Affordability is key in health insurance

IT has been several months since higher premiums for private health insurance under the CPF umbrella kicked in. But bewilderment over the magnitude of the premium hikes remains. To recap, premiums for Integrated Shield plans were raised last March on the back of an adjustment of MediShield premiums. Among the Integrated Shield plans, the average premium increase in the various age bands was reportedly between 20 and 50 per cent. But that average masks some sharp increases among older age groups - where, for some age bands, annual premiums effectively doubled. To be sure, insurers were quick with the reassurance that benefits were enhanced, to include coverage for congenital and neonatal treatments, for example. The rub is that the older cohort of policyholders is likely to feel that the enhancements are not meaningful enough to justify the significantly higher premiums.

But the more salient reason for the hike is a markedly higher claims experience in recent years. At least one insurer has said that its average claims cost has risen by as much as 50 per cent between 2008 and 2011. For MediShield, a not-for-profit scheme, the amount of claims paid out nearly doubled between 2008 and 2012, while premiums collected rose 40 per cent. It has been reported that over the five years, the average payout per claim had risen 12 per cent.

Policyholders must keep in mind that Integrated Shield plans are offered by private insurers with a profit motive. Cherry-picking risks, for instance, are par for the course, and premiums are priced to generate a surplus. As long as premiums are not excessive, the result should be a sustainable product which is surely to all policyholders' benefit.