Further regulation of healthcare insurers could worsen 'knot' situation and hurt policyholders: Rahayu

SINGAPORE: The further regulation of healthcare insurers could exacerbate trends such as escalating costs and premiums, affecting policyholders, said Minister of State for Health Rahayu Mahzam on Wednesday (Sep 24).

Speaking in parliament, Mdm Rahayu said that these trends are the "consequences and symptoms" of the "knot" that insurers, doctors, hospitals and policyholders are currently caught in. 

"Regulation will not loosen this knot; it will make it worse. If we restrict insurers’ claims management practices, we will likely see even larger premium increases," she added.

"And if we cap premium increases, products will become unviable, which will hurt policyholders."

Mdm Rahayu was responding to questions from Members of Parliament (MPs) about Integrated Shield Plan (IP) insurers, regulatory oversight and healthcare costs.

In her response, she pointed out that private healthcare insurance is in its current "unsustainable state" not because of collusion or anti-competitive behaviour. 

"That usually leads to supernormal profits by market players at the expense of consumers," Mdm Rahayu said.

"Here, insurers are either making losses or barely breaking even on their health portfolios. The situation is due to excessive competition that has gone wrong – another type of market failure."

Furthermore, there is already the Competition Act to "proscribe collusion and anti-competitive behaviour", said Mdm Rahayu.

"If we strengthen regulatory oversight, it should be to correct the market failures arising from unsustainable and self-harming competition that have taken place today," she added.

"Regulations to prevent insurers from correcting the current problem will likely exacerbate the situation, make private insurance even more unsustainable, with no market correction mechanism."

In June, insurer Great Eastern (GE) stopped issuing pre-authorisation certificates for policyholders admitted to Mount Elizabeth hospitals in Novena and Orchard.

Pre-authorisation refers to the insurer’s approval of coverage for medical costs before treatment. 

This minimises the upfront cash deposit needed for certain costs, such as hospitalisation and surgical expenses, doctors' fees, tests conducted in hospital, and certain outpatient treatments. The insurer settles these pre-approved expenses directly with the hospital.

In response to CNA's queries, a GE spokesperson said then: "We have observed that, over the past few years, certain private hospitals have been charging significantly more for similar treatment."

The move was part of the company's "ongoing efforts to manage rising healthcare costs and ensure long-term affordability for all policyholders". 

The two Mount Elizabeth hospitals are part of IHH Healthcare Singapore, the largest private healthcare provider in the country.

The suspension “surprised” IHH Healthcare Singapore, which had been in active discussion with Great Eastern over the past few months, the group’s chief operating officer and chief executive officer of Mount Elizabeth Hospital Mr Yong Yih Ming told CNA then.

“We do not agree with GE's claim about higher prices at two of our hospitals for similar procedures and case profiles," he added.

On Wednesday, Mdm Rahayu said pre-authorisation was an "administrative arrangement"  and not a "contractual benefit" offered by insurers. 

"It enables insurers to review and approve medical treatments and associated fees, to make sure that they are medically necessary and covered by the policy, before they occur. This arrangement also gives patients the assurance about what will be covered," she said.

"Regardless of pre-authorisation, IP policyholders enjoy their full contractual benefits, and can still make claims for their treatments according to the terms and conditions of their policy."

"LOOSEN" THE KNOT

To "loosen and untie" the knot "step by step", every stakeholder must do their part, and the Ministry of Health (MOH) will facilitate the process, said Mdm Rahayu.

"We have urged the insurance industry to relook their overly-generous policy design, such as minimal rider co-payment. Insurers will need to balance between providing assurance and protection, and encouraging prudent consumption and servicing," she said.

The ministry will do more to educate consumers on choosing the appropriate health insurance coverage for their needs, and will soon launch a public education campaign, added Mdm Rahayu.

To "rein in sector cost increases", MOH has developed and published over 2,800 doctor fee benchmarks that providers and insurers reference in order to set fees and review reimbursements, she said.

The ministry will also study what more can be done to guide fee setting by private hospitals, Mdm Rahayu added. 

This could mean introducing more benchmarks beyond those relating to professional fees, she said later in response to a question from MP Vikram Nair (PAP-Sembawang).

In a supplementary question, MP Fadli Fawzi (WP-Aljunied) asked whether benchmarks will be used for the costs of consumables such as hospital gowns. 

"We already had benchmarks on the professional fees. We are looking at how we can also create some benchmarks on hospitals' costs, which would probably include some of the elements you mentioned," said Mdm Rahayu.

The ministry will study what more can be done to guide fee setting by private hospitals, Mdm Rahayu added.

"MOH will also continue to work through the Multilateral Healthcare Insurance Committee, which brings together key stakeholders from healthcare providers, medical professionals, insurers and consumer representatives, to address these issues collaboratively," she said.