10 July 2014

MediShield Life Winners

People With Pre-Existing Conditions
People with pre-existing medical conditions will be happy just to be covered under MediShield Life. The loading — up to 30 per cent for ten years only — barely covers the significant cost of insuring them. Existing MediShield policyholders will be forced to subsidise them, with the remaining cost being borne by the Government.

People With Undisclosed Pre-Existing Conditions
It is not clear how the MediShield Life administrator will determine whether anyone who is not a MediShield policyholder has any pre-existing conditions. There are likely to be quite a few people who will deny having any pre-existing conditions. Unlike private life insurance or hospitalisation insurance, there are no penalties (e.g., withdrawal of coverage) for lying about pre-existing conditions under MediShield Life.

Self-Employed People Who Cheat On Their True Employment Income
The Government will provide permanent subsidies based on household per capita income and annual home value. There are probably quite a number of self-employed people who do not declare their true income to the Inland Revenue Authority of Singapore, to avoid paying all the income tax that they should otherwise be paying. Such people will soon have another reason to be dishonest — they will receive higher permanent subsidies.

People Who Live Past Age 90
MediShield coverage stops at age 90. MediShield Life will cover all policyholders for life.

The question that we should ask is this: why does MediShield coverage stop at 90, or any other age for that matter? As the likelihood of a policyholder needing hospitalisation insurance increases with age, MediShield takes away hospitalisation insurance just when he needs it most.

People Who Live Past Premium Rebate Starting Age
MediShield Life requires policyholders to pre-fund their premiums.

The premiums of policyholders who live past the premium rebate starting age are subsidised by the pre-funded premiums of others in their age cohort who die before they reach the premium rebate starting age.

People Who Don't Pay
Since MediShield Life will be compulsory, there must be a mechanism to collect premiums.

People who have sufficient Medisave moneys can't avoid having the premium deducted from their Medisave accounts. What about people who don't have sufficient Medisave moneys? If they don't pay, MediShield Life Fund will end up with bad debt, which will eventually mean higher premiums for those who pay.

MediShield Life Fund must be empowered by law to appoint banks to transfer to it the amount of premiums owed, drawn from funds held for or on behalf of the errant policyholders (including their household members).

New Residents
The MediShield Life Review Committee Report makes no mention of any loading to be paid by new residents upon their admission to MediShield Life.

MediShield Life policyholders will be required to pre-fund their premiums. By 2030, for example, younger Singapore-born residents who have been on MediShield Life since inception will have pre-funded their premiums for 15 years. If a new resident joins MediShield Life in 2030 without being required to pay any loading for the pre-funding that Singapore-born residents of his age will have paid, he will be tapping into, and diluting, their pre-funding pool.

Insurance Companies
MediShield is a subset of the integrated shield plans and MediShield Life will be a subset of the integrated shield plans.

MediShield Life's benefits will significantly encroach into the most basic integrated shield plans to the extent that some policyholders may consider terminating them. However, such plans still offer better (though perhaps not significantly) benefits, together with riders, to policyholders.

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 as, 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 (under MediShield Life) to most integrated shield plans, and their premiums should not increase by more than the premium for pre-existing conditions (together with changes to pre-funding). Any increase more than that is unfair to the integrated shield plan policyholders.


SPECIAL CASE — THE GOVERNMENT

The Government will bear significant costs under MediShield Life, including but not limited to transitional and permanent subsidies.

However, some of all the costs are already incurred or provided for elsewhere. For example:

■ Pioneer Generation subsidies.

■ Financial assistance via Medifund (Medical Endowment Fund).

It is not clear whether or to what extent the almost $4 billion in subsidies and financial support by the Government over the next four years include, for example, the Pioneer Generation subsidies, for which $8 billion has already been provided for in the last Budget.

The Government cannot be considered to be either a winner or loser with MediShield Life because it is something that the Government needs to do for its citizens and the Government itself set out the broad parameters for the Committee.

However, the Government will avoid bearing some costs, as follows:

■ Part of the cost of insuring people with pre-existing conditions, which is being forced onto MediShield policyholders.

■ Part of the cost of premiums to be paid by the elderly poor, which is being funded by those who die before them through pre-funding.

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