Eldershield

24 Aug 2001

As announced by Prime Minister Goh Chok Tong at this year's National Day Rally, the Ministry will introduce ElderShield, an affordable severe disability insurance scheme to provide insurance coverage to elderly Singaporeans who require long-term care. ElderShield will provide them with basic financial protection and help them defray out-of-pocket expenses in the event of severe disabilities.

With our ageing population, an increasing number of elderly Singaporeans will require long term care and support. The Inter-Ministerial Committee on Health Care for the Elderly has estimated that about 8% of elderly suffer from disabilities which make them incapable of handling the activities of daily living. About 2.7% of elderly will require residential long-term care, and another 5.3% will require non-residential long-term care.

Given the cost of long-term care and that only a relatively small proportion of elderly will require such care, risk pooling through insurance, as compared to personal savings, is a more pragmatic approach to providing financial cover for severe disabilities. The extent of disabilities can be measured by the number of Activities of Daily Living (ADLs), a standard widely used by private insurers which offer SDI products. There are altogether 6 ADLs: mobility, feeding, transferring, dressing, bathing, and toileting. Under ElderShield, members who are not able to perform 3 or more ADLs, will be eligible for insurance payouts.

Key Features of ElderShield

The key features of ElderShield are:

(a) Actuarial Scheme

Like MediShield, ElderShield is designed based on sound actuarial principles that are in line with industry norms. It is not a social insurance scheme. As such, those who have pre-existing disabilities would not be eligible to join ElderShield.

(b) Lifetime Coverage

ElderShield will offer lifetime coverage to its members. ElderShield members would only need to pay a small regular premium to be protected against the cost of long term care which could turn out to be a financial burden, especially for those in the lower income groups.

(c) Cash Payout

ElderShield payouts will be in the form of cash benefit, and not tied to the reimbursement of institutional care. This gives elderly Singaporeans who require long-term care to make their own decision as to whether they would want to be cared for at home or at institutions. With this flexibility, the cash payout can be used to pay for the cost of nursing home or home medical and home nursing services. This is in line with our philosophy of promoting family support and community-based services for the care of the elderly.

(d) Basic Coverage

The ElderShield insurance payouts will be set at $300 per month, up to a maximum of 60 months to provide basic coverage for the lower income group while keeping the premiums low. It will be sufficient to cover a substantial portion of a patient's share of subsidised nursing home charges, and also defray the expenses of those who choose to opt for home care. As the Ministry gains more experience, we will consider enhancing ElderShield to allow Singaporeans to opt for higher coverage and payouts.

(e) Opt-out at Age 40

To attain as wide a coverage as possible, ElderShield will operate as an opt-out scheme. The opt-out age will be set at age 40 so that a significant proportion of Singaporeans is eligible to join ElderShield. If the opt-out age is set too high, many Singaporeans might not qualify for ElderShield coverage due to medical conditions and pre-existing disabilities.

(f) Maximum Entry age at 70

Like any other actuarial insurance schemes, a maximum entry age will be imposed. In the case of ElderShield, the maximum entry age will be set at 70.

(g) Pre-funded Premiums

The premiums of ElderShield will be structured as pre-funded premiums, i.e. the members would pay more than the cost of their health risk while they are younger, to cover for their higher risk during their older years. In this way, the premiums need not increase as the members age even though technically, their health risk have increased.

(h) Premium Structure

The premiums will be designed such that they are payable annually starting from age 40 (i.e. for those who do not opt out), with the last premium paying age at 65. Those who opt in and enrol in ElderShield only at age 65 and above will need to pay single premiums. Once a member has fully paid all the premiums, he will be covered for life. However, should the member become disabled and eligible for the insurance payout, or should he pass away, he will not need to continue paying premiums. Those who wish to pay their ElderShield premiums as a single payment upon joining the scheme would be given the option to do so.

(i) Premiums Payable by Medisave

The Ministry will allow Medisave to be used to pay the premiums of ElderShield. For those who do not have enough Medisave savings, they can use the Medisave of their spouse, children, parents or grandchildren. The Ministry will set a cap on the amount of Medisave that could be withdrawn to pay for ElderShield premiums.

