MediShield Life premiums have to be adjusted accordingly to ensure that its coverage remains updated and relevant to the healthcare needs of Singaporeans, according to Senior Minister of State for Health Koh Poh Koon in Parliament on Monday (Nov. 2).

This was said in response to several Members of Parliament (MPs), who posed questions regarding the justification behind the recent hike in MediShield Life premiums and how to keep premiums affordable for certain segments of society, such as low-income households and seniors.

Premiums may rise by up to 35 per cent before subsidies

Recently, the Ministry of Health (MOH) announced that premiums for MediShield Life may increase by up to 35 per cent in the next few years, before subsidies, marking the first major review of the scheme since its launch in 2015.

This review was mentioned during MOH's addenda to the President's Address earlier this year.

According to CNA, under the MediShield Life Council's recommendations, those aged 61 and above will see the highest increase in premiums of about 35 per cent, before subsidies, although the net increase for all Singaporeans will be kept to about 10 per cent in the first year, after factoring in subsidies.

These changes are expected to be implemented in early 2021.

MediShield Life premiums have remained unchanged for the last five years

Although the government had considered deferring the MediShield Life review and consequent premium increases due to the ongoing Covid-19 pandemic, it has been unable to do so.

Since its launch in 2015, the number of MediShield Life claimants has increased by about 30 per cent, and the annual payouts have increased by about 40 per cent over the last for years.

Between 2001 and 2019, the size of the average hospitalisation bill in public healthcare institutions have also increased by about six per cent a year on average.

As a result, premiums need to be adjusted to ensure that the MediShield Life Fund "remains solvent and sustainable", according to Koh.

He also emphasised that MediShield Life premiums have been kept unchanged for the first five years of the scheme, in line with earlier public commitment.

Not appropriate to compare premium increase with other countries

According to Koh, it is "not appropriate" to compare MediShield Life's premium increases with other national health insurance schemes, given that premiums are priced taking into account multiple factors, which "inevitably vary" from country to country.

This was in response to a question posed by Non-Constituency Member of Parliament (NCMP) Leong Mun Wai, who asked whether it is "unusual by international standards" for a health insurance scheme to increase its premiums by 35 per cent in a single adjustment.

Leong, from the Progress Singapore Party, also asked Koh for the total Medishield premium that will be paid by a Singaporean in a lifetime, assuming that the premiums are compounded at 2.5 per cent and four per cent interest respectively, but Koh replied that it would "not be meaningful" to compute how much premiums a Singaporean will need to pay over his lifetime by assuming a fixed compounding factor each year.

This is because future premiums would depend on how the underlying drivers evolve, explained Koh, and this depends on many factors.

He also said that the amount of premium subsidies an individual would receive will also vary over his lifetime, depending on his financial circumstances.

Total premiums collected between 2016 and 2019 less than required to meet future claims

Koh said that the MediShield Life Fund has to be "self-sustaining" based on "sound actuarial principles", and that premiums collected have to cover potential current and future payouts, including amounts set aside to support future commitments, as well as provide a buffer against unforeseen contingencies, such as unexpected spikes in hospitalisations due to disease outbreaks.

He said that between 2016 and 2019, a total of S$7.5 billion in premiums were collected, which comprises of S$4.4 billion in premiums collected from policyholders, as well as S$3.1 billion from the government, in terms of subsidies and other forms of support.

In the same period, a total of S$3.5 billion in claims were paid out, while S$3 billion was set aside for future premium rebates.

Koh also said that the Incurred Loss Ratio (ILR) of the Fund was an average of 104 per cent over the period from 2016 to 2019, which means that the total premiums collected was slightly less than the total monies required to ensure that the MediShield Life Fund is able to meet future claims and future commitments.

Koh also emphasised that MediShield Life is a not-for-profit scheme.

"All premiums collected are placed in the MediShield Life Fund and are used solely for the the benefit of policyholders and in the administration of the scheme," said Koh.

He also said that information about the Fund size, reserves and ILR is published on the MOH website, and that the financial accounts for the Fund are audited by an external auditor, and submitted to Parliament every year.

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