News Highlights

Answer

1.     MediShield Life is a basic health insurance scheme that provides Singaporeans with universal and lifelong protection against large healthcare bills. The keywords here are universal and lifelong. It has strengthened our larger healthcare financing framework to keep healthcare affordable, together with Government subsidies, MediSave and MediFund. About 8 in 10 patients today need to pay $100 or less in cash for their subsidised hospitalisation bills. 

2.     To ensure that the scheme remains sustainable and relevant to Singaporeans, the MediShield Life Council has recently proposed enhancements to benefits and adjustments to premiums.

Premium Increases
3.     Ms Foo Mee Har and Mr Liang Eng Hwa asked about the reasons for the premium increases, while Mr Gerald Giam asked about the assumptions behind the premium pricing. While premiums have been kept unchanged for the first five years of MediShield Life, in line with our earlier public commitment, they need to be adjusted to ensure that the MediShield Life Fund remains solvent and sustainable so that it can meet its obligations to all policyholders.  Premiums are priced by actuaries based on established actuarial principles, taking into account claims experience such as utilisation rates and cost of medical treatment, scheme benefits, among other factors. 

4.     There are three key drivers of the premium increases, which I will elaborate.

5.     Since its launch, MediShield Life has been providing more payouts and greater protection for more Singaporeans. The number of claimants has increased by about 30% and the annual payouts have increased by about 40% over the last four years.  Mr Xie Yao Quan asked about the growth in hospital charges over the last 20 years. Between 2001 and 2019, the average hospitalisation bill size in public healthcare institutions have increased by about 6% a year on average, and this is affected by medical cost inflation, demographics and medical advancements over the years. This growth in utilisation and payout accounts for about two-third of the premium increases. 

6.     One-quarter of the premium increases is from refreshing the claim limits to ensure that Singaporeans continue to be adequately covered for the majority of subsidised bills.  The remaining portion of the premium increases, which is just about under 10%, supports the benefit enhancements including those implemented since 2018, such as the extension of coverage to inpatient hospices and serious pregnancy complications. 

7.     As premiums are priced taking into account multiple factors, which inevitably vary from country to country.  It would not be appropriate to compare MediShield Life’s premium increases with other national health insurance schemes, which Mr Leong Mun Wai suggested. 

8.     It would also not be meaningful to compute how much premiums a Singaporean will need to pay over his lifetime simply by assuming a fixed compounding factor each year.  Future premiums would depend on how the underlying drivers evolve, and this depends on many factors including what we can achieve together to manage healthcare costs.  The amount of premium subsidies an individual would receive will also vary over his lifetime, depending on his financial circumstances.

Premium Affordability
9.     Several members including Ms Ng Ling Ling and Mr Yip Hon Weng asked about the support for those who face difficulties with their premiums. I would like to assure members that MediShield Life provides coverage for all Singaporeans, for life. Several financial support schemes are available to ensure that no Singaporean will lose their MediShield Life coverage, or be denied access to appropriate care, just because of an inability to pay their premiums. 

10.    To ensure premiums remain affordable, the Government provides premium subsidies of up to 50% for lower and middle-income households. All Merdeka Generation seniors receive additional subsidies of up to 10% on top of these premium subsidies, and all Pioneers receive special subsidies of up to 60%. Taken together, about 35% of the total premiums collected, were paid for by the Government through various subsidies and support schemes in 2019. For the elderly aged 65 and above, the contribution from the Government is higher, at about 50% of their premiums.

11.     To illustrate this, the revised premium for a 62-year-old lower-income Merdeka Generation (MG) senior is $1,020 before subsidies. This is the annual premium, which equates to less than $90 a month. After taking into account the premium subsidies and additional MG subsidies, the net premium payable is $663, or about $55 a month.  Additionally, the MG senior will receive annual MediSave top-up of $200 for MGs from 2019 to 2023 which can be used to pay for his premiums. After this additional $200 offset, the effective premium payable for this MG senior will be $463, or less than $40 a month. 

