Integrated Shield Plan Premiums Are Rising. Whose Fault Is It?

Integrated Shield Plan Premiums Are Rising. Whose Fault Is It?

It’s been a hot minute since the commotion surrounding the premium hike around MediShield Life and Integrated Shield Plans, our national semi-privatised healthcare system.

All 3 sides — panel doctors, Singapore Medical Association (SMA) and Life Insurance Association (LIA) — have issued a flurry of rebuttals as to why the premiums are increasing, but it seems like the tussle is at a stalemate.

Price hikes are price hikes, and that’s no good for insurance policyholders like us.

If you’re like me, who’s a bit clueless about what’s actually happening and want to understand why these price hikes are happening, let’s dig deeper to find out.

What is an Integrated Shield Plan? 

According to Ministry of Health (MOH), an Integrated Shield Plan is made up two parts:

  1. A basic health insurance plan called MediShield Life which is administered by Central Provident Fund (CPF) Board
  2. Plus, another layer of coverage provided by private insurance companies in Singapore

Usually, this layer of coverage is to cover the costs of being warded in private hospitals or Class B1 or A wards in public hospitals.

There are 7 private insurance companies in Singapore that provide Integrated Shield plans:

Insurer Name of Integrated Shield Plan Premium as of 9 Apr 2021 (age 25, Class B1 coverage)
AIA HealthShield Gold Max S$248
Aviva MyShield S$261
AXA AXA Shield S$245
Great Eastern SupremeHealth S$228
NTUC Income IncomeShield S$239
Prudential PruShield S$243
Raffles Health Insurance Raffles Shield S$243

About 70% of Singaporeans complement their MediShield Life coverage with private insurers’ Integrated Shield Plans.

By how much are Integrated Shield Plan premiums set to rise?

At time of writing, our Integrated Shield Plan premiums have not yet gone up — if we don’t count the expected annual price increases. But we do expect prices to skyrocket sometime in the near future.

Why? Because our MediShield Life premiums went up in 2021, the first time this happened since the scheme was introduced in 2015. In short, expect your MediShield Life premium to increase by up to 35%.

On top of that, MediShield Life will cover a smaller proportion of some medical bills — meaning Integrated Shield Plan providers will need to shoulder higher costs.

So it’s very likely that Integrated Shield Plan policyholder will need to pay more for their health insurance in the future. Stay tuned for the impending price hike.

But why are Integrated Shield premiums rising?

We know that MediShield premiums are rising sharply and Integrated Shield premiums are set to follow. But what’s the root cause? Whose fault is it?

This is the part where no one seems to agree on. Some believe that it’s because insured patients are overclaiming, some think unethical doctors are overcharging. Others are pointing the finger at insurance companies spending too much on commissions and management costs.

Below, we look at the 3 big issues that came up in the SMA vs LIA debate.

1. Are doctors overcharging and patients overclaiming?

There’s a commonly floating myth that insurers are raising premiums because of “insurance buffet syndrome”. 

According to this myth, insured patients go for expensive/unnecessary medical treatments since they can claim everything, while unscrupulous doctors overcharge once they see an insured patient.

However, SMA’s position paper starts out by immediately debunking this myth using data from Singapore Actuarial Society. This data is pulled out from our national electronic health records.

Year Gross Claims  Number of Claims Registered  No. of Lives Covered Est. Average Payout per Claim
2016 S$1.190b 616,335  3,406,607 S$1,930 
2017 S$1.390b 727,279 3,461,147 S$1,911
2018 S$1.399b 792,804 3,557,822 S$1,764 
2019 S$1.617b 852,558 3,658,910 S$1,897 

Source: Singapore Actuarial Society

What SAS’ data shows is that average payout per claim has gone down by 1% from 2016 to 2019. (This might not seem like much to you and I, but remember that 1% of billions, is millions.) So it doesn’t sound like people are claiming more per claim.

SMA further stated that the claims incidence rate for IPs has been growing at a Compound Annual Growth Rate (CAGR) of 9% from 2016 to 2019, which is comparable to the basic MediShield Life claims incidence rate of 10%.

This is a point of contention that LIA seeks to rebuke. LIA says that, while the average payout per claim has been well-controlled, the claims incidence rate of 9% to 10% is unsustainable

This is supported with a graph of Integrated Shield Plan (IP) insurers’ annual returns to the Monetary Authority of Singapore from 2010 to 2019.

