09 July 2014

MediShield Life Losers

Existing MediShield Policyholders
People with pre-existing medical conditions will pay a loading of up to 30 per cent for ten years; thereafter, they will not be subject to any loading.

However, this loading is hardly enough to cover the significant cost of insuring them. Existing MediShield policyholders, many of whom bought MediShield coverage for no other reason than to protect themselves from future medical conditions (i.e., constituting pre-existing conditions if they did not have MediShield coverage before the diagnoses), will be forced to pay 3 per cent more in premium in cross-subsidies, in a twisted interpretation of inclusiveness and collective social responsibility. Such cross-subsidies will increase further when the 30 per cent loading on existing pre-conditions is removed.

The remaining cost, said to be 75 per cent of the total cost of providing MediShield Life coverage to people with pre-existing conditions, will be borne by the Government.

People With Corporate Non-Portable Hospitalisation Insurance
Only 17 out of 1,400 unionised companies in the private sector provide their employees with portable hospitalisation insurance. Since participation in MediShield Life is mandatory, employees covered under corporate plans will be paying MediShield Life premiums (almost) needlessly because any hospitalisation cost can't be reimbursed twice.

Not all their MediShield Life premiums will go to waste, though — they will be insured irrespective of the state of their health when their corporate insurance ends eventually.

People Living Overseas
With participation in MediShield Life being mandatory, the approximately 200,000 Singaporeans who live overseas will be paying MediShield Life premiums (almost) needlessly because they can't claim reimbursement for overseas hospitalisation.

Not all their MediShield Life premiums will go to waste, though — they will be insured irrespective of the state of their health when they return to Singapore eventually. However, being compelled to pay MediShield Life premiums may be the tipping point for some to give up their citizenship.

People Who Die Before Premium Rebate Age
MediShield Life requires policyholders to pre-fund their premiums, and the collective pre-funding pool will be used to offset a small part of their age-group premiums when they are past the premium rebate age.

The collective pre-funding pool is reserved for the policyholders in each age group. However, no individual policyholder has ownership of the pre-funding pool. When a policyholder dies, he leaves behind any pre-funded premium that he has contributed but has not used yet.

Policyholders who die early subsidise the premiums of others in their age cohort who outlive them. This reduces the likelihood that, or the extent to which, the Government would have to subsidise the premiums of the elderly poor.

The dead will be forced to subsidise the hospitalisation costs of the living.

Hospitalisation insurance is about risk pooling, not longevity insurance.

People With Modest Annual Home Values
The permanent subsidies will be a function of per capita household income and annual value ("AV") of their homes.

The permanent subsidies will not be given to households with AV exceeding $21,000. As this AV generally separates HDB flats from private properties, the Government seems to be saying that people who live in private properties do not deserve permanent subsidies, just like people with high per capita income.

Is a 4-member household with total income of $10,000 living in an HDB 5-room flat or executive condominium less able to pay the premiums than a non-Pioneer Generation retiree in a modest private property with an AV of $22,000? The former gets permanent subsidies but the latter does not, other than on a case-by-case basis.

What matters is a person's total financial resources, not just the value of his home.

Integrated Shield Plan Policyholders
MediShield is a subset of the integrated shield plans and MediShield Life will be a subset of the integrated shield plans.

When transitioning from MediShield to MediShield Life, the premiums will increase due to the enhanced benefits. The Ministry of Health says that the increase in premiums for the integrated shield plans resulting from the introduction of MediShield Life is expected to be the same, if not lower than, the increase in MediShield Life premiums. This is incorrect and confusing. With the exception of pre-existing condition coverage, most integrated shield plans already provide much better coverage than MediShield Life, so transitioning from MediShield to MediShield Life only adds pre-existing coverage to most integrated shield plans, and their premiums should not increase by more than the premium for pre-existing conditions together with changes in pre-funding. Any increase more than that takes advantage of the integrated shield plan policyholders.

Every MediShield Life Policyholder
While MediShield Life Fund should have reserves, the Government's penchant for accumulating reserves may result in its building its reserves far beyond what is actuarially reasonable, to the detriment of policyholders who end up paying more premiums than they should.

For example, in the financial year ended 31 December 2013, MediShield Fund collected premiums of $770 million and incurred claims of $335 million. It ended the year with reserves of $613 million. Of its total insurance contract liabilities of $1,700 million, $1,575 million were due in 2015 or later (and presumably projected rather than actual).


This article was last updated on 18 July 2014 12:39 am

1 comment:

  1. The MediShield Life Review Committee recommends that individuals with pre-existing conditions and not insured under MediShield should pay a 30% loading for ten years, and no loading thereafter.

    Because the cost of bringing such individuals under MediShield Life coverage far exceeds this loading, some of this cost will be passed onto, and borne by, existing MediShield policyholders, through a 3% higher premium initially (and still higher after ten years when the loading for pre-existing conditions is removed). Any remaining cost will be borne by the Government.

    It is right that society should be inclusive and caring, and individuals with pre-existing conditions should not be denied MediShield Life coverage.

    However, the cost of the significantly greater risk of insuring individuals with pre-existing conditions should fall on those individuals themselves and their families, with the Government stepping in to provide them with such financial assistance as it considers to be necessary.

    Suggesting that some of this cost should fall on MediShield policyholders as a form of collective social responsibility is misplaced.

    How is it fair to require MediShield policyholders who have been paying their premiums over many years — especially those buy MediShield coverage to protect themselves in the future against pre-existing conditions even though they are insured by their employers now — to subsidise the cost of bringing individuals with pre-existing conditions under MediShield Life?

    We don't, for example, require individuals who can meet the CPF Minimum Sum to give part of their CPF contributions to those who cannot otherwise meet the CPF Minimum Sum, or require that everyone should pool his Retirement Account moneys to be shared equally among his age-group.

    MediShield Life premiums will be higher than MediShield premiums due to enhanced benefits, and will be even higher as the transitional subsidies taper off. Forcing MediShield policyholders to subsidise individuals with pre-existing conditions will mean yet higher premiums for MediShield policyholders even as they themselves require subsidies.

    Furthermore, because all MediShield policyholders will have to subsidise all individuals with pre-existing conditions, some MediShield policyholders who have modest financial resources end up subsidising some individuals with pre-existing illnesses who have more financial resources.

    Our CPF moneys belong to us. The Government should not use any of the limited Medisave moneys of MediShield policyholders to subsidise the cost of providing MediShield Life coverage to individuals with pre-existing conditions.

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