The points made and the concerns raised by Government MP Derrick Burgess when he suggested Government regulate insurance companies to stop the rise in health premium costs are shared by many Bermudians, Argus chief executive officer and president of the Health Insurance Association in Bermuda Gerald Simons told Rotarians yesterday.

However the fact remains that Government regulating a company like BELCO is a very different prospect from Government regulating the insurance companies, he continued. “BELCO is a monopoly,” he told Rotarians at the Tuscany restaurant. “They have no competition.”

That means BELCO's rates are regulated by the Minister of Finance to prevent them taking advantage of that situation, he said. In addition, when regulating these rates the Minister must also take into account the need of BELCO's shareholders to receive a decent return on their investments - a return he believed was set at around 12 or 15 percent. However “Insurance companies are in a very competitive market,” Mr. Simons said. “And any company that attempts to gouge the public - would quickly lose their market share.”

Like BELCO, shareholders in insurance companies in Bermuda (with combined investments of around $150 million) are entitled to returns on their investments, he said.

And with costs rising everywhere in the health care industry premiums must be expected to rise as well: “It is worth noting that for every dollar of insurance premium paid well over 85 cents is used to cover the cost of claims. Thus as claims rise so do insurance premiums.”

Mr. Simons listed eight reasons driving the cost of premiums upward. They included: an increased population of those over 65 years old and therefore in greater need of health care; medical technology becoming more effective, advanced and costly than ever; the introduction of new products and drugs in the healthcare market; the increased expectations of consumers who are becoming more knowledgeable about healthcare thanks to increased health consciousness and more accessible information;

Other reasons include: competition in the insurance business; new providers in Bermuda (the more providers there are, the more claims will increase); increased claims for overseas care; and increasing reinsurance costs as health insurance claims deteriorate world-wide.

One of the results of these rising costs is that to cover an elderly person for the same benefits they enjoyed during their working life would mean the cost of their health insurance would have to increase six-fold, taking into account the fact that an employer would no longer be paying 50 percent of the cost as with most employees during their working lives.

As this is not possible, especially considering that most retirees live on a lower income than while they were working, Bermuda must find another way. “In theory it's easy, in practice difficult,” admitted Mr. Simons.

However he outlined three steps the community should take. He said first we must define the level of benefits for elderly persons - hospital, medical, surgical, anesthesia and overseas benefits - if deemed necessary. Secondly, we need to determine the total amount needed to provide these benefits, and thirdly, we need to identify a way of spreading those costs over the entire community.

Despite rising costs of health care and other challenges facing the insurance industry, Mr. Simons said he was “very proud” to be at the forefront of such an industry in Bermuda.

Noting that, for example, thanks to health insurance in Bermuda anyone needing open heart surgery - from a maid working in a hotel to the CEO of a million-dollar company - would be flown out of Bermuda to a leading hospital such as Johns Hopkins in Baltimore for that surgery, Mr. Simons said: “There are very few countries in the world where that situation pertains.”