Health insurance climbs - Costs driven up by falling dollar, inflation

Published: Sunday | July 12, 2009

Avia Collinder, Business Reporter

Jamaica's biggest insurance companies, citing inflation, a weak dollar, and the rising cost of medical inputs, are charging more for health coverage, saying it is impractical for them to absorb all of the added cost of care.

The result is that companies are facing higher premiums for renewing group medical plans, and they, in turn, are asking their employees to pay more, at a time when the largest insurance company, Sagicor Life Jamaica, says usage of health insurance is trending down.

Sagicor Life Jamaica says premium increases have varied between 5.0 per cent and 20 per cent, depending on the contract terms negotiated by individual companies.

Input costs

"One hundred per cent of any increase seen at the start of new contract periods is to be attributed to increases in input costs," said executive vice-president and head of the employee benefits division, Errol McKenzie.

"We could not absorb any of that. It would be like not pricing a house at the full cost of building it."

A Kingston-based operation that buys coverage from Sagicor - speaking on condition of anonymity - said its premiums rose by about 11 per cent, from $6,500 to $7,200 per employee on a family plan, and from $2,900 to $3,200 for those on an individual plan.

The employee portion of the premiums was raised to about $1,000 and $2,000 respectively.

Medecus, the health scheme operated by Guardian Life, was not pre-pared to say directly that it was also charging clients more, with one senior under-writing staffer saying only it was "a possibility" in-side periods of high inflation and other considerations.

But one of its clients, GraceKennedy Limited, told Sunday Business that the company's premiums have gone up under Medecus.

"We did get an increase, and based on the information we have, all companies did," said human resource manager Karlene Burgess.

"The increase was based not only on the general inflation figure, but also on medical inflation and the depreciation of the dollar."

Inflation a year ago was running at an anualised 26 per cent, but is now back down to under 10 per cent.

A phone poll by Sunday Business among employees in government service and private companies about what they contribute to their group medical schemes, ranged in responses from $784 for government workers, up to $3,000 in companies, per month; and $1,818 to $8,000 monthly on family plans.

The ratio of contributions varied between 10 per cent and 30 per cent, with employers paying 70 per cent to 90 per cent, but there were also some cases where companies pay for individual plans alone, while the employee pays 100 per cent for family benefits.

In the public sector, employee contributions varied between 25 per cent and 33 per cent, amounting to $196 of the $784 premium, and $454.20 on the $1,818 plan.

Sagicor, which has laid claim to about 80 per cent of the health market with its December 2007 acquisition of the Blue Cross portfolio, has on its roll some 250,000 employees and their dependents, which amounts to another 200,000 persons.

Insurance costs tend to rise the more claims that are filed. Utilisation is reviewed annually, and premiums adjusted as appropriate.

But McKenzie said the health premium increases negotiated this year were not based on consumption of benefits, but rather, the cost of health delivery.

No real increase

Indeed, he said Sagicor had seen no real increase in usage in the past year, and that in some cases, utilisation of the benefits seemed to have fallen because of the effect of the recession and consumers spending less.

"Companies get what they pay for, with human resources departments negotiating for a package, which works both for employees and the company itself," said the Sagicor executive.

"For those who perceive the benefits declining, it is reflected in what their employers ask for."

Also affecting coverage is the increased usage of new technology and new therapies, as well as the cost of a doctor's visit.

"There is a lot of new technology available now in Jamaica in health care, and this is driving cost. There are a number of new diagnostic procedures which we are happy are here now, and also new methodologies of treatment, especially the private sector. Those things are very desirable, but they also drive costs up."