Panel of doctors serves as enforcement mechanism, says Life Insurance Association

HAVING a panel of doctors serves as an enforcement mechanism to keep fees of healthcare practitioners in check, and is a "reasonable approach" to take if savings are passed on to policyholders, the Life Insurance Association (LIA) said in a statement on Friday.

Insurers and doctors have locked horns in recent weeks over issues surrounding Integrated Shield Plans (IPs) panels. The use of IP panels was recommended by the Health Insurance Task Force (HITF) in 2016, but has come under the spotlight lately as policyholders make the transition into co-pay arrangements. Such arrangements encourage seeking treatment from their insurers' accredited specialists or doctors.

Doctors responded with a call for more inclusive IP panels, but insurers warned of the possible trade-offs. The LIA had said earlier that including all private specialists on insurers' panels of doctors may drive up costs and premiums. The panel also serves to plug the gaps in the Ministry of Health's (MOH) fee benchmarks.

MOH fee benchmarks have been published for 222 of the most common procedures since late 2018, with each benchmark for a procedure listed with a lower and an upper limit.

The LIA pointed out that current benchmarks only provide a guide to acceptable charges. Doctors are not required to abide by them and can charge above the upper bound.

"This issue of enforcement can be addressed through the appointment of panels, within which doctors sign enforceable contracts, and are therefore legally bound to charge within the agreed fee range," said LIA.

The underlying concept of a panel is to use the insurer's bargaining power to negotiate preferential rates from healthcare providers in exchange for higher volumes, added the LIA.

"So long as a reasonable fee is left on the table for the doctor, and savings are passed on to policyholders in the form of lower premiums, this is a reasonable approach to take," it added.

The LIA also said that with the average difference between the upper and lower bound at 1.8 times, the appropriate charges within the range of the fee benchmark are unclear. This is as individual procedures do not have descriptors to determine when doctors should charge towards the upper or lower end.

Panels are therefore in place as a default fee benchmark below the upper bound. To be sure, insurers will allow charges above the default benchmark for cases which are more complex than the norm.

"So long as insurers are fair in allowing deviations, this should be a reasonable way to conduct panels," said the LIA.

In a statement on Friday, AIA Singapore said that its panel fees, while aligned with MOH fee benchmarks, does allow deviation from the agreed fees "should the case be more complex than the norm".

And in terms of recruiting doctors into its panel, the AIA Quality Healthcare Partners, the insurance company said two main general criteria are considered: a minimum of five years specialist practice experience, and a clean professional track record.

In addition, the practice patterns of a doctor based on AIA Singapore's claim records is also factored in.

"We size the required number of specialists for each specialty taking into consideration our claim patterns, size of our client base, and the need for adequate capacity at subspecialty and facility level," it said.

Meanwhile, as doctors push for wider panels that include all specialists whose fees are within benchmarks, the LIA said that there are limitations to the rate of expansion of panels and the eventual size of panels.

This is due to the "significant effort and cost are required to vet and monitor panel doctors". Insurers, however, remain open to engaging stakeholders on the ideal size of a private specialist panel, said the LIA.

Between 2016 to 2019, the compound annual growth rate (CAGR) rate of management expenses and commission stood at 16 per cent and 15 per cent respectively; the CAGR for gross premiums and gross claims stood at 10 per cent and 11 per cent respectively.

But the LIA highlighted that claims are still the main source of overall cost increases. Based on 2010 to 2019 annual returns, which insurers submit to the Monetary Authority of Singapore (MAS), total claims grew about six times from S$267 million to S$1.6 billion.

Meanwhile, management expenses grew about 3.1 times from S$53 million to S$166 million; distribution costs rose 3.3 times from S$79 million to S$267 million. Claims therefore account for about 81 per cent of the growth in costs experienced by IP portfolios, said the LIA.

The LIA also suggested that the increase in CAGR management expenses in recent years could be from costs incurred through the implementation of the HIFT recommendations.

At the same time, there were new entrants into the IP market between 2016 and 2018.

"As new entrants have relatively small portfolios, they tend to have higher management expenses as a fraction of premiums. In addition, distribution costs are higher for policyholders in the first year of a policy, as considerable work is involved in the inception of IP policies," said the LIA.

The Singapore Medical Association (SMA) had earlier suggested that IP insurers do the necessary to explore cutting their own management and commission costs to enhance the sustainability of the IPs. The association also recommended that the relevant authorities raise the claims ratios of each IP insurer to 85 or 90 per cent from the current 75 per cent.

In response, the LIA said that while such a regulation, known as the medical loss ratio regulation (MLR), might work elsewhere such as in the United States, the market conditions differ in Singapore. The LIA is therefore leaving it to relevant regulators to determine the feasibility of introducing MLR regulations for policyholders.

Additional Reporting by Rae Wee

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