Issue:
October 2018 | Life | Download PDF | English By Irene Ng, Life/Health Branch Manager,
Singapore Region: Asia
Managing
and maintaining a sustainable health insurance (hospital reimbursement)
portfolio is often a challenge. Very often insurers face claims rates rising faster
than inflation of health expenditures in the general population. Singapore’s
national health insurance scheme (MediShield) has often been viewed as one of
the more successful public-private partnership schemes that provides long-term
coverage to citizens and permanent residents. However, the MediShield is not
without its own set of challenges. This article provides a background to the
Singapore MediShield programme and to how the government, healthcare providers,
consumers and insurers work together to manage the rising healthcare costs to
ensure sustainability of the scheme.
Introduction to MediShield
MediShield
was first introduced in 1990 as part of the Singapore government’s approach to
keeping healthcare affordable for its citizens. Commonly termed as the 3M
approach (Medisave, MediShield, Medifund), the government, through heavy
subsidies of healthcare cost, uses these 3Ms to ensure every citizen has some
form of savings in every healthcare need.
Medisave,
the first of the 3Ms, is a national medical savings scheme which helps
individual set aside part of their income into the Central Provident
Fund (CPF) Medisave Account to help pay for (own and family members’)
healthcare expenses.
The
second of the 3Ms is MediShield, an affordable major medical insurance scheme
that helps meet the cost of more expensive treatment or prolonged illness.
Premiums for MediShield can be paid using Medisave funds subject to an annual
limit. The focus of MediShield cover is not to pay for low cost treatment,
which can partially be funded using Medisave or out of pocket, nor is it meant
to cover the more luxurious hospital stay in a single or double bedded ward.
Instead, to keep the premium affordable, the basic MediShield covers admission
into Class B2 or C wards (i.e. 5 to 9 bedded wards), and has an
annual deductible and co-insurance features, as well as inner limits on the
maximum claimable amount for certain procedure or treatment.
The last
M, Medifund, is an endowment fund set up by the government as a safety net to help
needy citizens who are unable to afford even the most heavily subsidized
medical care.
MediShield Life
With the
changing healthcare landscape and ageing population, the original MediShield
coverage was no longer adequate for the welfare of the citizens. A major revamp
of the MediShield coverage was introduced on 1 November 2015 and was
replaced by MediShield Life. The key enhancements to the coverage included
higher payouts so that out of pocket expenses are reduced for larger hospital
bills, universal coverage for all citizens and Permanent Residents for life,
and coverage of pre-existing conditions. The cost of covering serious
pre-existing conditions is borne mostly by the government, with the
policyholders paying only additional 30% of premiums over 10 years to
reflect their higher risk.
Integrated Shield Plans (IPs)
In
addition to Medishield, which is managed and insured by the CPF Board, select
private insurers are licensed to provide additional and better coverage on top
of the basic Medishield. These two coverage components, one provided by the
government and the other by private insurers, are integrated under one plan,
known as Integrated Shield Plans (IPs). The premiums for IP can also be
paid from an individual’s or from a family member’s Medisave fund as long as it
does not exceed the prescribed annual limit. Individuals with an IP policy
transact only with the private IP insurer, with the CPF Board sitting
in the background and interacting directly with the IP insurers with
respect to premium collection and claims disbursement for the MediShield
component. Currently, six private insurers are licensed to provide such
integrated plans, with the seventh insurer entering the market on 1 August
2018. As at end of 2017, two-thirds of Singapore residents (citizens and
permanent residents) have an IP.1
Since
2005, due to keen competition amongst the private IP providers, coverage
scope under IPs expanded so that most plans today cover claims on an “as
charged” basis with generous annual and lifetime limits. As the regulated IPs
have a mandatory deductible feature of up to SGD 3500 per annum and
co-insurance of 10% in addition, IP insurers also offer rider plans that
“plug the holes” not covered under the regulated IPs, thereby providing
first-dollar coverage on every hospitalization. As at March 2018, about
1.1 million (about 41%) of IP policyholders also bought a
rider plan.
