A preventive approach is key to keeping health cover sustainable

[SINGAPORE] Insurers, policyholders and corporates wrestle with the big elephant that is medical-cost or medical-trend inflation. Is it possible to bring it to heel?

The all-round impact is sobering. Policyholders with Integrated Shield Plans (IPs) feel the pinch in ever-rising premiums. Insurers grapple with soaring claims and a precarious book of business.

Those with IP businesses teeter on razor-thin margins. Those with group medical portfolios are in an even more unenviable state.

Based on data filed with the Monetary Authority of Singapore, this segment in aggregate has incurred cumulative underwriting losses of more than S$460 million over the past 10 years.

As for corporates, the negative cycle of an ageing population, high healthcare costs, overconsumption and overprescription raises a serious challenge.

The obvious, easier route is to reduce employee benefits or raise co-payment rates. But can they afford to do that in Singapore’s highly competitive labour market?

Medical-trend inflation is a far broader measure than healthcare inflation.

The latter is reflected in the healthcare consumer price index, which rose by 3 per cent in 2025.

The index includes primary care, hospital bills and medication cost. Its rise is more modest than medical-trend inflation, which ran at an expected growth rate of 14 per cent in 2025 and 2026, said Marsh Health and Benefits (MHB).

Medical-trend inflation is the more relevant term in the context of insurance, as its drivers extend far beyond healthcare inflation itself.

MHB cites four other causes: rising healthcare utilisation as populations age; healthcare staff shortages; pressure on public health systems; and dependence on imported goods and services, an aspect in which Singapore is particularly vulnerable.

Since medical-trend inflation is a given, frequent premium hikes are akin to chasing one’s own tail.

Insurers can do more

MHB’s health forum on Jul 23 threw up some insights, however.

Keynote speaker Dr Jeremy Lim, adjunct associate professor at the National University of Singapore Yong Loo Lin School of Medicine, said that healthcare inflation cannot be wished away.

“But it can be worked away by moving upstream, being much more thoughtful and intentional about preventing disease, and nipping disease factors in the bud,” he added.

He cited findings from Precision Health Research Singapore on the factors affecting health outcomes.

By far the largest, at 60 per cent, are behavioural and social or environmental factors. Genetics account for 30 per cent, and healthcare, a mere 10 per cent.

Singapore already has a framework for a preventive approach, through measures such as Healthier SG, national screening programmes and Active SG.

Insurance, however, is still largely reactive. People get sick, and claims are activated.

But, as payers with potentially enormous clout in the ecosystem, insurers can do more to proactively incentivise health.

The IP market has done this progressively. The latest modification to new riders ceases cover for deductibles and raises co-payment caps. This aims to curb overconsumption and nudge policyholders to take action to stay healthy.

In this interconnected web of healthcare, employers, who are payers themselves, have to step up.

As Richard Cooper, the MHB business leader, Singapore, said at the forum, employers who are best in managing healthcare costs over the next few years “are not the ones that simply redesign benefits to save money”.

He added: “They are the ones that use prevention and trust-based engagement to help keep people healthier in the first place.”

Prevention may not immediately slow premium increases, nor enhance insurers’ bottom lines. But healthier policyholders are likely to result in fewer and lower claims in the long run.