MediShield Life: Good case to align B1 premiums

A BI class ward at Changi General Hospital. If the benefits of a standard B1 plan are identical, shouldn't everyone in the same age band pay the same premium?
PHOTO: MediShield Life: Good case to align B1 premiums

SINGAPORE - It looks like, at long last, there will be some order introduced into the messy Integrated Shield Plans (IPs) market.

Under the current situation, the five insurance companies decide what benefits to offer and what premiums to charge. This has resulted in widely differing products which, not surprisingly, leave most Singaporeans confused.

This became increasingly obvious to the MediShield Life Review Committee during their feedback sessions with the public. Hence, it decided to look into the matter even though it was not part of the original mandate from the Ministry of Health (MOH).

Says its chairman Bobby Chin: "That's the responsible thing for us to do."

IPs were introduced in 2005 to cover people who wanted more than subsidised hospital care in standard B2 or C class wards.

The IPs fall into three categories - those pegged at public hospital B1 class, A class and private hospitals. They all incorporate the basic MediShield - and in future, MediShield Life.

When they started, plans and premiums within each category were fairly similar, and people buying into them merely chose the insurer they wanted. Today, premiums for people in the same age band, offered by different insurers, can vary by over $2,000 a year for plans in the same category. Benefits are also different.

The committee has rightly made two recommendations regarding the IP market. The first is a more general one - that the MOH improve existing regulatory and accountability framework for IPs and approved insurers in order to better protect consumers.

It also suggested letting insurers vary their premiums to accommodate higher-risk people, which they cannot do now, resulting in people not being covered or being covered with exclusions.

The second is more specific - that MOH work with the five insurers to create a standard IP to cover B1 class wards - and it should be an "affordable and easily understood package".

For many, a downgrade will be better value for money. The committee found that seven in 10 people with an A class plan and six in 10 with a private hospital plan actually opted for a lower hospital class when they needed treatment. This implies that many are over-insured and can save on premiums if they choose the correct plan. All well and good, but the devil is in the details.

In that sense, it was disappointing to hear Health Minister Gan Kim Yong say that while the ministry will stipulate the schedule of benefits for the new standard B1 plan, it will not dictate how much the insurers charge.

"Given the features are standardised, the variation in premiums should not be very large. The cost structure of the different providers might be different, so they may want to charge different fees," he explained.

While that might make sense from a business point of view, as they do not all have the same number of policy holders so the cost to them will likely differ, it will not make sense to the end consumer.

If the benefits are identical, shouldn't everyone in the same age band pay the same premium?

Today, the seven plans offered for this class of hospital care are as different as chalk and cheese.

Daily ward charges range from $450 to $1,000 a day on some plans, to "as charged" in others.

Similarly, surgical implants are capped at $3,000 in one plan, $9,000 in another, and "as charged" in a third - and surgical implants can be very expensive.

Some have lifetime limits, others don't; some pay only a portion of dialysis and cancer treatment bills, while others pay based on the full bill.

As expected, premiums vary greatly. At the maximum age of 100 years and older, premiums can be as low as $2,635 or as high as $4,913.

It may be better if MOH pooled all the B1 plans so that risks are shared. In this arrangement, the standard B1 plan is akin to a sort of "MediShield Life Plus" plan, and premiums will be the same across the board.

It is also a more efficient scheme for pooling of risk, which will also help reduce premiums.

With a bigger pool, it can also take in people with pre-existing conditions at higher premiums - again, similar across all insurers.

Insurers may not like this, but it will certainly take much of the confusion out of the B1 market. Everyone who buys into this category of IP pays the same premium and gets the same benefits.

After all, a standardised plan should be just that - similar in every respect.

Meanwhile, insurers can still offer add-on services, such as riders to fully cover B1 bills, to attract people to their scheme.

The MOH might also want to consider - both for the basic MediShield Life and the IPs - having the policy year the same as the calendar year.

This is important because the deductible is cumulative within a policy year - which starts the month a person signs on.

Today, a person might not know that a bill in April can't be added to the one in June because his policy year starts on June 1.

Having it follow the calendar year will make it much easier.

The MOH should take this opportunity to do a thorough overhaul to make the MediShield and IP schemes truly comprehensive and easy to understand.