Challenging task weaning employers off group plans

Singapore

THE MediShield Life Review Committee has called on the government to consider improving corporate tax incentives or providing grants to firms willing to switch to portable medical benefits that ride on MediShield Life for their employees.

But the committee is aware that the transition towards portable medical benefits will be a challenging one, given that the benefits under the group hospitalisation and surgical insurance plans offered by employers are seen as more attractive.

"These plans tend to offer higher perceived value to employees and at relatively lower costs for employers, especially if they have a younger and healthier employee profile," said the report.

Under a portable medical insurance scheme, a firm makes contributions to an employee's Medisave account. So the employee uses those funds to buy MediShield Life or an Integrated Shield Plan (IP); this reduces what would otherwise be duplication of coverage between the employer's medical benefits and MediShield Life. Portable coverage is also a boon for employees as they continue to be insured even if they switch jobs or retire - which is not the case with employer benefits.

The National Trades Union Congress (NTUC), responding to the committee's report, believes that portability is the way to go: "We hope to get more companies on board the Portable Medical Benefits Scheme (PMBS) as a possible way of reducing (potential duplication of medical insurance benefits). Employers should consider taking up portable medical benefits that ride on MediShield Life or provide additional Medisave contributions to help their workers pay for MediShield Life or IP premiums."

But this will be a hard sell with businesses, some of which regard their individual medical benefits as a way to attract and retain talent, said Singapore Chinese Chamber of Commerce & Industry president Thomas Chua.

PricewaterhouseCoopers (PwC) Singapore partner Woo Shea Leen said the take-up rate of PMBS is low despite tax incentives being available because companies prefer the more cost-effective option of a group plan; switching to portable insurance will cost more at a time when employers are seeking to control expenses.

But the Singapore National Employers Federation (SNEF) said the committee's recommendations for a standard IP - enabling risk-loaded policies for IP insurers and stronger incentives from the government to entice firms to restructure their medical benefits - represent a "major breakthrough" in encouraging the transition to portable medical benefits.

"For employers, their medical costs would be more predictable and, for workers, they would be able to get better coverage when they are in between jobs and after retirement," SNEF said, adding that government incentives to make the switch would be crucial.

Still, a key step will be made next year, with the CPF employer contribution rate rising one percentage point, and the increase to be funnelled towards the employee's Medisave account. A one-year employment credit scheme, under which employers will receive an offset of 0.5 percentage point of wages, will cushion the heavier burden for firms in the first year.

Meanwhile, REACH has set up a microsite to collect views on the MediShield Life recommendations. This microsite is at www.reach.gov.sg/medishieldlife