Jul 2010 Financial News

GEASO in limbo

Jul 09, 2010

Sagicor Life Jamaica Limited has got a six-month extension on the administration of the Government Employees' Administrative Services Only (GEASO) health scheme, but there is still no clear sign that the turmoil surrounding the contract has been settled.

Sagicor became administrator of the J$2-billion scheme by default at the close of 2008, having acquired the business of the company that has run the GEASO scheme for years.

Still at last report, up to early 2009, the then Blue Cross of Jamaica was being allowed to continue managing the scheme only until the contract had been retendered.

The scheme meantime is valued at half-a-billion more than a year ago, with the Ministry of Finance budgeting J$2.728 billion as its contribution this fiscal period, up from J$2.2526 billion.

The current extension on the contract, which was confirmed by Sagicor president and chief executive officer Richard Byles, runs from August 2010 to January 2011, sources say.

Sagicor bought Blue Cross' health portfolio in a deal that closed December 2008, leaving Guardian Life Limited as its only likely rival for the contract.

Recipients of new health cards say they usually last a year, but this time the tenure is six months.

The scheme covers some 176,000 individuals and pensioners.

Sagicor's Rupertia Smith, who refuses to give her title, said that there is no contract per se, but that workers have been issued temporary cards until ongoing negotiations with the Government are complete.

Smith refused to comment on whether outstanding payments from the last GEASO year have been cleared, referring the Financial Gleaner to Rachel Solomon at the Ministry of Finance.

Solomon is yet to comment.

Craig Beresford, senior director of monitoring operations at the Office of the Contractor General, also referred the Financial Gleaner back to the Ministry of Finance.

In 2007, the monthly payout by Government to beneficiaries of the GEASO scheme was J$141 million per month.

By 2008/09, the payout amounted to just under J$188 million per month.

Blue Cross earned J$200 million in management fees annually from the Government for the scheme, which it lost when the insurance market and the Office of Contractor General applied pressure for the contract to competitive tender in 2006.

The top-three local health providers went afterthe contract that then required coverage for some 67,000 public-sector employees and another 110,000 of their dependants.

Sagicor triumphed over Blue Cross of Jamaica and Guardian Life Limited, emerging with the winning bid of J$148.93 million in mid-2007.

Blue Cross had a bid of J$216.96 million, but also wanted a 5.0 per cent share of profit; while Guardian's bid was J$309.25 million.

But under pressure from the unions, who were concerned that the Sagicor bid would require GEASO subscribers to pay more out of pocket for health services, the contract was never endorsed by the Cabinet — a prerequirement in the procurement process for award of contracts above J$4 million.

The government opted instead to review the process, over the objections of the contractor general, who argued that the Sagicor bid had been legitimately selected and should be awarded the contract.

Blue Cross remained in control of the business throughout the process.

The Government eventually decided that the contract would be retendered, but there is no indication that it has followed through on the new bidding round.


Source:
Avia Collinder, Business Writer
avia.collinder@gleanerjm.com
Jamaica Gleaner
Friday July 9, 2010

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