How SZV’s healthcare funds built up a nearly 500 Million deficit

The nearly XCG 500 million deficit attached to the healthcare funds managed by SZV was not created by one loan, one unpaid bill or a sudden financial collapse. It represents more than a decade of accumulated annual shortfalls, with healthcare expenses repeatedly exceeding the premium income collected to pay for them.

The figure recently highlighted by the Committee for Financial Supervision, Cft, is based on the negative reserve balances of three healthcare funds: the Sickness Insurance Fund, known as ZV; the Accident Insurance Fund, OV; and the Government Retirees Fund, FZOG.

According to information provided by SZV from its 2024 annual report, the three funds had a combined negative reserve of XCG 494.2 million as of December 31, 2024. The largest portion belonged to the ZV fund, which had a negative reserve of XCG 356.6 million. The OV fund recorded a deficit of XCG 61.9 million, while the FZOG fund had a negative reserve of XCG 75.7 million.

In simple terms, these funds have spent more on insured healthcare benefits than they have received in premiums over many years. Each year in which spending exceeded income added another layer to the accumulated deficit.

The Cft has described the healthcare system’s financing as unsustainable and has warned that the funds are presently losing approximately XCG 30 million to XCG 35 million annually. Those losses have been covered using reserves from other social funds, primarily the AOV pension fund, placing wider pressure on the social-security system.

Spending grew much faster than income

The clearest explanation can be seen by comparing 2014 with 2024. In 2014, total benefit expenditures across the ZV, OV and FZOG funds amounted to XCG 76.9 million. Premium income totalled XCG 68.8 million. That meant the funds spent approximately XCG 8.1 million more than they collected that year.

By 2024, benefit expenditures had climbed to XCG 148.7 million, while premium income reached XCG 117.1 million. The annual difference had therefore widened to approximately XCG 31.6 million. Over the ten-year period, benefit expenditures increased by XCG 71.8 million, or 93.4%. Premium income increased by XCG 48.3 million, or 70.2%. Although income grew, it did not grow quickly enough to match the rise in healthcare spending.

The imbalance also became more severe. In 2014, the funds spent about XCG 1.12 for every XCG 1 collected in premiums. By 2024, they were spending approximately XCG 1.27 for every XCG 1 collected. Put another way, the annual gap between spending and premium income grew from XCG 8.1 million to XCG 31.6 million. That is an increase of approximately 290% in the size of the yearly shortfall. This is the central reason the accumulated deficit became so large. A fund can survive a single bad year by using reserves. It becomes much more difficult when losses continue year after year and the gap keeps widening.

Most of the deficit is in the sickness fund

The ZV fund accounts for approximately 72% of the combined XCG 494.2 million deficit. The FZOG fund represents about 15%, while the OV fund accounts for roughly 13%. This shows that the problem is not evenly distributed across the three funds. The largest pressure is concentrated in the fund responsible for sickness-insurance coverage. The broader figures, however, show that benefit payments, medical care and other covered costs increased at a substantially faster rate than premium revenue.

Irma and COVID-19 reduced collections

SZV also attributes part of the financial pressure to the economic damage caused by Hurricane Irma in 2017 and the COVID-19 pandemic from 2020 through 2022. Both events disrupted employment and business activity, which reduced the wages and payroll base from which social-insurance premiums are collected. SZV estimates that the cumulative difference between projected collections and actual revenue during these economic shocks exceeded XCG 63.2 million.

This does not account for the full deficit, but it helps explain why the income side fell further behind. Healthcare obligations continued, while the economy and premium collections were weakened for extended periods. The important distinction is that Irma and COVID-19 aggravated an existing structural problem. SZV said it had already identified and communicated impending shortfalls to government as early as 2012.

In 2014, the Cft issued a formal instruction calling for structural reforms. The current deficit therefore cannot be explained solely by recent disasters or the pandemic. The warning signs were present before both events.

The XCG 500 million is not necessarily a single payable debt

The term “debt” can create the impression that SZV owes one creditor almost XCG 500 million and must pay the full amount immediately. That is not the explanation provided by SZV.

The amount represents accumulated negative reserves within the three healthcare funds. A negative reserve shows how far the fund’s historical obligations and expenditures have exceeded its income and available assets. It is nevertheless a serious financial liability. The losses have had to be absorbed elsewhere within the social-insurance system, mainly through reserves belonging to other funds.

The Cft has warned that this approach cannot continue indefinitely. If healthcare deficits continue consuming reserves intended for pensions and other obligations, both healthcare financing and pension affordability could eventually be placed at risk.

Why the problem remains structural

The figures show that the central issue is not simply that healthcare is expensive. The problem is that the present system does not generate enough recurring income to cover recurring costs. In 2024 alone, the three funds collected XCG 117.1 million but paid XCG 148.7 million in benefits. Even without considering administrative expenses or other obligations, that left a benefit-level shortfall of XCG 31.6 million.

When similar deficits occur annually, reforms must either produce more income, slow expenditure growth, broaden participation in the insurance system or combine all three approaches. The Cft has repeatedly called for the implementation of General Health Insurance, with government working toward a target date of January 1, 2027. Additional measures under discussion have included better premium and tax collection, tax reform and a tourist levy.

General Health Insurance is expected to broaden the contribution base by bringing more residents into one system. Whether it will fully close the gap will depend on the final premium structure, benefits package, collection rate and control of healthcare costs.

A deficit built over years will not disappear quickly

The figures supplied by SZV make clear that the nearly XCG 500 million deficit was accumulated gradually. It was built through repeated yearly losses, growing healthcare expenditures, insufficient premium growth and major economic shocks that reduced collections. The deficit continued expanding because the underlying imbalance between income and spending was never fully corrected.

The healthcare funds do not merely need a one-time injection of money. Without structural reform, any new funding could temporarily cover past losses while new deficits continue accumulating. The immediate challenge is therefore twofold: government must decide how to address the accumulated negative reserves, while also changing the system so that future healthcare expenses are more closely matched by reliable income.

The possible consequences

If the structural deficits in St. Maarten’s healthcare funds are not addressed, the consequences will extend far beyond the balance sheets of SZV. A system that repeatedly spends more than it collects will eventually struggle to pay healthcare providers, reimburse pharmacies, cover treatment abroad and meet its obligations to insured residents. Hospitals and other medical institutions could face growing cash-flow pressure, while patients may experience longer waiting times, reduced access to specialist care and fewer treatment options.

The danger is that the strain would not remain confined to healthcare. Employers and workers depend on a functioning social insurance system, and government would likely be forced to step in with emergency funding if the reserves are exhausted. That could mean higher premiums, increased taxes, reduced benefits or cuts elsewhere in the national budget. Money needed for education, justice, infrastructure and other essential services could instead be diverted to prevent the healthcare system from failing.

A serious breakdown in healthcare would also weaken the country’s economy and social stability. Businesses cannot function effectively when workers cannot access timely care, families cannot absorb large medical costs and public confidence in essential institutions begins to disappear. St. Maarten’s healthcare system may not collapse overnight, but continued inaction could produce a slow deterioration that eventually becomes a national crisis. Protecting the system is therefore not only a health priority. It is necessary to protect the functioning of the country itself.

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