09 September 2015

MediShield Life: Robbing Peter to Pay Paul

MediShield Life, the compulsory universal hospitalisation insurance scheme that the Government will be introducing later this year unfairly forces some members to help pay the premiums of other members.

Pre-Existing Conditions

People who are excluded from MediShield will be included under MediShield Life.

Individuals with pre-existing conditions will pay an additional 30 per cent of the standard premiums for the first ten years, after which they will pay the standard premiums.

Existing MediShield members will pay more to subsidise those with pre-existing conditions.

This is unfair to existing MediShield members. Many of them have generous coverage provided by their employers. Yet, they also bought MediShield insurance so that they will have hospitalisation insurance regardless of the state of their health when they stop working. Ironically, now they have to help others who are in a situation that they (the existing MediShield members) had paid to avoid.

Pre-Funding

The seductive story line is that a MediShield Life member should pay more premium than that corresponding to his age when he is young so that he can pay less premium than that corresponding to his age when he is older.

This is known as pre-funding.

Under MediShield Life, a member pre-funds all the way until he is 65 years old, and he starts receiving rebates from his 66th birthday onward.

However, the pre-funded premiums don't belong to him and the nearer to age 66 years when he dies, the more of his pre-funded premiums he leaves behind for others in his age cohort.

This is the Government's way to get MediShield Life members who don't live very long lives to subsidise the premiums of those who live very long lives. Combining longevity insurance with hospitalisation insurance is unfair.

Overseas Members

Singapore citizens and permanent residents who live overseas have to pay the full MediShield Life premiums even though they are unlikely to return to Singapore for medical treatment, which they have to in order to charge their hospitalisation expenses to MediShield Life.

In many cases, they already have hospitalisation insurance overseas.

The Government argues that requiring them to be insured under MediShield Life now protects them in the future when they return to Singapore. Otherwise, they may not be insurable if they have medical conditions then.

The Government ignores the fact that premiums paid in any year cover current hospitalisation risk (which, net of claims, is taken to surplus/deficit in the current year) and future hospitalisation risk (which is not taken to surplus/deficit in the current year).

Why can't overseas citizens and permanent residents simply pay premiums for future hospitalisation risk? Presumably, it is because the Government wants them to subsidise resident MediShield Life members.

Conclusion

None of the above measures under MediShield Life are wrong or unfair if an individual can decide whether and how he wishes to participate, but they are unfair if the individual is not given any choice.

1 comment:

  1. I agree with your comments.

    I have had private insurance on top of MS. Until last year, I was paying $105 for MS. Now I have to fork out 3 times more for the new MSL i.e. $310 without enjoying any additional benefit. I still get the same combined coverage from MSL + Private insurance as I used to get from MS + Private Insurance until last year.

    The 3 fold premium increase is completely unjustifiable no matter which way I look at it.

    It's a BIG thumbs down from me for the MSL. I called MSL hotline and registered my concern. Not that I expect it to change anything. We need to have choice as you said in the conclusion.

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