What’s ailing the group medical-benefits market? Integrated Shield Plans offer clues

[SINGAPORE] Employees who fall ill and need outpatient or inpatient care typically try to claim as much as they can from their company’s medical cover, before they tap their Integrated Shield Plan (IP).

But they may not be aware that their employers, who subscribe to group-medical cover for their workforce, grapple with similar pressures that dog the IP market.

Escalating claims and rising cost of care – usually in private-care settings – are causing companies’ group-health premiums to rise by an average of 15 to 20 per cent a year.

Outsized claims in any single year could cause renewal premiums to rise by more than 20 per cent.

Insurers who offer group-medical plans are also in a tough spot. In aggregate, the underwriting margin of the group-medical segment was minus 2.8 per cent over the past 10 years to end-2025, based on industry data crunched by Singapore Actuarial Society (SAS) president Alex Lee.

In contrast, IPs’ 10-year average underwriting margin was 0.5 per cent.

In Singapore’s competitive talent market, medical benefits are a key feature of companies’ incentives to attract and retain staff. Financial institutions and tech companies are said to offer the most generous plans.

But rising premiums and costs put employers in a quandary. In its latest report, Aon has projected a lower medical trend rate in the Asia-Pacific in 2027 of 9.7 per cent, compared with 11.3 per cent in 2026.

Singapore, however, is an exception. Its medical-trend rate in 2027 is forecast to rise to 14.7 per cent from 13 per cent in 2026.

Rising claims force a rethink

Richard Cooper, business leader for Mercer Marsh Health and Benefits, said: “There are organisations struggling with revenue pressures, driven by global macroeconomic challenges. Revenue growth may have slowed, but benefit costs are rising at a far greater rate.

“This financial strain is forcing a growing number of employers to re-evaluate their employee health-benefit programmes, including increasing the share borne by employees.”

Post-Covid, some companies raised benefits to help and protect the workforce, he said.

“Unfortunately, that’s now part of the bigger (cost) picture and has opened the door to higher claims… Benefit design is one aspect which organisations must look at, because the dollar is not stretching as far as it used to.”

Employers are understood to be examining levers to dampen claims and curb overconsumption among employees, including changes to their plan design and higher co-payment rates.

Susan Ong, Income Insurance general manager (corporate business) said: “Over the past year, we have been engaging employers on measures that can support the long-term sustainability of employee healthcare benefits, including cost-sharing arrangements such as co-payments.

“But adoption has been slow, as many employers are mindful of maintaining competitive employee benefits. They’re understandably cautious about reducing benefits that employees have grown accustomed to.”

Unlike IPs, where plans are guaranteed renewable and cover individuals for life, group-medical plans are contracted for a year or two, after which premiums and benefits are renegotiated.

Employees are underwritten collectively as a group, which means pre-existing conditions are covered.

Dr Jeremy Lim, adjunct associate professor at the National University of Singapore Yong Loo Lin School of Medicine, said the group-medical business is much more competitive to start with.

“Brokers compare across insurers and (employers) can negotiate much better rates and benefits which translate into lower returns and tougher loss ratios.”

WTW head of Singapore Fong Han Wei said margins are thinner because “employers purchase coverage at scale and negotiate competitively on price”.

“As group policies are generally renewed annually, they also limit insurers’ ability to build in long-term pricing buffers.

“As a result, even modest deviations between actual claims experience and pricing assumptions can have a significant impact on profitability. In an environment where medical cost inflation has been running at double-digit levels, any underestimation of future healthcare costs can quickly turn a portfolio from profit to loss.

“Looking ahead, insurers are likely to adopt a more disciplined underwriting approach and price more conservatively to protect margins amid continued medical-cost inflation.”

SAS’ Lee noted that the group-medical market is “highly concentrated”. In 2025, the 10 largest insurers accounted for more than 95 per cent of group medical premiums, and the remaining business is spread across nearly 20 other insurers, he said.

“Employers must balance costs against employee welfare and talent retention. This is particularly challenging for large corporations and multinationals, where established benefits may be difficult to reduce. Smaller employers may have greater flexibility but tighter budgets.”

Over the longer term, wellness initiatives can also help companies manage medical plan costs, Aon’s study has found. Cardiovascular and respiratory diseases, for instance, are the top drivers of higher claims.

Alan Oates, Aon head of global benefits (Apac), said “well-being programmes” could nudge employees towards better lifestyle choices.

“The idea is to change people’s behaviours... to reduce the risk of and predisposition towards chronic illnesses.”

Impact of new IP riders

Meanwhile, changes in the IP market are expected to cause further strains on the group business. New IP riders launched in April cease the coverage of deductibles and raise the co-payment cap to S$6,000 from S$3,000.

The changes raise policyholders’ out-of-pocket costs, and are intended to curb overconsumption.

But the new riders could instead drive more people to tap their group benefits to cover the out-of-pocket costs that would be incurred by using their IPs and riders. The net result may further elevate group claims, and arguably do little to curb overconsumption.

Lee said it is important to consider the interaction between employer-sponsored insurance and IPs. “Healthcare utilisation needs to be considered across different insurance arrangements, rather than examining each policy in isolation.”

He added: “Deductibles and co-payments under IPs are intended to encourage patients to consider healthcare costs. But where group medical insurance reimburses these expenses, the employee’s actual out-of-pocket cost may be substantially reduced or eliminated.

“This can weaken the intended cost-sharing incentives and potentially encourage unnecessary or disproportionately expensive treatment.”

Aon’s Oates said the IP rider changes could result in “more first-payer burn in employer programmes”.

But he is optimistic over the longer term. “We’re going to see that as a one-time effect. Once those changes are in place, people’s utilisation plans will normalise. Once we get to the other side of that, we’ll probably see Singapore fall in line with other major markets around the region.”

For now, it is too early to ascertain the impact of the new rider design on group medical plans. The new IP riders apply to new customers from April. Those who purchased legacy riders before Nov 25, 2025, can still renew them.

AIA Singapore chief corporate solutions officer Kenneth Tan said group medical plans that provide first-dollar coverage could see higher utilisation. “Some employees may also begin to look to their corporate benefits as the primary source of healthcare financing.

“What this does reinforce is the need for employers and insurers to regularly review benefit design and care pathways to ensure programmes remain sustainable, while continuing to provide meaningful protection for employees.”

AIA Singapore covers over 1.3 million employees, about a third of Singapore’s workforce.

Singlife group head of distribution Akhil Doegar said premium adjustments are only one lever. “Healthcare inflation is not driven solely by the cost of healthcare itself. A significant proportion of overall healthcare spending is determined by how employees navigate the healthcare system.

“When care pathways are fragmented, patients may bypass primary care, undergo unnecessary medical investigations, or seek treatment in higher-cost settings when alternative options are clinically appropriate, such as going for day surgery instead of full admission.

“This means that healthcare costs are often shaped well before a claim is filed – which contributes to higher claims costs, pricing volatility and pressure on premiums across the market.

“As the healthcare ecosystem continues to evolve, we need to look beyond how healthcare is financed and focus on how care is accessed and delivered in the first place.”