$1.7b MediShield reserves, but $2.4b MediShield assets?

September 17, 2014

We refer to the article “Size of MediShield reserves” (TR Emeritus, Sep 16).

$1.7b MediShield Fund reserves

It states that “Mr Gan Kim Yong (Minister for Health): The MediShield Fund’s reserves were at $1.7 billion as at 31 December 2013. The reserves support scheme liabilities that include policyholders’ claims as well as premium rebates to help policyholders with their premiums in their older ages.

Of the total reserves set aside, currently about two-thirds support ongoing and future claims while the rest support future premium rebates. The portion of the reserves that support premium rebates is expected to rise in future with the move to distribute premiums more evenly over policyholders’ lifetimes under MediShield Life, so that net premiums after the premium rebates rise less steeply in old age.

MediShield liabilities and reserves are reviewed annually in line with established actuarial principles. The MediShield Fund accounts are audited annually by an independent auditor.”

$2.4b MediShield Fund 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”.

So, since the MediShield Fund’s assets was $2.4 billion at end 2013, why is it that the Minister’s reply now says that “the MediShield Fund’s reserves were at $1.7 billion as at 31 December 2013”? – without mentioning that there is about another $700 million set aside as capital?

What about the accrued % since inception?

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?

MediShield-Plus Surplus?

Also, does the “Fund assets of $2.4 billion” include the surplus when MediShield-Plus was transferred to a private insurer?

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) for the last 5 years.

Most profitable scheme in the world?

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

According to the article “Puthucheary v Gerald Giam on MediShield reserves” (Straits Times, Jul 8)

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”.

Need 80% more?

Why would a national health insurance scheme need to have a capital adequacy ratio that is 80 per cent more than the expected minimum for private insurers?

S Y Lee and Leong Sze Hian

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About the Author

Leong
Leong Sze Hian has served as the 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), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.