Jul 07, 2014

    Educate the public on health-care financing system

    MUCH has been said about the strengths and weaknesses of the long-awaited recommendations crafted by the MediShield Life Review Committee, but one issue has stuck out like a sore thumb: the overbuying of Integrated Shield Plans (IPs).

    In the clearest indication that something is amiss, the committee's report released on Friday stated that about three in five Singaporeans are covered under IPs.

    Nothing wrong there. After all, it is the consumer's prerogative to have higher health-care assurance. But seven in 10 armed with IPs that target Class A wards in public hospitals chose to stay in lower ward classes when hospitalised. Only one in 10 from the same group chose private hospitals.

    Echoing a similar trend were those with IPs that target private hospitals - six in 10 chose lower ward classes in public hospitals.

    The committee noted twice in its report that many Singaporeans want medical treatment beyond that provided in Class B2/C wards but have "over-stretched themselves to buy the most expensive product for higher protection".

    A quick comparison of the IPs offered by the five insurers - AIA, Prudential, Aviva, NTUC Income and Great Eastern - showed that premiums for the first 40 years of an individual's life were priced suitably low to gain market share.

    For example, existing private IPs for Class B1 in public hospitals range between $78 and $207 annually, according to the comparison provided by the Ministry of Health's (MOH's) website. The amount payable doubles to about $297 to $410 when the consumer is between the age of 41 and 50. It rises to between $425 and $921 for those aged 51 to 65, and for those who are 66 to 90, the yearly costs go up to between $888 and $4,245.

    While information is relatively accessible and most people understand that they have to pay more as they get older, only a small number of people truly realise the exponential spike in IP premiums from age 60 onwards, not to mention the accumulated lifetime costs.

    This is why there is a pressing need for the Government to educate the wider public on its entire health-care financing system, as well as the things to look out for in choosing an IP if required, so that the individual can make an informed decision.

    The knee-jerk reaction to the introduction of MediShield Life is to drop the existing IP, but hold your horses.

    Typically, the existing IPs should provide enough coverage. Steven Lim, health insurance consulting and actuary partner at PwC Singapore, cautioned that the individual should compare apples to apples.

    "Basically, most people will be weighing the increase in the premium against the increase in level of coverage, and also looking at other secondary factors, such as the insurer's reputation and the level of service by the insurance agent.

    "However, lower-income earners, who currently have a Shield Plan for which the increase in premium is significant, will now have to make a choice on whether they can afford to continue with an IP."

    In a similar vein, MOH advised the public to factor in their "preferred ward class" and "the affordability of premiums over the long term".

    Woo Shea Leen, financial services insurance partner of PwC Singapore, said that the uncertainty surrounding IPs in terms of pricing, coverage and the treatment of pre-existing conditions is the single biggest challenge that consumers now face.

    Honestly, besides educating the consumer, perhaps the same can be done for those promoting the IPs.

    For now, consumers may feel assured that the proposed changes make sense and are necessary to plug the gaps in our health-care system. But as medical inflation and claims limits balloon, the path to universal health care is undoubtedly uphill.