The Fattest Cats

On 9 October, The Economist published an article, “Who profits most from America’s baffling healthcare system”. The sub-heading read: “Hint: it isn’t big pharma”.

The article began by saying that on 4 October, 75,000 employees of Kaiser Permanente went on a 3-day strike. Kaiser Permanente is a name that many public sector senior management in Singapore may be familiar with. It was the go-to place for study trips and was touted as a model of care that we could learn from, even before the idea of population health became popular or anyone thought about Healthier SG (HSG). The article also noted that in April this year, Kaiser had acquired Pennsylvania-based Geisinger Health, yet another name that many public sector leaders in Singapore may be familiar with.

The Economist article went on to state “Pharmaceutical firms and hospitals attract much of public ire for the inflated costs. Much less attention is paid to a small number of middlemen who extract far bigger rents from the system’s complexity. Over the past decade these firms have quietly increased their presence in America’s vast healthcare industry. They do not make drugs and have not, until recently treated patients. They are the intermediaries – insurers, chemists, drug distributors and pharmacy-benefit managers (PBMs) – sitting between patients and their treatments. In 2022, the combined revenue of the nine biggest middlemen – call them big health – equated to nearly 45% of America’s healthcare bill, up from 25% in 2013”.

It seemed rather ironic to this hobbit that the biggest and fattest cats in America healthcare now are neither the folks that made the drugs and equipment that patients need, nor the hospitals or folks that actually gave the care. The fattest cats are now (drumroll please), “the middlemen”.

Thank goodness there is little chance of that happening in Singapore. For primary care, with the advent of HSG, the third-party administrators (TPA) who sat between the GPs and the patient are largely redundant and will be replaced by the one TPA to rule them all – the government. There is a lot of pain and angst with HSG, especially when it comes to the IT part (such as syncing with NEHR) and worries over drug pricing, but at least the government pays on time and pays adequately when compared to many TPAs. This hobbit does not think that the government will ever become the biggest or fattest cats making money in the primary care sector, but it needs to be said that bureaucracy does have a tendency to becoming fat and unwieldy, although not in a feline or profitable sense.

The government also makes up the lion’s share of the hospital sector, with some 80% of all acute hospital beds, so the middlemen can’t really sink their teeth there too. But when you look closer at the private hospital and specialist sector, the signs are there that we may be walking down the American path.

We need to just look at the profits insurance companies make in Singapore, as well as the increasing amount of money going to management salaries and bonuses as well as the commissions paid to insurance agents and you can see where the proverbial train may be heading.

On top of this, on the provider side, be they at the hospitals or doctors’ end, more and more resources are being spent on insurance-related matters, which include:

• obtaining pre-authorisation in a timely manner
• appealing against denial of pre-authorisation
• filing of claims after service and care has been provided
• handling denial of claims
• processing of requests for discounts from insurance companies

It used to be that hospital and clinic staff took on these insurance-related tasks in addition to the regular responsibilities they had. But no more. Now it is not uncommon for a staff nurse to tell the specialist upfront that his/her responsibilities do NOT include dealing with insurance-related matters if he/she is to work for the specialist The consequence is that the doctor now has to hire another staff just to deal with insurance-related matters.

And we wonder why healthcare spending is going up. Soon, we will end up like the USA, where folks on both sides hire legions of staff to frustrate one another in the private hospital sector.

On 10 October 2023, MOH announced that through its Claims Management Office (CMO), it was issuing Claims Rules. Medishield Life (MSL) claims deemed potentially unreasonable are now subject to adjudication by an independent panel appointed by the MSL Council.

“If the claim is found to be inappropriate, the medical institution and/or doctor will be asked to rectify and refund the inappropriate portions of the claims and not recover the monies from the patient”….”MOH is stepping up our monitoring of inappropriate claims and will not hesitate to act against the small minority of doctors who are found to be repeatedly non-compliant despite warnings. Repeat offenders may have their accreditation status under the MSL and Medisave schemes suspended or revoked”. (MOH press release dated 10 Oct 2023).

All well and good. In a population of thousands of specialists, there will be a few who don’t play by the rules or reasonableness and they have to be managed actively, if not managed out.

The press release also stated that speciality-specific claims rules have been and will be developed. These rules are based on “evidence-based literature, prevailing clinical practice and cost-effective guidelines”. It was also stated in the same release that the first set of claims rules for gastrointestinal endoscopy was released in August 2022. Two more sets of claims rules were released in September 2023 for ENT and cardiology.

All these efforts are to ostensibly primary protect the interests of the patients and to keep MSL financially sustainable in the long-term. This hobbit has nothing against supporting practices that are “cost-effective” and “evidence-based”.

However, what about the other side of the equation with the insurance companies who sell Integrated Shield Plans (IPs)? IP premiums and claims sit on MSL premiums and claims. Who ensures IP providers are “cost-effective” and “evidence-based”?