Implementation of ElderShield

Special Opt-out Exercise

The Ministry will conduct a special one-off opt-out exercise for Singaporeans aged between 40 and 69. Under this exercise, they will be given a 3-month grace period to decide whether to opt out of ElderShield. If they do not opt out within a 3-month grace period, they will automatically be covered under ElderShield, unless they suffer from pre-existing disabilities. Medisave will be deducted from their Medisave accounts to pay the ElderShield premiums.

If they decide to opt out, they will not be covered under ElderShield. They are free to opt in and join ElderShield later. However, like all other actuarial-based insurance schemes, they will not be eligible to join ElderShield should they suffer from disabilities prior to their re-application to join ElderShield.

10-Year Premium Payment Plan

Under normal circumstances, Singaporeans aged 57 and above who join ElderShield would have less than 10 years to pay their ElderShield premiums. In particular, elderly aged 65 and above would have to pay a one-time premium to join ElderShield. To help this group of elderly Singaporeans, the Ministry will provide them with a special arrangement to pay their ElderShield premiums over a 10-year period.

Government Subsidy for Elderly

In recognition of the fact that elderly Singaporeans did not have time or the opportunity to build up their Medisave to purchase ElderShield, the Government will subsidise the premiums of elderly aged between 56 and 69. For elderly aged between 65 and 69, the Government will subsidise about one third of their premiums for 10 years. For elderly aged between 56 and 64, the Government will still provide premium subsidies but on a sliding scale. The Government will subsidise elderly aged 64 about one third of their premiums for 9 years, elderly aged 63 about one third of their premiums for 8 years and so on. As a result, elderly aged 56 would be subsidised about one third of their premiums for the first year only. Annex A (10.7KB) provides a tabulation of illustrative figures to illustrate how the premium subsidy works.

Those who decide to opt out of ElderShield will not be eligible for the premium subsidy.

Interim Disability Assistance Programme for the Elderly (IDAPE)

Certain Singaporeans would not be eligible to join ElderShield. First, Singaporeans aged 70 and above would not be eligible, regardless of their health condition, as the maximum entry age for ElderShield is 70. Second, Singaporeans aged between 40 and 69 during the launch of ElderShield but who already suffer from pre-existing disabilities would not be eligible to join ElderShield since it is an actuarial-based scheme.

As such, the Government will introduce an Interim Disability Assistance Programme for the Elderly (IDAPE) to help them. Like ElderShield, IDAPE will provide financial coverage against severe disabilities. Singaporeans not eligible to join ElderShield due to pre-existing disabilities or age limit would not need to pay any premiums to join IDAPE.

Under IDAPE, Singaporeans will be eligible for disability payouts if they cannot perform 3 or more ADLs. The payouts will be set at $150 per month up to 60 months for those whose per capita household income is below $700 per month, and $100 per month up to 60 months for those whose per capita household income is between $700 per month and $1,000 per month. Means testing will be administered by the Citizens' Consultative Committees to ascertain the eligibility of the elderly.

As the name of the scheme implies, IDAPE will only be an interim scheme. It will not be expanded to cover other Singaporeans in the future. As such, the Ministry encourages Singaporeans who are currently less than 70 years of age and do not suffer from pre-existing disabilities to sign up for ElderShield.

Please see Annex B (276KB) for the flowchart.

Selection of private insurer to run ElderShield and IDAPE

To encourage greater private sector participation in the severe disability insurance market, MOH will tender ElderShield out to the private insurers. The tender will specify the features of ElderShield and level of benefits, and insurers can submit their proposed premium structure for ElderShield. Through such a competitive bidding process, the Government would be able to get the best value for the premiums that ElderShield members will be paying.

Similarly, the administration of IDAPE will also be tendered out to private insurers. However, unlike ElderShield, the insurance risk of IDAPE will not be tendered out but borne by the Government.

The details of the tender will be separately released within the next 2 months. Based on the bids submitted by interested private insurers, MOH will select up to 4 private insurers to operate ElderShield and 1 insurer to administer IDAPE. The Ministry expects to be able to introduce ElderShield and IDAPE in the 2nd quarter of 2002.

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