The Life Insurance Association of Singapore (LIA) has said that health insurance claims accounted for 81% of the growth in costs experienced by private Integrated Plan (IP) portfolios from 2010 to 2019.
Total health insurance claims grew from S$267m ($199m) to S$1.6bn (a 6-times increase) from 2010 to 2019. By comparison, management expenses grew from S$53m to S$166m (a 3.1-times increase), while total distribution cost grew from S$79m to S$267m (a 3.3-times increase).
The association said this in a fuller response on 2 April to criticisms by the Singapore Medical Association (SMA) on how private insurers manage IPs which are optional private health insurance plans that provide medical coverage on top of what is offered by the government-run basic health insurance scheme, MediShield Life.
The SMA had issued a 10-page position statement dated 25 March accusing private insurers of forming “highly exclusive” medical panels for patient consultation and of clustering their fee scales around the lower limit of the fee benchmarks set by the Ministry of Health (MOH). In addition, the SMA said that the current IP sector appears to be loss-making or unsustainable and that measures to reduce administrative and manpower costs in the IP sector have to be explored.
LIA, which had issued an interim response to SMA on 29 March, said on 2 April that if the current claim rate of 25% continued to increase at a compound annual growth rate of 10%, it could reach 30-40% in five years, and 50-65% in 10 years. At some point, the risk pooling effect may break down, it added.
The claim rate for IPs has been growing at approximately 9% year on year, which is close to MediShield Life’s claim rate growth of 10%. The key question, said the LIA, is whether a 10% CAGR in the claim rate is appropriate and manageable.
LIA also said that it is in the process of working with local academics to further analyse the drivers of cost increases in IPs.
The association also said that while it is important to control non-claim expenses, it is important to recognise that claims are still the main source of overall cost increases. It rebutted the SMA allegation that management expenses and distribution costs are primarily responsible for cost increases experienced by IP insurers.
LIA said, “Managing healthcare costs is a complex issue for which there are no simple solutions. At the same time, doing nothing is not an option because the current trajectory of healthcare cost increases in Singapore raises real sustainability concerns.”
The association said it has consistently advocated the need for collective action on the part of multiple stakeholders to tackle the issue.