Table 1
provides a sample comparison of coverage under MediShield and the new
MediShield Life, as well as an example of a private Integrated Shield Plan. The
full spectrum of coverage scope from all six IP insurers and different
plan types can be found in https://www.moh.gov.sg/medishield-life/about-integrated-shield-plans/comparison-of-integrated-shield-plans.
Recommendations of the Health Insurance Task Force (extract from
Table 1 of HITF report)
1.
Introducing
Medical Fee Benchmarks or Guidelines
·
To have a
set of medical fee benchmarks or guidelines to provide a range of professional
fees. Benchmarks or guidelines should be calibrated to ensure the appropriate
involvement and adoption by stakeholders
·
To
address the issue of information asymmetry by providing stakeholders access to
information on appropriate charges
·
To
mitigate cases of over-charging by providers
2.
Clarification
on existing process to identify inappropriate medical treatment
·
To
clarify the existing escalation process, allowing insurers to raise cases of
inappropriate and excessive medical intervention to the relevant authorities
·
To
clarify the practices of insurers when dealing with such claims so as to
minimise the impact on policyholders whose cases are subject to investigation
·
To
increase awareness of the existing avenue for insurers in their review of
claims to raise cases of inappropriate and excessive medical intervention
3.
Enhancing
insurance procedures and product features
Panel
of Preferred Healthcare Providers
·
To
suggest that insurers consider the use of preferred healthcare provider panels,
where appropriate, to manage medical costs through fee agreements
(IP insurers should make clear to their customers that their choice of
healthcare providers is not restricted by the existence of the panels, although
their coverage may be affected.)
·
To
enhance and ensure transparency of the arrangement (e.g. disclosures in the
healthcare provider selection process)
·
To
suggest that insurers consider, during the appointment of preferred healthcare
providers, TPAs and intermediaries, whether their fee arrangements are in line
with SMC’s ECEG
Co-insurance &
Deductibles
·
To
encourage insurers to include co-insurance and/or deductible features in
product design in order to ensure consumers’ interests are aligned with
managing healthcare costs
·
To
address the risks of overconsumption of insurance due to poor product features
Pre-approval
of Medical Treatment
·
To
encourage insurers to approve claims for medical treatment and estimated bill
size prior to the actual procedure, which provides certainty to patients about
what can be claimed on their insurance policy
·
To
address the risks of inappropriate treatment and high medical charges
4.
Educating
consumers
·
To
educate the general public on the available options, such as the types of
hospitals and wards, and the corresponding costs of their medical treatments
·
To
address the issue of information asymmetry by ensuring information on medical
charges is readily accessible and easily comprehensible by consumers
Source: (extract from
Table 1 of “Managing the Cost of Health Insurance in Singapore” published
on 13 October .)
Rising claim costs
Inflation
of medical-related expenditures in Singapore has been running at about 50%
above that of general inflation over last decade.2 With the
expanded coverage of IPs and first-dollar coverage of rider plans, it is not
surprising that by 2016, all six IP insurers reported underwriting losses
of between SGD 7.3 million to SGD 29.2 million, as seen under the
mandatory financial filings.3 All six insurers reported a
second year running of underwriting losses in 2017, totaling SGD 146
million.4 Since the introduction of IPs in 1994, insurers have
been improving their operation efficiencies with reduction in management
expenses and distribution costs. However, these savings have been unable to
translate to reduction in premium for consumers as the counter increase in
insurance claims outweighs such savings. In a bid to ensure that health
insurance remains affordable and to curb the escalating medical inflation, the
insurance industry gathered relevant stakeholders – including healthcare
providers, relevant government bodies and industry associations – to form the
Health Insurance Task Force (HITF) in February 2016. The main tasks of HITF are
to evaluate the causes of rising claims and to recommend measures in the
short-to-medium term to moderate the escalation of IP premiums.
