Many might be tempted to point out that insurance companies brought this upon themselves. In the race for customers, their benefits got more and more generous, and premiums soared to pay for them.
But if these private health plans become unsustainable, it could have dire repercussions for healthcare provision and its financing.
This is because IPs are integrated with the mandatory national health insurance MediShield Life to provide coverage for unsubsidised, or private, medical bills. About 2.9 million people, or more than 70 per cent of Singaporeans and permanent residents, depend on IPs for this.
The purchase of IPs was encouraged by the Government to help people pay for private care. Premiums for IPs were paid for with MediSave, the compulsory savings set aside for healthcare under the Central Provident Fund.
So while IPs are offered by for-profit private companies, they form an important part of Singapore’s overall healthcare financing. Soaring IP premiums are thus of concern, as they put plans out of people’s reach.
The attrition is already occurring. There was a 5 per cent drop between 2021 and 2023 of private hospital IPs being taken up; and 2.2 per cent of people over 60 years old gave up their IPs altogether, between 2020 and 2023.
If too many people turn to subsidised care as a result, it would put a heavy strain on public sector hospitals, which are already struggling with insufficient bed capacity.
Given the serious implications for the nation’s healthcare system, the Government may need to act even if the problem is caused by the insurers competing to lure policyholders with as-charged plans and riders that undermine efforts to rein in healthcare costs.
On July 13, Senior Minister Lee Hsien Loong said tough decisions and trade-offs are needed for the country to continue delivering high-quality, affordable healthcare to Singaporeans.
He warned: “There are too many examples elsewhere of healthcare services practically at breaking point.
“Populations suffer from poor healthcare delivery and long wait times, or exorbitant medical bills and high insurance premiums. And it shows in the outcomes – population health deteriorates, and so does the quality of life, even life expectancy.”
In his speech on July 12, Mr Ong spoke of the need to rein in the current unhealthy “buffet syndrome” brought about by overly generous insurance coverage.
When a third party foots the bill, doctors and patients tend not to hold back on tests and treatments, even if they may not be needed.
The Health Minister urged insurance companies to take a hard, realistic look at their product design because they risk “a race to the bottom” with the intense competition.
The crux of the problem are IPs pegged at private hospitals, which account for about 60 per cent of all IPs.
Why premiums are soaring
The problem with IPs did not happen overnight. It was at least a couple of decades in the making. The two major drivers are the “as-charged” schemes and riders that left patients with nothing to pay.
Aviva (the IP is now under Singlife) introduced the as-charged model in 2005 which pays any bill submitted by healthcare providers.
Prior to that, the insurance schemes imposed limits on claims.
The as-charged model was essentially a blank cheque – often up to a yearly limit of $1 million – resulting in higher claims than would have otherwise been made.
The model proved popular and, today, all seven insurers have as-charged plans.
The only thing that reined in runaway costs was the compulsory deductible and co-payment element mandated by the Government.
This was to prevent the “buffet” syndrome Mr Ong spoke of.
But those safeguards went out the window when riders were introduced in 2006 that covered the entire bill, leaving patients with zero payment.
There are anecdotes of blatant over-consumption such as a patient in his 60s with stomach pains getting a full heart check-up before any treatment was given, because of its risk, given his age.
Some in the healthcare industry also took advantage of the generous payouts. Insurers saw prices charged for a simple cataract lens marked up between 500 per cent and 1,000 per cent, while mark-ups for drugs ranged from 7 per cent to 800 per cent.
What’s been done
The Government stepped in several times to correct the excesses resulting from the competition for IP accounts. But mostly it exercised a light touch, preferring the industry to sort out its problems itself.
In 2015, it imposed an age-based cap on the amounts that could be paid for with MediSave to no more than $300, $600 or $900 above the MediShield Life premium. The rest would have to be paid for in cash.
With IP premiums crossing $10,000 a year at the upper range, allowing them to be paid for entirely with MediSave would have depleted many MediSave accounts.
In 2018, at the collective request of the insurance companies facing ever higher claims, the Ministry of Health (MOH) stepped in and ruled that new riders could no longer fully pay for the patient’s portion of bills.
So today, patients with riders must pay at least 5 per cent of their bills, but this can be capped at $3,000 a year. This satisfies the original need for co-payment, but not for the deductible.
