Integrated Shield Plans: sustainability and affordability are big issues

A PRIVATE Integrated Shield Plan (IP) is arguably a necessary element of individuals' insurance portfolios, as a means to mitigate healthcare costs. It complements Medishield Life, which provides basic cover where costs are pegged to Class B2/C rates. IP plans, designed with "as charged'' benefits, are more comprehensive so out-of-pocket costs should be relatively less than with Medishield Life alone.

This is no small consideration. Medical costs rise at a much faster clip than consumer price inflation; they also escalate with age. The Aon Asia Healthcare Trends Report published earlier this year found a medical inflation rate in Singapore of 10.9 per cent, just a tad higher than the regional average of 10.7 per cent. What is somewhat startling is that Singapore's out-of-pocket (OOP) health expenditure is the second highest of 11 countries at 54.8 per cent. The highest OOP is Pakistan with 56.3 per cent; the lowest is Thailand at 11.9 per cent.

Insurers of IP plans, however, are grappling with deepening underwriting losses since 2016. Wen Consulting estimates underwriting losses of S$146 million in 2017, compared to S$99 million in 2016, despite premium increases. Insurers have taken steps, following the seminal 2016 study of health insurance costs by Life Insurance Association, to rein in over-consumption of healthcare, particularly in private hospitals. These steps included the establishment of "preferred'' panels of doctors and the requirement for a co-payment element in riders by 2019. It was found that coverage of the entire bill through riders for the deductible and co-payment portions encouraged not just over-consumption, but also over-charging by medical professionals. The report noted instances of over-charging, including "inflating certain components of the bill, unbundling certain routine laboratory tests for higher total billing or charging excessive amounts for consumables''.