Integrated Shield Plan Insurance

NOTICE PAPER NO. 3205

NOTICE OF QUESTION FOR ORAL ANSWER

FOR THE SITTING OF PARLIAMENT ON 11 NOVEMBER 2024

Name and Constituency of Member of Parliament

Dr Tan Wu Meng

MP for Jurong GRC

Question No. 6810

To ask the Minister for Health (a) when will the Ministry provide the next update regarding its study on whether Integrated Shield Plan (IP) insurance can be made portable in a way that is helpful for existing and future policyholders; and (b) what measures can be considered beyond the status quo to better safeguard the interests and market bargaining power of IP policyholders who currently face difficulty switching IP providers after their existing providers have significantly changed the de facto terms of policy coverage and access to policy benefits.

Answer

1. The suggestion for Integrated Shield Plan (IP) insurance to be made portable has been raised a number of times. The Ministry of Health (MOH) has carefully studied the issue, including the arrangements in other countries.

2. The calls for portability of IPs stem mainly from three groups of policyholders. Those who are unhappy with changes in the terms of their policy coverage imposed by their insurer, those who faced difficulties in making claims, and those who find it difficult to afford their IP premiums as they become older. Hence, they want to switch to another plan offered by another insurer, but realised they have to undergo another round of underwriting, and may not be able to preserve the coverage they already have, or they have to pay more premiums.

3. The conclusion is that IP portability – allowing all IP policyholders to switch insurers freely – will enhance competition and improve bargaining power of IP policyholders.

4. IP portability is generally uncommon across the world, as it is usual practice for insurers to underwrite new policies in order to price the risks of accepting more policyholders with pre-existing conditions into their risk pool. Underwriting can result in the insurer imposing additional conditions on the policyholder’s coverage, such as a waiting period during which no claims will be paid, or exclusions to the coverage. Policyholders may also have to pay higher premiums in view of the higher risks.

5. For countries that ensure full portability where policyholders can switch insurers without underwriting, it is usually a feature limited to their mandatory, national health insurance. For example, in the case of the Netherlands or Switzerland, universal coverage is mandated but administered by private insurers. These private insurers are therefore required to accept any applicant, regardless of whether they are switching from another insurer or uninsured previously. This gives the impression that the commercial insurance is portable, but actually it is not, as only the basic coverage under the universal, national health insurance scheme is fully portable. These countries do have supplemental, private insurance, which involves underwriting and is not portable.

6. Our parallel is MediShield Life. As our national health insurance scheme, MediShield Life covers all residents regardless of age, health status, personal insurance or employer coverage. This ensures that all residents enjoy a basic level of protection against large hospital bills. Last month, MOH announced a set of enhancements for MediShield Life which will be progressively implemented from April 2025. We will continue to ensure that MediShield Life stays relevant and affordable to Singaporeans as our national health insurance scheme.

7. Australia and Ireland are two notable examples that have implemented full portability for non-national, supplemental private health insurance plans. But they did so for different reasons than one may think. In Australia, private hospital care accounts for close to half of admissions, so good uptake of private health insurance, including through features like full portability, is integral to support access. As for Ireland, private insurance was initially introduced for a population segment who was not eligible to receive free treatment under their public healthcare system. Private insurance with full portability was established, to ensure that the segment previously mentioned had protection against large bills. This feature continued to be retained even as policy reforms later extended universal access to public hospital care to this group.

8. In all instances where full portability between private insurers is ensured, whether in Netherlands, Switzerland, Australia or Ireland, additional compensation mechanisms need to be established. In other words, for insurance company A to take over from insurance company B a policyholder with a pre-existing condition and of higher risk, A will receive compensation from B.

9. To facilitate this compensation system, countries set up a risk equalisation fund, usually funded with public monies and insurer contributions, and where a neutral body facilitates transfer payments between insurers. Insurers with a lower-than-average risk profile provide net funding into the fund, while insurers with a higher-than-average risk profile receive net funding from the fund. Significant additional national resources will need to be set up and to administer the fund. If we do this, it will be a whole new department.

10. For these reasons, MOH does not believe that mandating full portability for IPs is the right solution for the issues faced by policyholders. Most of all, it is not an international best practice for supplementary and commercial personal health insurance to be fully portable.

11. Fundamentally, for the group of IP policyholders with pre-existing conditions, the issue may not be a lack of competition between insurers, but that insurers are not actively competing for this group of customers. It is because their probability of claims is higher, which means that insurers may have to pay out to them more than what they collect in premiums. For IP policyholders with pre-existing conditions, the assurance for them is that Government always stepped in to ensure that MediShield Life will cover them for their pre-existing conditions, even if their private insurance does not.

12. The best way to provide assurance to everyone is to keep healthcare costs manageable. At the national level, MOH will continue to look at measures to manage healthcare costs and ensure that all Singaporeans have access to good and affordable basic healthcare.