Concerted efforts needed to keep IP plans sustainable
THE Health Ministry has always wanted to avoid a "buffet" syndrome when it comes to private health insurance under the Integrated Shield (IP) scheme.
A buffet syndrome is one where policyholders over-consume health services, leading to outsized claims and insurance plans that eventually become unsustainable. Hence, to qualify as a product provider in the Shield scheme, insurers are required to design plans with deductibles and co-insurance components. These are portions of hospital charges that must be borne by the policyholder, ostensibly to encourage consumers to take responsibility for their health. More than 10 years after the launch of the first "as charged" Shield plan, the industry finds itself in just the predicament that the ministry sought to avoid.
The Health Insurance Task Force has unveiled a significant set of recommendations aimed at reining in soaring claims that threaten to eventually make IP premiums unaffordable and plans unsustainable. Research by the Life Insurance Association finds that insurers with IPs grapple with steadily rising claims ratios and drastically reduced underwriting profit margins. Data shows that in 2015, the underwriting profit margins of IP insurers dipped to minus 5 per cent, the first year margins went into negative territory. The claims ratio climbed steadily from 57 per cent in 2011 to 82 per cent in 2015. Reports by both the LIA and the task force suggest that plan design influences policyholder behaviour - IP plans with riders tend to have higher claims incidence rates compared to IP plans with no riders. The differential in incidence rates between rider and no-rider plans runs as much as 24 percentage points.