In its
report published on 13 October 2016, the HITF put forth a set of
recommendations based primarily on the findings from a study conducted by the
Life Insurance Association of Singapore (LIA) on the key contributing
factors to rising IP claims. The full set of recommendations can be found
on the side note on this page.
In the
LIA study, “Managing the Cost of Health Insurance in Singapore”, which used
publicly available data and statistics from IP claims between 2012 and 2014,
the following observations were made:5
·
IPs claim
incidence rate increases at a higher rate than general population at 9%
vs. 4%.
·
Plans
with lower Ward-type entitlements have higher claims incidence rate than plans
with higher Ward-type entitlements. This is due to the higher average attained
age of policyholders with lower Ward-type entitlements plans.
·
Although
plans with IP riders have only slightly higher incidence or utilization
rate, there is clear indication of higher propensity to utilize private
hospital services than policyholders without a rider plan.
·
The
inflation rate of average hospital bill sizes at private hospitals is higher
than public hospitals, with differences about two times the cost for inpatient
treatment, 2.5-3 times the cost for outpatient treatments, and
4 times the cost for day surgeries.
·
Costs for
various components of inpatient hospital treatments are higher in private
hospitals compared to public hospitals. The biggest differential arises from
surgery charges at 2-2.4 times in costs.
·
The inflation
rates for all inpatient bill components are much higher for private hospitals
than public hospital Class A wards (i.e. single bed wards) across all
distribution levels. (This allows better comparison as Class A wards in
public hospitals are not covered by government subsidy.)
·
There is
a high tendency to utilize public hospitals for more complex procedures.
·
Policies
of IPs with IP riders have higher average bill sizes, averaging 20%-25%,
than those with only IPs.
·
With the
introduction of MediShield Life in 2015, some savings should accrue to the
private insurer’s share under the IPs and IP riders due to the higher
coverage scope of MediShield Life. However, this savings will not be
adequate to offset the higher claims incidence rate and higher claims cost
expected.
Actions to curb healthcare costs
Since the
publishing of the HITF report and recommendations, the Ministry of Health has
been working with the industry and relevant stakeholders to implement measures
to decelerate medical inflation and curb the rising MediShield and IPs claims.
Below are some actions that have been implemented or will be introduced in the
coming months.
Action 1 – Introducing medical fee benchmarks or guidelines
The
Singapore Medical Association (SMA) removed its Guidelines on Fees in 2007
as it was deemed anti-competitive. This removal has been blamed as one of the
triggers to rising medical charges over the years as the absence of fee
benchmark or guidelines makes it difficult for insurers or consumers to
challenge charges made by doctors and hospitals and to detect inflated claims.
Following the HITF recommendation in 2016, the MOH established a 13-member
committee to come up with “reasonable” national benchmarks for medical fees on
common procedures. This first set of fee guidelines, which account for 80%-85%
of operations done in Singapore, will be introduced by the second half of 2018.
The guidelines will further expand following this first release to eventually
include benchmarks for consultation fees and laboratory charges. With the
re-introduction of medical fee benchmarks, the hope is that insurers will be
more empowered to detect inflated claims and take effective actions towards
claims adjudication.
Action 2 – Appointment of preferred healthcare providers
and pre-authorisation framework
To enable
better management of health claims costs, the HITF recommended IP insurers
consider appointing a panel of preferred healthcare providers and introducing a
“pre-authorisation” framework prior to a medical procedure.
In
January 2018, the LIA published a memorandum of understanding for all
IP insurers entitled “Good Practices on panel of preferred healthcare
providers” and separately, a “Good Practices on pre-authorisation
framework/process”. These memorandums encourage IP insurers to be
transparent with customers with regard to these changes to the
IP coverage. The selection criteria for panel healthcare providers and the
list of their names should be made available and easily accessible to
customers, and the provider list should be regularly updated. Customers should
also be advised on the impact to their coverage if they decide to use a panel
provider or not. If customers decide to seek treatment outside the panel,
insurers should also provide alternative options to such customers.
