MediShield Life premium increases driven by rise in payouts and more claimants, says Koh Poh Koon

SINGAPORE: The proposed hike in MediShield Life premiums is driven by three factors, including an increase in annual payouts and the number of claimants, said Senior Minister of State for Health Koh Poh Koon in Parliament on Monday (Nov 2). 

He was responding to questions by several Members of Parliament from the People’s Action Party (PAP), Workers’ Party (WP) and Progress Singapore Party (PSP) about the Government's justification for increasing premiums, the schemes available to help those who cannot afford it, as well as the rise in hospital charges.

The MediShield Life Council had announced in September several recommendations to enhance MediShield Life benefits and adjust premiums upwards by up to 35 per cent for some. It is the first major review of the national insurance scheme since it was introduced in 2015.

READ: MediShield Life premiums may rise by up to 35% for some, higher claim limits proposed as part of review

Giving a breakdown of the figures, Dr Koh said that over the last four years, the number of MediShield claimants increased by about 30 per cent and annual payouts went up by about 40 per cent. 

Between 2001 and 2019, average hospitalisation bills for public healthcare institutions increased by about 6 per cent a year on average, affected by medical cost inflation, demographics and medical advancements over the years, he added.

"This growth in utilisation and payout accounts for about two-thirds of the premium increases," he told the House. 

READ: Ageing population, medical advancements among factors that contribute to rising healthcare costs: Koh Poh Koon

One-quarter of the premium increase comes from “refreshing” the claim limits of MediShield Life, while the remaining portion, just under 10 per cent, “supports the benefit enhancements”, including those implemented since 2018. These include the extension of coverage to include inpatient hospices and serious pregnancy complications. 

“Premiums have been kept unchanged for the first five years of MediShield Life, in line with our earlier public commitment. They need to be adjusted to ensure that the MediShield Life Fund remains solvent and sustainable so that it can meet its obligations to all policyholders,” said Dr Koh.

Responding to a question from PSP Non-Constituency MP Leong Mun Wai on whether it is unusual by international standards for a health insurance scheme to increase its premiums by 35 per cent in a single adjustment, Dr Koh said it would not be appropriate to compare with other schemes as premiums are priced based on multiple factors “which inevitably vary from country to country”.

"It would also not be meaningful to compute how much premiums a Singaporean will need to pay over his lifetime simply by assuming a fixed compounding factor each year," said Dr Koh.

“Future premiums would depend on how the underlying drivers … evolve, and this depends on many factors including what we can achieve together to manage healthcare costs. The amount of premium subsidies an individual will receive will also vary over his lifetime, depending on his financial circumstances.”

KEEPING PREMIUMS AFFORDABLE

Financial support schemes are available to ensure that all Singaporeans can continue to pay their premiums, said Dr Koh.

For instance, lower- and middle-income households, as well as seniors from the Merdeka Generation and Pioneer Generation will receive premium subsidies and support.

“Taken together, about 35 per cent of the total premiums collected were paid for by the Government through various subsidies and support schemes in 2019. For the elderly aged 65 and above, the contribution from the Government is even higher, at about 50 per cent of their premiums,” he said.

Singaporeans can use MediSave to pay for their premiums in full, and they can also use their MediSave to pay for their family members’ premiums as well.

Those who still require more help can apply for Additional Premium Support, including those who are mid-way through medical treatment or who have recently lost their jobs and part of their income. 

The Additional Premium Support will cover all outstanding and future premiums, said Dr Koh.

READ: Singaporeans to receive COVID-19 subsidy to offset proposed increase in MediShield Life premiums

In addition, Singaporeans will receive a COVID-19 subsidy for the next two years, which will “pay for the bulk of the premium increase in the first year”, said Dr Koh.

He noted that the Government had considered deferring the MediShield Life review and the premium increases due to the current “difficult economic situation” with COVID-19.

“However, I must emphasise that it was important that MediShield Life remains solvent and sustainable so that it can meet its obligations in time to come when policyholders make claims. Its coverage also has to be updated and enhanced to remain relevant to the healthcare needs of Singaporeans,” he said.

PART OF PREMIUMS SET ASIDE FOR FUTURE

Touching on the MediShield Life Fund, Dr Koh said a portion of premiums paid by working adults is set aside to provide for future premium rebates, which will help to moderate premium increases as people age.

"This constitutes the bulk of future commitments set aside in the reserves. As the majority of policyholders are relatively young today, the amount set aside has been increasing," he said.

Dr Koh added that other such commitments include diseases currently under treatment that will require long-term care, such as renal failure and cancer.

Providing figures in Parliament, Dr Koh said a total of S$7.5 billion in premiums were collected between 2016 and 2019. This comprised S$4.4 billion collected from policyholders, and S$3.1 billion from the Government in terms of subsidies and other forms of premium support.

In this same period, S$3.5 billion in claims were paid out, while S$3 billion was set aside for future premium rebates.

The Incurred Loss Ratio of the fund was an average of 104 per cent over the period from 2016 to 2019.

"This means that the total premiums collected were slightly less than the total monies required to ensure that the fund is able to meet current claims and future commitments," said Dr Koh.

He stressed that the fund has to be “self-sustaining” and based on “sound actuarial principles”.

"Premiums collected have to cover potential current and future payouts, including amounts set aside to support future commitments as well as provide a buffer against unforeseen contingencies such as unexpected spikes in hospitalizations due to disease outbreaks," he added.

COMPUTING PREMIUM INCREASES

Several MPs raised questions relating to how premium increases are computed.

In response to PAP MP Foo Mee Har’s question on whether the Ministry of Health would “itemise” factors contributing to the premium increase, Dr Koh said that it is difficult to predict the technology driving clinical practice.

In the past, a head injury would only warrant an X-ray of the skull, which costs about S$15 to S$20. But now, barely 20 years later, CT scans are required for head injuries, which can cost “hundreds of dollars”, he said.

“So as opposed to a transport fair formula where the parameters and variables are a little bit more fixed and more predictable, healthcare inflation takes into account many unforeseen kind of variables that will come along the way,” he said.

While it will be hard to have a single formula with “that level of clarity”, actuaries that use current data to project will make adjustments over time, and this is why the Government has to review premiums on a regular basis, he added.

WP MP Gerald Giam reiterated his question on whether the Government would make the full MediShield Life actuarial report available, for the sake of transparency.

Dr Koh said MediShield Life premiums are proposed and calculated by external actuaries who are independent from the Government. The size of the funds, the amount collected and the amount paid out are also externally audited and the report will later be submitted to Parliament on an annual basis, he added.

However, Dr Koh acknowledged that the Government may have to have a “better system” of looking at how the assumptions and calculations need to evolve.

“Over time, we could perhaps engage different consultants to take a look, to challenge the assumptions, to do another calculation at an appropriate time, to make sure that we are still on track,” he said.

He added that ministry would speak to consultants on publishing some of the data “in an academic way”, but emphasised that it will “not be something that most laypeople will understand”.