Virgin Islands residents could soon have to up their National Health Insurance contributions by more than 25 percent if their payments are to fund the programme’s deficit, which is projected to reach $34.1 million by 2022 under the current system, according to human resources consulting company Morneau Shepell.
The Canadian firm conducted a review of the NHI Division of the BVI Social Security Board across a two-year period from Jan. 1, 2016 to Dec. 31, 2017.
The resulting report is dated August 2018, but it wasn’t made public until it was tabled in a July 31 House of Assembly sitting this year.
The document details several risks that could put the sustainability of the NHIP in jeopardy, including an aging demographic, funding shortfalls, and climate-related disasters.
But the report also outlines several measures the VI could take to strengthen the programme, like improving reporting and analytics; clarifying policies and more strictly adhering to existing ones; and raising contribution rates.
While enrollment in the programme has risen overall, the report expressed concern that the growth has been predominantly attributed to the elderly, whose insurance claims are the costliest of any age group.
In 2017 the ratio of insured people between the ages of 20 and 64 to insured people age 65 and over was eight to one, but that ratio is expected to decline to five to one by 2022. All insurance systems, the report explained, rely on the payments of young people, who have the lowest cost per capita.
If there is not a replacement and growth of younger workers, the aging of the population could increase the costs per capita, the consultants explained.
The report also highlighted how a small percentage of high-cost claimants make up a significant portion of expenditures.
During the 2016-2017 period, about 200 individuals constituted a quarter of all expenditures, while the top 10 claimants constituted 10 percent of all expenditures.
Two individuals had already exceeded $750,000 in expenditures by the end of 2017, approaching the general lifetime limit of $1 million.
“In the near future,” the review stated, “consideration may have to be given as to how very high-cost claimants will continue to be insured and maintain their treatment plans.”
The NHI programme relies on the government to fund the BVI Health Services Authority expenditure, and the report stated that the success of the programme depends on the government’s ability to sustain this funding.
It went on to suggest that the programme acquire utilisation data from the BVIHSA to assess its effectiveness as a major provider.
Currently, the BVIHSA does not record the details of patient encounters, making it impossible to evaluate the how many patients are coming through and which services are being provided, the consultants found.
The review added that the BVIHSA should “compete effectively with the private sector” or provide clinical services that the private sector does not offer so that it attracts enough volume to justify the government’s expenditure on NHIP.
Because the NHIP is a relatively small insurance programme, it faces a high risk of significant fluctuations in spending on claims from year to year, the consultants explained.
These risks include an aging demographic, a downturn in the economy, an increase in chronic non-communicable diseases, and extreme weather events as a result of climate change.
Having comfortable reserve funds can help a programme support payments during such times of volatility, the report noted.
As of Dec. 31 2017, the NHIP had a reserve of $2.6 million, which is $14.1 million less than “the reserve level of 2.5 months of estimated expenditure” that Morneau Shepell recommended during the NHIP’s inception.
For this reason, the report recommends the development of a funding policy to clarify the quantity of a required reserve, and whether it will come from contributions or from government funding.
While it considered an increase in the contribution rate to be “prudent,” the report also suggested that the programme first review its expenditures and reimbursements.
Across 2016 and 2017, the NHIP spent $153.9 million and received $151.3 million, resulting in a deficit of $2.6 million.
The review also noted that the NHIP spent less between September and December of 2017 because of Hurricane Irma and the resulting inability to deliver local services.
But if not for the storm, the report noted, the 2017 expenditure could have been 15 percent higher, bringing the 2017 deficit to $6 million.
The report estimated that the programme’s accumulated deficit would reach $34.1 million over 2018 to 2022.
If the NHIP’s deficit is to be entirely funded by contributions and not by government funding, the individual contribution rate would have to increase effective from 2018, from 7.5 percent to 8.7 percent, said the review.
Alternatively, the rate could be raised by 0.4 percent each year for five years so that it reaches 9.5 percent by 2022.
Morneau Shepell also put forth several suggestions for how the programme can reduce its expenditures.
For example, claims data shows hundreds of instances in which the programme has reimbursed claimants for amounts beyond the annual maximums for benefits like vision and dental, the consultant found.
The current annual maximum is $500 for vision benefits and $1,500 for dental. But the review discovered about 200 instances of reimbursements exceeding the vision benefit and 400 instances of reimbursements exceeding the dental benefit.
In other cases, the review shows that under the billing code patients receive higher reimbursement rates the longer the duration of their consultations with a physician.
This system led to an increase in 25- and 40-minute consultations and a decline in 15-minute consultations, the consultants found.
In light of the findings, the report suggests that the NHIP adhere to maximum reimbursement levels; improve the recording of contributory data to “efficiently assess eligibility;” and review its billing practices, reimbursement models and plan designs to ensure it is spending an appropriate amount.
The programme should also develop a risk management policy, the report adds.
By identifying risks and establishing approaches to manage them, the division would also be prompted to regularly report analytics, which would improve its financial forecasting and contribute to the sustainability of the programme, according to the consultants.