THE NIS NEEDS REFORM

Nov 17, 2012 Features / Columnists, Peeping Tom

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Many years ago, I had a discussion in her apartment. She was an immigrant from Guyana and in front of her obviously embarrassed husband, made it known in no under certain manner that she wanted nothing to do with Guyana.
Apparently, she had suffered a personal misfortune which to today she still blames on the public health system in Guyana. So hurt she was by that experience that despite many years as an illegal immigrant in the United States she made it clear that she wanted nothing to do with Guyana, with any institution in Guyana, nor did she ever want to go back to her homeland.
A few years ago we met again at a religious function and when the conversation switched to Guyana, she was keen to find out how she could claim some benefits from the National Insurance Scheme, benefits she said she had earned and was entitled to.
She is not alone in having an interest in Guyana only because of the National Insurance Scheme. The pensions now being paid by the NIS are healthy and many overseas-based Guyanese, some of whom who left here a very long time ago, are keen to receive these benefits.
NIS benefits are now a hot topic in the Diaspora and many of those who like to bad mouth Guyana are keen to cash in on whatever benefits their contributions entitle them to. Years ago these benefits were so small that very few bothered. Today the NIS is helping to buy the groceries for many a retired Guyanese in New York.
The NIS is not going to fail. It is too big to fail; it is too important to fail and the government now has the resources- unlike in the past- to bail out the NIS should it encounter any difficulties.
It is not likely to, however, encounter any difficulties bordering on a collapse. It is normal for regular actuarial reviews to be done. These reviews are usually premised on certain assumptions based on the growth of the economy, the labour force participation rate, the participation rate within the NIS and the contribution rate.
Most actuarial reviews signal that the NIS is in a crisis and often it is said that unless there is reform, the scheme could collapse. A previous review had indicated that the fund would have run into problems in 2011 unless there were reforms. There were no serious reforms, except for adjustments of rates and insurable ceilings and the NIS is still on its feet.
It has not been wobbled by the fact that it lost a major investment in CLICO. It will recover that investment through the government of Guyana.
There have been a lot of criticisms and hype over the NIS over the years. Once when it made a loan to a private sector entity a big furor was made that the Scheme would collapse. But for years the scheme has had very little profitable sources of both short and long term investments and yet it did not collapse.
This however does not portend that all is right with the scheme. There are many problems with the National Insurance Scheme and reforms are needed so as to ensure that benefits which overseas Guyanese now find so attractive can be sustained and improved.
For one, the scheme needs to examine its policy of paying for spectacles and dental work. These benefits rebound primarily to the dentists and opticians in the country and should be re-examined since dental care can be had free at public institutions. The public health system is capable of providing cheap spectacles for those in need. These benefits serve the professional class and in some instances payments are made in advance.
Secondly, the participation rate and contribution rate are too low. Too many persons are not paying NIS and this is resulting in pressures to increase contributions. Eventually the NIS will have to increase contributions but before this is done they need to ensure that in compliance with the law all employees including domestics and farmhands are registered with the Scheme and their employers remit contributions.
Too many workers are not paying NIS and this has to be laid at the feet of the employers. Instead of the NIS using the heavy rod of correction, it should try moral suasion by encouraging workers to have their bosses deduct their contributions from their wages and remit these to the NIS.
Thirdly, employment costs are too high. Most insurance companies today have managed through computerization to drastically slash employment costs. The NIS however still employs a great many persons and with increased computerization, including networking employers with the NIS, it can drastically reduce its employment costs which are far too high.
To achieve reforms that would improve the financial health of the NIS, overcome the pace of computerization and reduce operational expenses, the government should do what many Latin American countries have done. They should privatize the NIS.
While the NIS is too big to fail, it has proven too big for the government to effectively administer.

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