Premiums at risk?

11 Feb 2005, Today

Question

Name of the Person: Chang Wei Meng 

Premiums at risk?

Worry over MediShield Plus outsourcing 

I refer to the proposal to outsource MediShield Plus plans to private insurers and would like to raise some concerns. 

With regards to the three-year freeze on premiums, what happens after the moratorium? The presumption is insurers will be free to recalibrate and assess the premiums accordingly. What about those with pre-existing conditions? Will they be subjected to higher premiums? 

Private insurers already cherry-pick from MediShield clients and load up on premiums or add in exemption clauses for the less healthy. 

While the CPF Board is providing this service, one can feel more reassured that the risk is shared collectively and premium increases are raised usually with much reluctance. Private insurers do not necessarily share this sense of obligation. 

With a CPF Board-managed MediShield Plus in the picture, the temptation to raise premiums is dampened partly by the competitive pricing element. Without it, it is just competition between insurance companies yyy a business oligopoly at present, with just a handful of players providing this service. 

The existing MediShield arrangement allows mobility among the plans. A person who is doing well might opt for the Plus plan yyy but when affected by economic restructuring, for example, might decide to downgrade to a basic plan with the flexibility to move back when his situation improves. 

Once Plus plans are outsourced, how does this class of people with changing fortunes downgrade? And what of basic plan policyholders who opt for Plus plans in future? If they are healthy, they will be accepted by insurers. But if they are not, the CPF Board will once again be saddled with the leftovers. 

So far, little light has been shed on the policy sub-limits. Most laypeople are under the impression that after deductibility and co-payment, the rest of the medical bill is paid by MediShield. 

This is hardly the case. With the qualification of sub-limits, the amount reimbursed can turn out to be surprisingly less. 

Most people find out too late when they have to pay the uncovered expenses out of pocket. I would like to see a bigger increase in the sub-limits in this restructuring.

Reply

Reply from MOH 

Interests of MediShield Plus policyholders will be fully protected 

In "Premiums at risk? Worry over Medishield Plus outsourcing" (Today, 11 Feb 2005), Mr Chang Wei Meng was worried that the tendering of Medishield Plus might lead to (a) premium increases after the three year moratorium, (b) withdrawal of coverage for those with pre-existing medical conditions, and (c) a loss of flexibility for policyholders to downgrade to a basic plan. 

These are valid concerns which must be addressed. Indeed, the terms of the tender will ensure that the interests of existing MediShield Plus policyholders are fully protected in the cut-over to the new insurer. 

First, the new insurer will be required to provide continuous insurance coverage for all existing policyholders. For these policyholders, the insurer will not be able to unilaterally withdraw coverage on ground of pre-existing medical conditions, nor subject those who have fallen ill to higher premiums. 

Second, after July 1, all MediShield Plus policyholders will be automatically insured with MediShield for their basic medical coverage. They can therefore downgrade to MediShield at any time, if they so wish. 

Third, the 3-year moratorium is to prevent insurers from bidding low to secure the tender, only to raise premiums soon after that. Whether the moratorium should be 3 years or longer is a judgment call. We think that 3 years is a reasonable period. It does not mean that premiums will automatically rise after 3 years. That will depend on the prevailing economics of the industry and the intensity of competition. We are optimistic that greater competition can be achieved through this reform, with real benefits for Singaporeans. 

Mr Chang also suggested a "bigger increase" in the revised MediShield "sub-limits". This is in fact the intent of the MediShield reform. From Jul 1, the sub-limits will be raised substantially to provide higher payouts for large bills. The increased payouts will halve the current effective co-payment by patients from 60 percent of the hospital bill to about 30 per cent.