Cost-effective?

Does anyone in Singapore set a minimum limit on how much of the premiums collected are spent actually on paying for healthcare? Or IPs can spend as they like on management costs and commissions and also on amassing profits?

USA’s Affordable Care Act or “Obamacare” states that 80 to 85% of premiums collected should be spent on healthcare costs. But in Singapore, between 2016 and 2019, the corresponding figure is only 75%, with the rate of rise for management costs and commissions being faster than claims (i.e. payment for claims for healthcare provided) between 2016 and 2019. Can such a state of affairs support the aim of being “cost-effective”?

Evidence-based?

As for “evidence-based”, what is the evidence for some IP providers selecting certain doctors to be empanelled over others?

It was stated in the SMA’s Position Paper on Troubled IPs (May 2021) that “The Health Insurance Task Force (HITF) Report stated ‘To enhance and ensure transparency of the arrangement (e.g. disclosures on the healthcare provider selection process)’, that is, IP insurers should state the criteria used to select doctors to be on a panel. The fact remains that no doctor or policyholder knows what the actual quantitative or qualitative measures that make up these secret criteria are”.

This was the state of affairs in 2021 and remains so today.

In other words, the exercise of selecting doctors for empaneling is a completely opaque exercise with no accountability to regulators, policyholders and of course the hapless healthcare providers who do not get selected.

But this is just the tip of the iceberg about evidence-based. What is far worse is the exclusion clauses and denial of claims that are inflicted on policyholders that are not evidence-based. Policyholders are not healthcare professionals armed with the knowledge to understand and appreciate the true impact of these clauses up-front. Only years later, when they need to make claims for conditions that are excluded, they then experience dismay if not devastation when they receive notice that their claim has been denied. Some IP providers also indulge in semantics to get away with paying for claims. The examples of non-evidence-based exclusion clauses and denial of claims are many. Some of the commonest or egregious ones include:

• A history of breast cysts leading to an exclusion clause for all breast conditions, including breast cancer. (The evidence is that breast cysts do not become cancerous)
• A history of piles or anal abscess that leads to an exclusion for all colorectal conditions. Some insurance companies even state that all gastrointestinal conditions are excluded! What has an anal abscess got to do with stomach or colorectal cancer?
• A major branch of the Left Anterior Descending Artery (LAD: a major coronary artery) is the diagonal artery. A claim for a stent inserted for a almost completely occluded diagonal artery is denied on the grounds that the diagonal artery is NOT the LAD, it is a branch. (That is like saying your car insurance policy only covers you for the main Singapore island but not Sentosa). Well for the record, a heart attack involving the diagonal artery can lead to death and disability too.

No Two-way Street

This hobbit can go on and on. But at the end of the day, one of the major conclusions from this exercise that this hobbit has arrived at is that while healthcare providers, such as doctors, are compelled to practise in a cost-effective and evidence-based way (and rightly so) when MSL is involved, there is no such requirement for IP providers although IP premiums and claims sit on the MSL framework. IP providers just need to be seen to be financially sustainable to their regulator and when things get rough for them, they can resort to that one usual and effective trick they have up their sleeves:  – the ability to get away with squeezing healthcare providers and policyholders ever harder by raising the spectre of premiums increasing for policyholders if they are not allowed to get their way. (I gotta admit, this is a beautiful strategy that works like a charm, something almost akin to a kid throwing tantrums when he realises that he always gets what he wants by doing so)

But one should perhaps wonder: for how long more can this lop-sided state of affairs continue?

And while we may reassure ourselves that the private hospital and specialist sectors constitute a small part of healthcare delivered in this country, the fact that about 70% of Singapore residents have bought an IP policy means that there is great potential for this to mushroom into a big problem later on.

Previous posts on the subject of IP:

https://wordpress.com/post/hobbitsma.blog/914

https://wordpress.com/post/hobbitsma.blog/865

https://wordpress.com/post/hobbitsma.blog/773

https://wordpress.com/post/hobbitsma.blog/757

https://wordpress.com/post/hobbitsma.blog/749

https://wordpress.com/post/hobbitsma.blog/731

https://wordpress.com/post/hobbitsma.blog/709

https://wordpress.com/post/hobbitsma.blog/664

Doctors In The Crosshairs

On 2 May 23, a certain financial advisor by the name of Francis How Chee Kuen wrote to The Straits Time Forum stating, “Many years ago, IPs (Integrated Shield Plans) were more affordable, but doctors have been charging high prices for their services, leading to insurers increasing their premiums. Premiums will continue to rise if doctors overcharge or mark up prices”. The letter was titled, “Holistic approach needed to tackle cancer care costs”.