MOH stepped in because riders were distorting claims.
Then Health Minister Gan Kim Yong, who is now Deputy Prime Minister, revealed that people with full riders had bills that were 60 per cent higher than those without riders.
MOH also set up a Claims Management Office in 2022 to arbitrate claims disputes between insurers and healthcare providers.
Mr Ong said that the great majority of doctors are good people, but some are not doing right. So MOH will strengthen its enforcement against errant doctors who overcharge.
Another move by MOH was to set up a Cancer Drug List (CDL) of proven treatments that insurance is allowed to cover. Treatments not on the list are not covered by insurance. The cost of cancer treatment has been going up 20 per cent a year.
Insurers, too, have tried to tackle high claims.
Following recommendations from the Health Insurance Task Force in 2016, they now have panels of several hundred specialists each whose charges they cover.
Policyholders getting treatment from non-panel doctors may not get full reimbursement. One way to ensure coverage is to get a pre-approval letter from the insurer, where treatment and costs are spelt out.
AIA, the largest IP insurer, has a fully digital pre-authorisation service across all private hospitals and healthcare providers.
Its chief marketing and proposition officer, Ms Irma Hadikusuma, said: “This is important to curb overtreatment and overcharging, given the significant knowledge asymmetry between medical professionals and patients.”
Several insurers, including AIA, have also introduced claims-based premiums for their riders that support private hospital IPs.
AIA policyholders can get up to 25 per cent taken off their rider premiums if no claims are made, or have their rider premiums at double the minimum amount if heavy bills are incurred. Premiums are adjusted annually.
Prudential and Great Eastern also have variations of claims-based pricing.
While this approach encourages people to be prudent, some worry that it may discourage patients from seeking early treatment so as not to pay higher premiums.
It could also make patients turn to public hospitals, adding to their load. Many such patients actually seek subsidised care at public hospitals.
Mr Ong said: “About half of patients with IP plus rider protection still end up using subsidised public healthcare when hospitalised or receiving day surgery.”
Government needs to step in
Both the Government and insurers have implemented schemes to try to correct the situation. But given the recent calls by SM Lee and Mr Ong, more still needs to be done. The question is what, and by whom.
Insurers cannot and should not control what healthcare providers charge. On the other hand, reimbursing them with whatever they feel like charging is a dangerous road to take and could see costs and premiums spiralling out of control.
As commercial entities, insurance companies will continue to fight for market share. The Competition Act also stops them from getting together to discuss how to improve the situation.
This means the Government will have to step in to mandate any changes.
The IP benefits most open to abuse are the as-charged model and the coverage for pre- and post-hospital treatments.
By offering pre- and post-hospital cover, IPs have deviated from their original purpose, which was to cover large hospital bills, not outpatient treatments.
If insurers are covering outpatient treatment under the guise of pre- and post-care, then it is a loophole that needs to be plugged.
Doing away with the as-charged model alone won’t fix the problem unless reasonable caps are put in place. While these limits need to take into account the higher charges in the private sector, the Government has to curb insurers from competing with ridiculously high claims limits. This is especially true given how high some private hospital charges are.
According to MOH, the typical bill for expanding a blocked artery for a private A-class patient in a public hospital is $26,265, while private hospitals charge more than double that at $55,258. Similarly, ultrasound removal of kidney stones done as day surgery costs a private patient at a public hospital $3,838, while the typical bill for a patient in the private sector is $10,294.
A review should look at whether the huge difference is justified, and adjust claims caps accordingly.
Any review should also include riders.
With the mandated change in cancer treatment coverage that separates the reimbursement of drugs from cancer services, IPs now pay up to five times the cover provided by MediShield Life.
Oncologists in the private sector say this coverage is not enough. Patients need to have riders to pay for the costs not picked up by the IP.
Competition for market share has insurers offering riders that add triple the coverage provided by the IP, and include treatments not allowed under the CDL. This undermines the Government’s efforts to curb high costs and excessive and unproven treatments.
Even though premiums for riders are paid for in cash, the fact that two in three IP policyholders also have riders means they impact overall healthcare costs significantly. Sensible parameters for IP-linked riders would address this.
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