Source: MAS via LIA

Do take this graph with a grain of salt, because LIA has stated that this data contains “other long-term health products”, but “about 77% were IPs based on 2018 data”.

There is one thing we can glean from this graph. Ever since MOH has implemented a minimum 5% co-payment for new riders across all Integrated Shield Plans in March 2018, the average payout per claim dipped. This suggests that MOH’s policy has helped somewhat, but it does not help the fact that Integrated Shield Plan premiums are still set to rise.

2. Are insurers spending too much on commissions and management costs?

According to SMA, yes. Their position paper stated that insurers spend S$363 million a year on management expenses and commission fees alone — quite a “sizable recurrent sum”. 

They took this opportunity to push for a cheaper and more efficient single-payer system to eliminate two problems that they see in the current landscape:

  1. Having too many IP insurers causes duplication of resources and costs
  2. Having management and commission costs growing at a much faster rate than healthcare being delivered

LIA quickly picked apart SMA’s statement and provided another graph, this time illustrating that their management and commission fees have remained well-managed.

The graph shows that, over the past decade, gross claims have climbed 6-fold, while total management and distribution costs have climbed only 3-fold.

Source: MAS via LIA

LIA deduced that the high growth of claims accounted for an 81% increase in costs that Integrated Shield Plan insurers faced. Again, their take is that the claims rate is too high.

3. More insurers are adopting doctor panels, but is this working?

The issue of insurance panels is also a pain point between SMA, LIA, doctors and patients. 

Let’s say you are sick, and you’d like to seek treatment at your family doctor. However, your family doctor is not under the list of panel doctors approved by your Integrated Shield Plan insurer. That means you have no assurance that your medical expenses will be reimbursed by your insurer.

It’s a problem for everyone — SMA stressed the importance of the doctor-patient relationship, while insurers miss out on the business opportunity for having more doctors on their panels. Most importantly, patients miss out specialised care that only their preferred doctor can provide.

How big is this problem?

According to Dr Ng Chee Kwan, a urologist in private practice and current 1st Vice President of the SMA, only 300 out of the 1,500 specialists in private practice are on the Integrated Shield Plan insurers’ list of panel doctors (caa Nov 2020). That’s only about 20%.

This problem is compounded by the fact that certain specialties like geriatrics, gynaecology and psychiatry (among others) are underrepresented, with only 10% of the above mentioned amount in such panels.

LIA wrote in their position paper that currently there are about 250 to 400 private specialists in their Integrated Shield Plan insurers’ panels. They are looking to grow this number, but they did mention that there will be “significant effort and cost” for insurers to include on their panels.

Either way, things don’t look great for the consumer. 

If doctor panels remain as limited as they are right now, we will lack choices when we fall ill. The catch-22 is that if insurers widen their panels so that we have more healthcare options… then we can expect higher costs.

What’s MOH doing to mediate the Integrated Shield Plan premium hikes issue?

On April 3, 2021, Senior Minister of State at MOH Dr Koh Poh Koon stated that MOH will appoint a specialised committee in this lengthy Facebook post. This formalised committee seeks to balance the requests of:

  1. SMA wanting to set up a Complaints Committee for Integrated Shield Plan insurers
  2. LIA wanting to set up an IT platform for data consolidation, sharing and quickening the claims process

With this committee, MOH hopes to improve transparency on doctor fees and outcomes, Integrated Shield Plan insurers’ performance, how to better public awareness as well as better processes to deal with any unfair behaviour.

What can Integrated Shield Plan policyholders do for now?

For now, the best thing that us policyholders can do is to wait for further news.

Currently, there are measures in place to cushion the blow from the MediShield Life premium hikes — all Singaporeans get a 70% cover from the net premium increase from the first year, followed by 30% cover in the second year. This has been in effect since March 1, 2021.

But since 2 out of 3 Singaporeans have Integrated Shield Plans, most of us would be very worried about impending private insurers’ premium hikes.

If you’re young and healthy with no pre-existing medical conditions, you might still be able to switch to a cheaper health insurer (though there’s no guarantee their premiums will be competitive forever).

But if you’ve developed any medical conditions, it will be risky to switch out. Your new insurer will not cover any pre-existing medical conditions. So you can only “downgrade” your plan to a cheaper one.

Seems like there’s not much we can do but hope that MOH, SMA and LIA can resolve the situation. In the meantime, you can get familiar with the MediShield Life changes and educate yourself about health insurance in Singapore.

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