PNG Public Service Going Private

Papua New Guinea’s public health service is so dysfunctional, underfunded and corrupt the government has come with a plan that has experts calling foul.

It is proposed that public servants will be forced to pay for private health cover, using a single monopoly provider, i.e. no competition allowed and no consumer choice permitted. That provider will be a foreign owned company only set up in May 2018.

This forced consumption of a monopoly private health insurance service will be paid for from funds drawn down from the public servant’s superannuation, potentially taking K250,000 from each persons retirement nest egg.

According to Ministers, thousands of public servants are missing work every day because of preventable illnesses and many promising leaders of tomorrow are dying from lifestyle diseases.

So the cure to our national health crisis is not root and branch reform. It is private insurance, and Ministers, of course, have a favoured health insurance provider, PNG Health Assurance Company Limited (PNG HAC), to deliver.

Indeed, according to the PNG Nurses Association General Secretary  – in a claim that will be a scar on a dedicated frontline profession – the insurance offered by PNG HAC provides the only way to achieve the governments 2050 vision of a ‘healthy population, healthy nation for productivity’.

But what about all those in the public service who will feel they can’t afford to pay for private health insurance and what is the future for everyone else in PNG who will still rely on the abandoned public health system?

And do the promised benefits of the private scheme really stack up for public servants, especially when it could end up costing them over K7 million every fortnight?

Ardent health advocate, Professor Glen Mola, says he fears the whole scheme could be just a financial scam.

If that proves to be true, it is public servants who will be paying the price from their hard earned salaries.

PNGi has been taking a look at the evidence.

Government plan

Public Service Minister, Elias Kapavore, is a prominent advocate for PNG Health Assurance Company and the benefits he claims its insurance will bring to the public service.

He wants the health insurance scheme to cover the whole public service, around 110,000 employees, and is asking the National Executive Council to make membership compulsory.

Kapavore, along with recently resigned Finance Minister, James Marape, were the headline speakers at the glamorous public launch of PNG HAC’s ‘Public Officers Group Health Care Insurance Scheme’.

Held in the ballroom of the Stanley Hotel, the event included dinner for the invited dignitaries. It was a powerful statement of the political support that PNG HAC has been able to drum up.

According to Kapavore, the insurance scheme is necessary to ensure a healthy workforce. James Marape, meanwhile was encouraging workers to stop buying cigarettes and betel nut and put their money instead into health insurance.

Kapavore, Marape and his wife, Rachel, all publicly signed their membership forms in front of the gathered media.

The costs

Excerpt from a PNG HAC brochure explaining its health insurance scheme

The health insurance scheme being promoted by Minister Kapavore does not come cheap.

For an ordinary public servant, the cost is 4.5% of their fortnightly salary. Want cover for your spouse and two school-aged children? Then the cost is 8%. For a public servant earning a modest salary of K25,000 a year, the cost is K77 a fortnight, or K2,000 every year.

Multiply that by the number of public servants and the cost is a whopping K220 million a year!

No wonder PNG HAC is happy to pay for dinner at the Stanley Hotel to launch its scheme!

PNG HAC has very recently added two new, lower cost, premium options in the latest iteration of its web-based enrolment form, the cheapest at K20 a week. Unfortunately though there are are no details of what benefits will be provided under these low cost premium options.

Who pays?

Expecting a cash-strapped public servant to sacrifice a minimum of 4.5% of their salary, plus another 1.5% to cover a spouse, and further 1% for every school age child is not going to be an easy sell for the government.

But they have a cunning plan. Public servants already have to contribute part of their salary to compulsory superannuation funds. Lets dip into those retirement funds to pay for the insurance!

Understandably the superannuation industry is a little put out by the idea.

Chairman of Nambawan Super, Anthony Smare, says the idea is ‘dangerous’ and points out that the real loss to public servants will be far higher than just the money they pay now, because of the compound interest they will lose.

According to Smare, a public servant who gives up K10 a week from his superannuation contribution could lose K62,000 from his eventual retirement fund. This means a public servant who pays K2,000 a year for private health insurance out of his superannuation contribution, could lose K250,000 from his retirement fund.

No public tender

But wait a minute. The government wants public servants to sacrifice K200 million a year from their salaries and pay the money to a private health insurance company.

There are already a number of private health insurers out there in the market. Has the government conducted any due diligence to establish that PNG Health Assurance Company offers the best value for money?

Has there been a transparent tender process to ensure the best possible cover at the lowest possible price?

Of course not. So why did Elias Kapavore and James Marape decide to back PNG HAC?

Lets take a look at the company and its track record.

The insurer

Who is PNG Health Assurance Company Limited?

A long-term health insurance provider with a concrete track record of business success and financial acumen in Papua New Guinea’s challenging environment?

Well, no.

The company claims on its website its vision is ‘to set the standard of excellence among insurance providers’ but after that it is very light on the details. No ownership details, nothing about the board members or even the senior management.

According to the PNG HAC website, they are all great people, the best of the best, ‘insurance professionals across the globe with extensive and multidisciplinary experience’.

Website screen shot captured on 19 April 2019

But no names are provided.

PNGi though, can shed a little more light on the ownership and history at least.

Company records show that PNG HAC was bought ‘off the shelf’ from law firm Leahy Lewin Lowing Sullivan in May last year.

Yes, that’s right, May 2018 was the first time PNG Health Assurance Company saw the light of day.

