19% Increase in Health Insurance Premiums for Government Workers

Some background to the GEHI increase

In the BPSU document released last night – reviewed in my post yesterday – was that among the reasons why the BPSU (and presumably the BTUC as a whole) are opposed to the continuation of furloughs was:

“Health insurance rates are to increase by 19% in April 2015”

This itself isn’t really ‘new’ news, and was public knowledge as far back as August 2014.

Indeed, the BPSU provided a review of just this issue in a position paper they publicly released at that time.

Now, the position paper doesn’t go too in-depth into the issue, as the matter of health insurance was just one section of the paper, itself being an overview of ‘initiatives affecting the public service employees’.

All the same, I don’t know how well read this position paper, and its section on health insurance.

My intention here isn’t to add anything to that position paper – all I’m going to do here is give a review of the key points from it, for the sake of ensuring more people are aware of the situation.

I fully recommend reading the entire paper and the section in question for a fuller read.

GEHI Overview

The sections begins with an overview of GEHI:

  • Government Employees (Health Insurance) Act came into force in 1986.
  • Created to ensure all Government employees (and others) were adequately covered by:
    • Maintaining accurate employee records.
    • Processing all claims in a timely manner.
    • Provide premium health care at reasonable rates.
  • The dental plan (outsourced to BFM) offers two levels of coverage:
    • The Basic Dental Plan covers preventative services (routine examinations, x-rays, fillings, root canals, cleaning, etc).
    • The Comprehensive Dental Plan includes all the above benefits as well as major restorative services (inlays, crowns, bridges and dentures).
    • The employer provides the minimum coverage of the Basic Dental Plan.
    • Staff opting for the Comprehensive Dental Plan pay 100% of the premium for the additional coverage.
  • There are 7,043 primary policy holders and 3,459 dependents.
  • GEHI paid out $6.6m for the cost of prescription drugs in 2013.
  • The general cost of overseas medical care was $18.6m in 2013.
  • Local doctors claims = $6.8m.
  • Outpatient claims = $10.7m.
  • Hospital claims = $7.3m.
  • KEMH Emergency Room claims = $2.1m.
  • KEMH professional charges = $2.7m.
  • Imaging claims = $2.7m.
  • Lab charges = $3.1m.
  • Total losses in 2012 were $37m, and there was a projected loss of $38m for 2013/2014.

Current Rates

The section then provides a break down of current GEHI rates, which I present here as a snapshot from the document.

From the BPSU August 2014 position paper.

From the BPSU August 2014 position paper.

Actuarial Review

It notes that the actuary, Mr Howard Cimring, of Morneau Shepell:

  • Recommended a GEHI premium of $370.73 (per month) for 2014/2015, before the claims fluctuation reserve (CFR).
  • Additionally, recommended a provision for the CFR of 3% (or $11.12 per month).
  • As such, this equals a GEHI premium, per month, for 2014/2015 of $381.85.
  • This represented an overall increase of $105 – or 38%.

The actuarial report in question can be read here (opens as a pdf).  With any luck I’ll be able to provide a review of that going forward.

BPSU’s Response

  • The 38% premium increase should be phased in over a 2 or 3 year period.
  • The potential of rewarding members for ‘proper wellness’ by reducing the premium, or some other incentive plan, be looked into.
  • GEHI should verify the numbers of dependents listed under GEHI that are gainfully employed, and, if proven to be, remove them from the plan per the Act.
  • Promote stronger usage of generic drugs (to reduce the overall cost to GEHI).
  • Prior to any moves towards outsourcing the plan to the private sector, former recommendations to reinsure the scheme to offset claims – the union’s view was to have all of the insurance plans (HIP, GEHI and FutureCare) under the reinsurance policy.
  • Promote wellness campaigns within the workplace.

Additional

That’s pretty much what the BPSU position paper from August 2014.

There’s more things I’d personally like to look at to expand on this issue, however the purpose of this post was just to highlight some of the background to the 19% health insurance premium increase.

It seems evident that the unions were able to convince the Government to phase in the 38% increase over two years, but weren’t able to push for the three-year phase (which would have presumably seen a 12.66% increase each year for three years).

 

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