Lee paints grim picture of financial state of some funds under SZV management | THE DAILY HERALD

Health Minister Emil Lee with members of his delegation in parliament on Friday.

~ Major funds operating at a loss ~   

PHILIPSBURG–Health Minister Emil Lee painted a grim picture of how some of the funds managed by Social and Health Insurances SZV are doing financially, during an urgent meeting of the Central Committee of Parliament on Friday.

Two of the funds managed by the insurance service provider are operating at huge losses. According to the information provided to MPs, while the AOV/AWW (old age, widows and orphans pension), AVBZ (long term care insurance) and Cessantia (severance pay insurance in the event of bankruptcy) are financially healthy, the two largest funds – FZOG (retired civil servants’ health insurance) and ZV/OV (sickness and accident insurance) – are operating at huge losses. There are 67,000 workers under the ZV fund.

The ZV/OV funds had a negative reserve balance of -27.8 million guilders in 2012, -37.5 million in 2013, -23.1 million in 2014, -39.6 in 2015, -69.8 million in 2016 and -108 million in 2017. In 2018, the negative reserve for the sickness and accident insurance fund is expected to increase to -148 million.

Lee said there were no significant changes in expense pattern for the ZV/OV fund after the 2017 hurricanes. In 2009, 60 plus seniors (which is now seniors aged 62+ since the pension age has increased) had been added to the ZV medical insurance and the number of seniors in the fund is growing at a high pace.

The FZOG fund, on the other hand, had a reserve deficit of -3.3 million in 2012, -5.1 million in 2013, -5.6 million in 2014, -9 million in 2015, -11.1 million in 2016 and -16.9 million in 2017. In 2018 the deficit in the FZOG fund is expected to climb to -19.3 million. Lee said there were no significant changes in expense patterns for this fund after Irma. He suggested that the FZOG premiums be increased to cover the higher medical expenses, and spreading the risk by reforming health care insurance.

The Cessantia fund was operating in the green with 13.7 million in reserves in 2017, up from the 11.9 million in reserves in the fund in 2016. No claims had been paid out from the Cessantia fund since 2015 and no claims were made after the 2017 hurricanes.

The AVBZ fund was also in the black with 90.2 million in reserves in 2017, up from the 77.8 million in reserves in the fund the year earlier. There were no significant changes for the fund after the 2017 hurricanes.

The AOV/AWW fund had 508.1 million in reserves in 2017, down from the 452.9 million in 2016. Lee said no increase in expenses for this fund are expected for the next two years because of the increase in the pension age from 60 to 62.

All of the funds under SZV’s management raked in a total of 208.3 million guilders in premiums in 2016, while in 2017 the premiums received dropped by 1.2 per cent to 205.9

million guilders. The medical expenses of all the funds last year stood at 122 million guilders, up from the 108 million guilders spent in 2016.

SZV’s total current assets as of 2017 stood at 346.8 million, including its financial assets 252.2 million, trades and receivables 40 million, cash and equivalents 54.6 million. Its total liabilities stand at 54.3 million, making the current ratio 6.39.

Lee stressed that SZV as an organisation is able to meet its short-term and long-term liabilities without problems. However, the individual (medical) funds that have negative reserves are not able to meet their short-term liabilities and their commitments in the long run.

Alluding to Government Accounts Bureau SOAB’s comments on the structural issues affecting the funds, Lee said a number of structural legal and administrative problems remain in the different funds.

The number of “former employees” under ZV seems very high.

SZV lacks access to tax and census data to check eligibility.

Medical referrals abroad are not properly regulated in ZV law and FZOG (retired civil servants) get 100 per cent medical cost reimbursed, while it should be 90 per cent for medical and 75 per cent for lodging, according to the law. A legal minimum for ZV and OV fund reserves is not in place.

Lee said the SOAB acknowledged that introduction of a General Health Insurance would repair most of the structural problems observed in the funds.


Government debt to SZV

Government is responsible for the cost of civil servants’ health care (PP-card holders and premiums for former employees). After St. Maarten obtained its new constitutional status in 2010, Lee said government did not always make the payments owed to SZV, creating arrears.

Based on an instruction from the Kingdom Council of Ministers in 2015, St. Maarten, SZV and Government made a plan to settle the debts to SZV. The new Government Administration Building was used to settle part of the debt. SZV invested in and completed the building and today collects rent from government, which Lee says is a win-win for government and SZV.

He said challenges in government revenues in 2016 and 2017 resulted in new accumulated debt from government to SZV. “Government is now actively working with SZV on a solution,” he told MPs.


Moving forward

Lee said the health care funds are structurally unbalanced, which is the result of attempts to cover more vulnerable, high risk groups without the necessary funding. He said that while short term measures can stop the bleeding, the underlying trend will continue. In the long run, only fundamental reform will help.

Short term measures to address the issues being faced by some of the funds include cost reduction focus and adding new specialisations at St. Maarten Medical Center (SMMC) such as ophthalmology, urology and orthopaedics, which will mean that more patients will seek treatment in St. Maarten and fewer will be going abroad.

Other measures are pharmaceutical cost control, which will take effect in 2019, the development of an automated system between SZV and health care providers (pharmacies, doctors, hospital), efficient billing, control against abuse and making fewer mistakes.

Other short-term plans include the registration of medical professionals, prevention/education, increased compliance in paying premiums and the reduction of SZV overhead cost.

Source: The Daily Herald https://www.thedailyherald.sx/islands/82538-major-funds-operating-at-a-loss