October 30, 2019 / 10:18 AM / a month ago

Indonesia hikes state health insurer's premiums to plug deficit

JAKARTA (Reuters) - Indonesia’s state health insurer will raise regular customers’ premiums starting 2020 to patch up deficits and the government will chip in to cover this year’s $2.3 billion estimated cash shortfall, according to a government statement on Wednesday.

The burden of supporting the state-owned agency providing some of the biggest health system in the world has become a growing fiscal risk for Southeast Asia’s largest economy.

BPJS Kesehatan, which provides universal health coverage for over 200 million people, has been facing cash problems not long after its inception in 2014, regularly booking claims far exceeding premiums it collects. The premiums are regulated by the government.

BPJS is set to record a 32 trillion rupiah ($2.28 billion) cash deficit at the end of the year without government help and this may grow more than two-fold to 77 trillion by 2024, company executives have warned.

Starting next year, the government will raise premiums for the cheapest insurance package by 65% to 42,000 rupiah a month and two other packages by more than 100% to 110,000 rupiah and 160,000 rupiah per month, according to a statement by the Cabinet Secretariat.

There will be additional funds given to the insurer by the state this year, as the regulation calls for a retroactive increase from August of state-covered premiums for 133 million poor and vulnerable people by 83% to 42,000 rupiah a month.

Askolani, director general of budgeting at the finance ministry, said the government was still calculating how much it would have to transfer to BPJS based on the new rules.

BPJS chief executive Fachmi Idris did not respond to a request for comment.

The finance ministry had originally planned for an increase for the cheapest package to start in September, but after receiving backlash from trade unions, President Joko Widodo ordered for this to be reviewed.

Muhammad Nafan Aji, a Binaartha Sekuritas analyst, said the premium increase can be a positive catalyst for listed companies in healthcare and pharmaceutical, such as hospital operator Mitra Keluarga Karyasehat and Kalbe Farma.

“Billing payments to BPJS will be more flexible, easier,” Aji said, adding that better financial position would allow the insurer to pay hospitals on time, ensuring payments to pharmaceutical companies as well.

Last year, the government ordered an audit into BPJS after it injected 10.1 trillion rupiah to help the insurer manage its cashflow. State auditors have given BPJS executives some recommendations to improve governance to get the company out of the red.

Reporting by Tabita Diela; Additional reporting by Maikel Jefriando; Writing by Gayatri Suroyo; Editing by Muralikumar Anantharaman

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