INSURERS DISMISS VAT ACT ‘MISINTERPRETATION’

BAHAMIAN health insurers yesterday said “no one wants to pay an additional 36 percent on their medical insurance” from April 1, 2023, when consumers will have to bear the full VAT burden on claims payments.

Julian Rolle, BAF Financial’s managing director, argued that the increased financial burden this change in VAT treatment will impose on ordinary Bahamians has yet to be properly digested or understood.

Speaking at a press conference staged by the Bahamas Insurance Association, he said: “If you are hypertensive and you have $100 per month for your medication. If you have private health care now. for the most part, you’re going to pay a $20 co-pay for that.

If you pay $20 co-pay and $2 VAT (at 10 percent), that’s $22 you pay for your medication.”

However, with the VAT treatment of health insurance claims payments set to change with effect from April 1, insurers will no longer be able to recover the 10 percent levy applied to their $80 portion in this example. As a result, the patient or end-consumer will now be responsible for paying an extra $8. This will raise their share of the payment to a total $30, representing a 36 percent increase compared to the present $22 bill.

“That number will move to $30, and while that doesn’t sound like a big number, that extra $8 a month, that’s a problem, especially if you have more than one set of medication, especially if you have more than one family member that’s paying this additional cost,” he added.

“So while we understand all of the big numbers that are being thrown about, we have a significant amount of medical claims that appeared in the country last year. The medical claims in the country would, give or take, have been $200m and that was what was paid by the insurers.

“So, yes, there’s a huge VAT number to add on to that. But just the difference on what each individual pays.... I don’t think anyone wants a 36 percent increase on anything that they buy monthly. That’s just not what they want, and that is what this change is fostering.

PM: ‘Happy medium’ was goal on health claims VAT

FROM PAGE A23 it had “received over $20m illegally” through this mechanism.

The ministry, and the Department of Inland Revenue’s, position is that VAT is payable on medical insurance claims payouts because these are being made on behalf of the end-user - the consuming patient - and thus should attract the tax. Health insurers are currently claiming this as ‘input’ VAT, offsetting it against their ‘output’ tax on premiums and effectively allowing the likes of Colina, Family Guardian and CG Atlantic to claim it back from the Government.

However, insurers arguing that the Ministry of Finance is wrong to treat the payment of clients’ medical expenses and the care received from providers as two separate services. Its case is that since health insurance and medical services are both VAT-able, health insurance claims should continue to be tax-deductible for health underwriters, otherwise the Government would be knowingly applying two layers of VAT. One insurance source, though, speaking on condition of anonymity, said: “The Department of Inland Revenue has changed its interpretation of what the law is. It hasn’t changed the law. What they’re saying is the insurance companies are not the beneficiaries of the service and, as such, the insurance companies are not to claim back the VAT related to any payout. If the insurers are not the ones receiving the service, then the one doing so has to pay the VAT.”