12.     Premiums can be fully paid using MediSave, and the vast majority of Singaporeans have sufficient MediSave for their premiums. Family members can also utilise their MediSave to help pay the premiums for their loved ones. Singaporeans who continue to face difficulties even after subsidies and have limited family support can apply for Additional Premium Support. This includes those who are mid-way through medical treatment or have experienced a recent job loss or a reduction in income, as pointed out by Ms Ng and Mr Yip, certainly a concern that many Singaporeans have during this COVID-19 crisis. If approved, Additional Premium Support will cover all outstanding premiums as well as future premiums. 

13.     The Government had considered deferring the MediShield Life review and consequent premium increases given the current difficult economic situation with COVID-19.  However, I must emphasise that it was important that MediShield Life remains solvent and sustainable so that it can meet its obligations in time to come when policyholders make claims. Its coverage also has to be updated and enhanced to remain relevant to the healthcare needs of Singaporeans. The MediShield Life Council therefore recommended that premiums should be adjusted accordingly. 

14.     Nonetheless, in recognition of the challenges faced, the Council further recommended that the Government should provide additional subsidies to help Singaporeans during this exceptional period. The Government has therefore provided a COVID-19 subsidy for all Singapore Citizens in the next two years, which will pay for the bulk of the premium increase in the first year. Taken together with existing premium subsidies and support, the net premium increases for all Singapore Citizens will be no more than about 10% in the first year after the MediShield Life review is implemented. 

MediShield Life Fund
15.     The MediShield Life Fund has to be self-sustaining based on sound actuarial principles. Premiums collected have to cover potential current and future payouts, including amounts set aside to support future commitments as well as provide a buffer against unforeseen contingencies such as unexpected spikes in hospitalizations due to disease outbreaks.

16.     As policy holders age, claims are likely to increase and so will premiums. A key feature in the MediShield Life scheme is to distribute premiums more evenly throughout the policyholders’ lifetimes.  Part of the premiums paid by policyholders during their working ages are set aside to provide for future premium rebates, which will help to moderate premium increases in their older ages. This constitutes the bulk of future commitments that are set aside in the reserves. As the majority of policyholders are relatively young today, the amount set aside has been increasing. Other commitments include future payouts for diseases currently under treatment that will require multi-year care, such as renal failure and cancer.

17.     Between 2016 to 2019, a total of $7.5 billion in premiums were collected. This comprises $4.4 billion in premiums collected from policyholders, and $3.1 billion from the Government in terms of premium subsidies and other forms of premium support provided to keep premiums affordable, which also went to the Fund.  In the same period, a total of $3.5 billion in claims were paid out, while $3.0 billion was set aside for future premium rebates.

18.     Mr Yip asked about the surplus or loss ratio of the MediShield Life Fund. The Incurred Loss Ratio (ILR) of the Fund was an average of 104% over the period from 2016 to 2019. This means that the total premiums collected was slightly less than the total monies required to ensure that the Fund is able to meet current claims and future commitments.

19.     Mr Leong asked about the formula for computing the Fund’s reserves.  The reserves are computed by external professional actuaries in accordance with the Monetary Authority of Singapore (MAS)’s requirements, and in line with industry standards.  For more details, the member can refer to the Insurance (Valuation and Capital) Regulations 2004. 

20.     MediShield Life, I must emphasise, is a not-for-profit scheme.  All premiums collected are placed in the MediShield Life Fund and are used solely for the benefit of policyholders and in the administration of the scheme. Information about the Fund size, reserves and Incurred Loss Ratio is published on the MOH website. The financial accounts for the Fund are also audited by an external auditor and submitted to Parliament every year for transparency.

Scheme Benefits
21.     Mr Yip asked whether Singaporeans can pay premiums based on the choice of coverage and illnesses covered. MediShield Life focuses on the basic needs of Singaporeans and apply equally to all policyholders. Those who prefer to have better coverage and are willing to pay higher premiums can consider private Integrated Shield Plans (IPs).

Managing Healthcare Costs
22.     The rise in healthcare costs is key to maintaining the longer-term affordability and sustainability of MediShield Life premiums and the overall healthcare system. Everyone has to play a part. Together, appropriate care can remain affordable for all Singaporeans.