Under the
“pre-authorisation framework”, insurers should clarify the process and terms
and conditions surrounding pre-authorisation. Customers should be made aware of
the benefits of going or not-going through pre-authorisation and how that could
potentially impact the policy coverage. The aim of implementing
pre-authorisation is to benefit all three stakeholders – the insurer, the
patient (policyholder) as well as the healthcare provider. With this aim in
mind, the process of implementation should take care of the interests of these
stakeholders.
Action 3 – Change in IP rider product features
One of
the most significant changes to the Singapore health insurance framework
following the HITF recommendation is the change to the product features of
IP riders, announced by the MOH in early March 2018. In this change,
it has been made compulsory for all IP riders to be sold from 1 April
2019 onward to include a mandatory co-payment – a minimum of 5% of a hospital
bill. The annual co-payment amount will be capped if the policyholder selects
treatment by the insurer’s panel doctors or obtains the insurer’s
pre-authorisation for seeking treatment outside the insurer’s panel. This cap
will ensure that the total healthcare cost remains affordable to the consumers.
However, if the policyholder opts for treatment outside the preferred
healthcare providers or does not seek pre-authorisation, this cap will no
longer apply. These features will encourage consumers to be conscientious in
choosing their medical providers and treatments as they will have “skin in the
game” in managing the healthcare expenditure. Individuals who purchase a full
rider between 8 March 2018 to 31 March 2019 will be required to
switch to the new co-pay rider by 1 April 2021. All IP riders
purchased before this date of announcement will not be affected by the change.
Light at the end of the tunnel?
With the
keen interest of the Singapore government and IP insurers in keeping down
the cost of health claims, and with the various measures undertaken or in the
pipeline to better manage and balance the interests of all the stakeholders,
the medium to long-term hope is for the MediShield Life and Integrated
Plans to remain affordable while providing universal coverage. Naturally,
higher healthcare expenditure comes with an ageing population, and so the
Singapore government is also embarking on measures to encourage healthy living
and early disease detection to slow this wave of rising medical expenses.
With the
recent report of high underwriting losses for all six IP insurers for a
second year running, despite a premium increase a year ago, consumers are
facing the imminent possibility of yet another premium hike. Without more
drastic changes to curb these losses, consumers will soon be facing rising
premiums that could lead to unaffordability for more people.
Will
Singapore find the magic formulae with the implementation of the various
changes discussed here? This possibility is certainly promising, but time is
needed to turn the ship around and also to change consumers’ behavior in
managing their health expenditures in more responsible ways.
Endnotes
1.
Ministry
of Health (8 May 2018). Government Health Expenditure and Healthcare
Financing. (https://www.moh.gov.sg/resources-statistics/singapore-health-facts
government-health-expenditure-and-healthcare-financing).
government-health-expenditure-and-healthcare-financing).
2.
Singapore
Department of Statistics (SDOC), Consumer Price Index from 2005
to 2015, http://www.tablebuilder.singstat.gov.sg/publicfacing/mainMenu.action.
3.
Monetary
Authority of Singapore (MAS) website.
4.
The
Straits Times, 25 June 2018, “IP insurers’ losses raise possibility of
premium hikes”.
http://www.genre.com/knowledge/publications/ri18-9-en.html?utm_campaign=Subscription%20Management%20Center&utm_source=hs_email&utm_medium=email&utm_content=66563343&_hsenc=p2ANqtz-8Bz9jJywwBongknaGK9xanoaHb1bmXVbdbeLHcZmjOdWwNbvgYs2TwGiPxWJbyYhYYz7XcvTgEk033Uic-bAF2LLldUw&_hsmi=66563343
No comments:
Post a Comment