IP insurers incurring losses: What about MediShield Life?

2017-outlookfairly-bleak

The increasing underwriting losses have triggered off concerns on life premiums.

I refer to the article “Six IP insurers stung by underwriting losses as claims surge” (Business Times, Sep 7).

It states that “FOR the first time in 12 years since the market’s first as-charged Integrated Shield Plan (IP) was rolled out, the insurers all clocked underwriting losses in 2016, despite hikes in IP and rider premiums.

Perhaps, at the start of an unhealthy streak, the industry chalked up an underwriting loss margin of 9.4 per cent in 2016.

The individual and industry underwriting losses posted in 2016 come at a time when net claims incurred by the IP insurers rose faster compared with premiums earned. Not helping are claims for treatments in private hospitals which remain a thorny issue for the insurers.

Between 2005 and 2016, the industry’s claims ratios grew quickly from 42.6 per cent to 84.1 per cent.”

In this connection, according to the CPF Board’s annual report 2016 (page 141) – the MediShield Life Fund (2015) – Total financial assets through profit or loss – was $2.7 billion.

According to the article “Parliament: Nearly half of MediShield Life claims paid out went to Singaporeans over 65” (Straits Times, Nov 8, 2016) – “In total, more than $600 million was paid out under the universal insurance scheme during this time period. This is up from the $307.5 million disbursed over the same time under the old scheme.

“Overall, for older Singaporeans, MediShield Life paid out an average of $1,639 per claim,” Mr. Gan said. “(This is) a 15 per cent increase from $1,425 per claim under MediShield.”

Premiums increased 153% against claims increase of 100%?

As to “between last November and September this year – a total of $614.3 million (claims) was paid out” and “over the same period in the previous year, $307.5 million was disbursed for 291,500 claims – premiums rose, mounting to $1,736 million in the 11 months from its launch – compared with $685.7 million in the same period the previous year – almost half was paid by the Government, largely as premium subsidies” (“MediShield Life helps more people a year on” (My Paper, Nov 1) – does it mean that premiums increased by 153 per cent ($1,736 divided by $685.7 million) against the increase in claims payout of 100 per cent ($614.3 divided by $307.5 million)?

Premiums increased 2.5 times against claims payout increase of 2 times?

So, does it mean that premiums increased by 2.5 times against the claims payout increase of 2 times?

What happens when transitional premium subsidies end?

Although “almost half was paid by the Government, largely as premium subsidies” – when the decreasing transitional premium subsidies end after four years – will the premiums to claims ratio still be higher than before – as the data is now showing?

44.8% claims to premiums ratio in the previous year?

Also, does it mean that the claims to premiums ratio over the same period in the previous year was 44.8 per cent ($307.5 million claims divided by $685.7 million premiums)?

35.4% claims to premiums ratio from its launch?

And the claims to premiums ratio in the 11 months from its launch was 35.4 per cent ($614.3 million claims divided by $1,736 million)?

Claims to premiums ratio dropped from 44.8 to 35.4%?

Why is it that the claims to premiums ratio has apparently, dropped from 44.8 to 35.4 per cent?

51,000 residents have outstanding premiums?

“In response, Minister of State for Health Chee Hong Tat said that as of September, around 51,000 residents have outstanding premiums due, which amount to around $12.8 million. This represents about 1 per cent of all members and includes overseas Singaporeans as well as those who cannot be contacted.

“We are reaching out to remind Singaporeans and help them with their MediShield Life premiums,” Mr Chee said. “The Government has provided subsidies to help Singaporeans pay for their MediShield Life premiums.””

200% capital adequacy ratio?

“The ratio of the MediShield fund at the end of 2012 was 165 per cent. The fund has set a target ratio of 200 per cent (required capital adequacy ratio is 120 per cent), which Health Minister Gan Kim Yong has said is in line with industry best practices.”

$2.4b MediShield fund’s assets?

In this connection, according to the report on the “MediShield Fund“ – “As at end-2013, the Fund assets stood at $2.4 billion.

Over the past five years, on average, about two-thirds of the MediShield Fund comprised reserves to fund the expected scheme liabilities.

The remainder is capital which meets the same standards required of other insurers under the Monetary Authority of Singapore (MAS)’s risk-based capital framework”.

What about the accrued % since inception?

In Table 1 – the insurance premiums of $372,132, 385,563. 404,732, 421,297 and $770,039 million, from 2009 to 2013, adds up to a total of $2,353,763 billion shown in the same table.

So, does the “Fund assets of $2.4 billion” include the interest that should normally accrue on the annual surpluses of premiums less claims, every year since the MediShield scheme started?

Surpluses before 2009?

Also, does the “Fund assets of $2.4 billion” include surpluses prior to 2009?

We have calculated from the table, that the claims to premiums ratio is 59 per cent (claims $1,395,382 billion divided by premiums $2,353,763 billion).

Most profitable scheme in the world?

Does this make MediShield the most profitable national health insurance scheme in the world?

Need 80% more?

Why would a national health insurance scheme that will ensure 100 per cent of the population (including those not residing in Singapore) which has been made compulsory for every resident, need to have a capital adequacy ratio that is 80 per cent more than the expected minimum for private insurers?

Make actuarial report public?

Can the actuarial report for MediShield Life be made public?

The Government should spend more on healthcare to help Singaporeans.

By the way, are there any countries in the world, whereby the mandatory national health insurance scheme is apparently, making money, whereas the private insurance schemes are incurring losses?

Leong Sze Hian

 

About the Author

Leong
Leong Sze Hian has served as president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), invited to speak more than 200 times in over 30 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of Indonesia and Brunei. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.