Tan Kin Lian's Blog: Building up a reserve on Medishield

Monday, October 05, 2009

Building up a reserve on Medishield

Published in the Straits Times Forum on 3 October.

I refer to the letter from the Ministry of Health entitled “MOH exploring Medishield coverage for congenital illnesses” (ST 28 Sep 2009).

The Ministry said, “Medishield must build up sufficient reserves to fund future claims, as it is a long-term health insurance policy.”

I am not clear why this has to be the case. The premiums charged for Medishield in each year are based on each age band and are adjusted according to the claim experience.

If there is an intent to build up a reserve to reduce the premium rates that will be charged at the higher ages, the principles and method to be adopted must be stated clearly and the stakeholders must be allowed to express their views on this matter.

Without transparency, there is a risk that some groups may be unfairly treated or a huge reserve may be built up that will never be used in the lifetime of the contributing members. This will unnecessarily add to the cost of health care.

If there is sufficient reserve in the current premium rates, it may be possible to cover the congenital illnesses without any increase in premium rates, or to reduce the Deductible and make Medisheld more attractive to the members.

Tan Kin Lian

5 comments:

Tan Kin Lian said...: Based on the current loss ration (i.e the percentage of claims to premium), it is possible for the premium rate of Medishield to be reduced by 30% or for the benefits to be increased by 30% (i.e. cover congenital illness and/or reduce the Deductible) without any increase in premium.

There is no need for Medisheld to accumulate a large reserves, as it will be difficult to manage this large reserves equitably.; October 06, 2009 3:24 AM
Anonymous said...: You are right! MOH should be more transparent! As is the norm, civil servants are kiasu & kiasi & like to keep the cards to their chests!!!; October 06, 2009 9:53 AM
Vincent Sear said...: In an insurance fund, be it commercial life fund or national medishield fund, the only "sure" way to build up large reserves is to overcharge on premiums.

There's another "unsure" way to build up reserves, invest and hope for gains, but I don't see Temasek or GIC doing too well there.; October 06, 2009 9:37 PM
wjsim said...: Why reinvent the wheel?

Basic Medishield coverage is a good alternative for people who cannot afford private plans. By increasing the coverage of Medishield, you increase the burden on healthy taxpayers. Either status quo, or privatise Medishield, like what they did with IncomeShield. Let the people have the right to choose what to do with our own money. If they want coverage for congenital illnesses, pay higher premiums and go private.

People complain that we are a nanny state. Ironically, isn't that what they want?; October 07, 2009 12:55 PM
Don Lim said...: I do think a reserve is important. Especially so when our population is aging, and there is a risk of global epidemics that may inflict hundreds of thousands of people when a strong strain of virus spread in the community.; October 18, 2009 4:51 AM