Previously known as Helios No.180 Limited, the shelf company was purchased by Singapore based Global Consultancy Insurance Services PNG PTE LTD.

In the 10 months since then though, the share structure has changed significantly, most recently in December 2018 (unfortunately, nobody connected with the company has thought to yet update their ‘foreign enterprise’ registration details which are woefully out-of-date and misleading).

The company is now majority owned by a Czech citizen, Libuse Brixiova (she also owns 37.5% of Global Consultancy Insurance Services).

Brixiova directly owns 74.25% of the issued shares in PNG HAC, plus about another 1% through GCIS.

The other direct shareholders in PNG HAC are a Canadian, Bhavna Thakersee, a Malaysian based in Singapore, Hoong Chu Eng, and Global Consultancy Insurance Services PNG PTE LTD.

None of the shareholders are listed as resident in PNG.

All a bit alarming for a company that expects to be handling K220 million a year from public servants’ wage packets!

The only person with an ownership interest who appears to have any track record in PNG, is Cliff Poh Chee Wan. He owns 37.5% of the shares in the Singapore registered Global Consultancy Insurance Services, which equates to an interest of just under 1% in PNG HAC.

Cliff Poh Chee Wan also owns shares in PNG registered companies including CDL Limited, Fu Gui Village Limited, Prime Prosperous Limited, and Raffles (PNG) Limited.  Through these companies he has strong links to Malaysian businessmen with very senior roles in the logging industry.

The insurance cover

Chairman of Nambawan Super, Anthony Smare, has also pointed up another glaring weakness in the private health insurance proposal.

How will public servants working outside the main urban centres be able to access private medical care when there are so few such facilities outside Port Moresby and Lae?

PNG HAC claims its cover will provide access to a network of clinics and hospitals around PNG and worldwide. Yet in a Media Statement released on 21st March, the company admits it has no publicly available ‘official list of our partner clinics and hospitals’ and has only signed agreements ‘with a number’ of such facilities. It optimistically claims, ‘more are expected to sign agreements in the next few days’. 

But, for the moment, insurance holders are totally in the dark about where to go for treatment!

And how will the few private clinics and hospitals be able to cope with the demand from over 100,000 public servants and their families?

There is also the issue of medivacs. Professor Mola argues there are currently only quality private medical facilities available in Port Moresby and Lae. If patients are too sick or injured to travel to get to those private facilities, will the insurance cover the cost of a medical evacuation?

Prof. Mola says that is unlikely: “if medivacs do take place on a regular basis they will bankrupt any health insurance scheme because of the very high cost of air transfers”.

Minister Kapavore though has been keen to promote the added benefit of overseas medical treatment that the insurance will provide. However, looking at the policy details, those benefits may be illusory.

The costs of overseas travel, hospital stays and medical treatment will be capped. For the public servant in our example, earning K25,000 a year, that cap is K50,000.

Benefits will be severely limited for lower paid public servants

With a night in an Intensive Care Unit costing anything from K10,000 upwards in Australia, and even an ordinary bed in a private hospital K1,500 before any treatment costs are added, that K50k may not go far.

Especially when we add in the costs of actually getting to the overseas hospital!

Just another Ponzi scheme?

Papua New Guinea has seen its fair share of Ponzi or pyramid type schemes over the years – fraudulent financial scams that attract ‘investors’ with the promise of high rates of return but are based on using new investors’ funds to pay the earlier backers.

In the case of PNG HAC, there is no hard evidence that suggests it intends to defraud anyone, but there are a number of key risks. One of which is that the subscription fees collected from members will be used to fund the medical expenses of early claimants while the owners collect large administration and management fees before disappearing into the night. 

Without any further information on the business model, those behind the company, and how it proposes to operate competitively outside of this absurd prospect of forced consumption of a monopoly service, such a risk is a serious one that needs to be investigated.

Even if the scheme is here for the long-term (and with a potential income of K200 million a year, that could make commercial sense) will members be satisfied with the health treatment they are able to access? Or, will the scheme fail because it simply can’t deliver on its promises, particularly for those living and working outside Port Moresby and Lae?

And what about the public health system on which most people will continue to rely?

What now for public health?

Perhaps the greatest concern with the whole PNG HAC scheme is what it signals for Papua New Guinea’s public health system.

Politicians clearly have no faith in the public health system and rather than fixing it they are encouraging the bureaucrats who are meant to be delivering it to go private.

Even the Nurses Association says it has no faith in the public health system and has signed its members up for private health insurance. Given the concerns and information revealed here, Nurses Associations members should be up in arms.

If the politicians, the bureaucrats and the health care professionals are all relying on private health cover, who is going to be striving to deliver quality health care through the public system for the majority of the population?

And where will the motivation come from for government to continue allocating a substantial part of its limited revenues to supporting the public health system?

PNG HAC has its own answer. It says it is donating 5% of its profits to a ‘Healthcare Development Fund’ that will, among other things, ‘develop the health care ecosystem’ and ‘modernise the infrastructure of government hospitals’.

PNG HAC website screenshot taken on 19 April 2019

Unfortunately, the company has not yet declared any profits and Papua New Guinea has a long and bitter history of very wealthy overseas companies who are able to structure their finances to ensure no or only tiny profits are ever declared on their operations in PNG, despite earning hundreds of millions of kina in revenues.