efforts are needed to strengthen the regulation of private sector providers (including their use of health technology) as a means to reduce duplication that adversely impacts healthcare costs and exposes patients to unnecessary risk.”

The economic experts who penned the report said “an appropriate regulatory infrastructure with enforcement resources remains a necessary element of any strategy for cost containment in Bermuda’s healthcare sector”.

The report also warns: “The island’s costly healthcare system risks overwhelming the budget and the whole economy as the population becomes increasingly elderly and frailer, with more and more requiring long-term care.”

The panel goes on to recommend:

• Subsidies being redirected to help those unable to pay for health insurance.

• The basic healthcare package should be extended to encourage preventive care and disease management to limit the need for expensive hospital care.

• Price controls to reduce treatment costs that are excessive when compared to costs elsewhere.

The report added that the Ministry of Health’s recent adjustment of the Bermuda Hospitals Board fees for different services based on an international standard was “an important first step in the direction of cost control”.

Chronic diseases, often a result of lifestyle choices, are a huge drain on the system.

On the plus side, Mr Wight said that many of his company’s clients had introduced wellness programmes and were seeing premiums and sick days fall as a result.

Ms Jackson added that awareness was growing. “It’s not terribly complicated, what we need to do, and there’s some really good work being done by different organisations to get the word out,” she said.

The government consultation on health financing reform, which included representatives of insurers, the medical profession, employers and unions, found support for deeper reforms.

According to brief minutes of a stakeholder consultation group meeting on October 17, published on the government website, those present noted that “quality, outcomes and costs to consumers were not directly addressed in a change in financing structure”.

At another meeting on October 31, there was support for means-tested subsidy reform, expansion to a prevention-based system shifting away from fee-for-service, a focus on providing universal coverage and provisions for chronic disease management.

The minutes continued: “There is definitely an urgency for change but also a desire that that changes are completed strategically and in the most effective order.”

Healthcare cost inflation in Bermuda is estimated at around 6.5 per cent annually, roughly five percentage points higher than overall inflation, as measured by the Consumer Price Index.

So what will health insurance premiums look like in five years’ time if there is no reform of the system?

“We’ve had some actuarial studies done and all I can say is that it doesn’t look pretty,” Ms Jackson said.