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Private medical insurance industry to be transformed


Transiting to a Competitive and Dynamic Private Medical Insurance Market

Last week, the Ministry of Health (MOH) announced the details of the reformed MediShield. The reform will fix the current limitations of the MediShield scheme, bringing substantial benefits to Singaporeans by easing their financial burden if and when confronted with a major hospitalisation.
The limitations of MediShield, pertaining to high co-payment by patients and unduly low deductibles, also affect some of the Medisave-approved private medical insurance schemes (PMIS), although to a lesser degree. This is because the private insurers have been updating their insurance parameters periodically. Nevertheless, some inadequacies exist.
We should fix these limitations now before they become too severe for the patients to bear. Timely adjustments require less drastic adjustments.
In formulating these adjustments, MOH has taken the approach of letting the insurance industry free play, subject to certain minimum regulatory requirements.
These requirements are to:
(a) preserve the use of Medisave principally for inpatient care; and
(b) discourage open-ended and comprehensive medical insurance which has led to serious moral hazard problems of abuse and over-servicing elsewhere.
Specifically, MOH will require these private insurance plans to incorporate (a) a minimum deductible and (b) a minimum co-insurance element.
The current deductible levels have remained unchanged for more than a decade. They have gone out of line with current cost. Periodic adjustments are necessary to reflect the changing cost of hospitalisation.
From July 1, MOH will reset the minimum deductible level from $2,500 to $3,000 for Class A and private wards, and from $1,500 to $2,000 for Class B1 wards.
Current projections suggest that in 2010, MOH may have to raise the minimum deductible level to $4,000 for Class A and private wards, and $3,000 for Class B1 wards. But MOH will review this closer to the date.
As for the minimum co-insurance requirement, the current prescribed rate is 15%. MOH has decided to reduce it to 10%. This will give the private insurers greater flexibility in designing their insurance plans.
Some can take advantage of this relaxation to offer higher payouts for their policyholders who incur large bills.

Source: Ministry of Health Press Release 3 February 2005


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12 February 2005