He gave an example of one his clients having to pay $3000 out of $5000 a month when the new Cancer Drug List (CDL) is enforced in February 2024. He ends off the letter by saying “In our battle to contain cancer treatment costs, we can’t just be targeting the insurers and capping coverage. Instead, the whole issue needs to be addressed holistically and from all angles”.

“Holistic” is a very politically-correct word nowadays, but using such a big word doesn’t make one’s argument any more complete and persuasive than making a monkey wear a skirt or a pair of pants and calling it human.

What this Mr How is actually saying is, doctors overcharging and making mark-ups to their services is the root of the problem. He also said in the same letter that pharmaceutical companies should be subject to scrutiny as well. And the system should not be just targeting insurers and insurance coverage in an attempt to contain costs.

Just Being Human

This hobbit’s answer to Mr How is quite simple – Everybody wants to make a good living and put bread on the table. These includes doctors, employees of pharmaceutical companies such as pharma reps and insurance agents (now called financial advisors).

So let’s cut to the chase. Everyone wants to defend or maintain if not increase the money they are making. Because doctors, insurance companies and their financial advisors as well as pharmaceutical companies and their sales representatives are humans and no one wants to suffer a loss of earnings. This is true for a communist society and even truer for a market and capitalist economy like Singapore. It is true whether you are making $4,000 a month or $4,000 a day. Nobody wants to then earn $3,000 a month when he was earning $4,000 a month or $3,000 a day when he is used to earning $4,000 a day. It’s human nature.

Let’s start with the insurance industry itself and their financial advisors. In the four years leading up to the Pandemic (2016-2019), the growth rate in management costs and commissions (paid to insurance agents and financial advisors) was actually faster than payments made to the healthcare providers. This could be easily inferred from a study made by the Singapore Actuarial Society. (https://actuaries.org.sg/sites/default/files/2021-01/SASResponseMSHLReview2020FINAL.pdf) (Table A4 of Medishield Life 2020 Review: SAS Comments). From this data, we can reasonably conclude that insurance companies and financial advisors are not exactly doing this for charity. They also want to make money, and probably as much as legally possible.

Now, let’s turn to the doctors. According to the 2021 SMC Annual Report, there are about 50 medical oncologists in the private sector. These 50 will prescribe the bulk of cancer drugs in the private sector, although there are also many other specialists who prescribe cancer drugs.

So it is probably expedient to focus on these 50 specialists and say they overcharge or have mark-ups and use ineffective cancer drugs. Especially if many of them are big earners. Are all 50 completely blameless? Probably not. But that’s not the point. By the way, no medical oncologist has actually been convicted of overcharging by SMC or in the courts.

Moreover, Mr Frances How used the case of his patient from a restructured hospital, which to this hobbit, makes no sense because as everyone knows, a doctor in a restructured hospital has no input on decisions of drug price. He does the work and the hospital decides on the prices based on costs. Unless he is thinking that even restructured hospitals unreasonably mark-up their services.

Which means that he is either illogical, uninformed or he must think the problem lies elsewhere – i.e. the pharmaceutical companies. Well, pharmaceutical companies are for-profit companies that will expectedly maximise their profit. Why do you want to sell a cancer drug for $3,000 when you can sell it for $5,000? Especially in this case, your customers have paid insurance premiums that will fund most if not all of the $5,000.

So, there is no use in pointing fingers at doctors or pharmaceutical companies. Everybody is behaving as expected. It is more fruitful to, as the saying goes, “follow the money trail” by revisiting why people pay for IPs, especially pertaining to IP cancer care coverage.

We Should Be Anti-social

Since the introduction of the CDL, the IP providers have come up with riders for coverage of cancer drugs that the CDL either does not cover or where the CDL-based reimbursement caps are perceived to be insufficient to cover the actual cost of treatment. These riders are to be paid for in cash. There is a concern in some circles that if too many people buy these riders, the issue of expensive cancer drugs gets “socialised” to a huge segment of society, thereby undermining the efforts of introducing the CDL and claims caps etc to control costs.

In an article published in The Straits Times on 24 April 23, it was reported that the Minister for Health said “now that riders provide higher cancer coverage, their premiums will need to be priced higher. If this results in fewer people buying riders, “I think we have addressed the problem”. But if riders continue to be in high demand, notwithstanding high premiums, that would be a problem and MOH and the MAS are prepared to step in.”

This reporting by Ms Salma Khalik is a relief to this hobbit because it shows that MAS, the body empowered by law to directly regulate insurance companies (not MOH) is now finally prepared to step in on matters that are medical-related. This hobbit does not remember MAS stepping in to regulate IP providers in any meaningful way other than for non-medical issues and have appeared to be content to let MOH to do the heavy lifting in this area. Perhaps they have finally crossed over to a higher plane of enlightenment, which is good.

However, this hobbit thinks many people will buy these riders, which means the problem is likely to persist. We will look at this issue from both the demand and supply sides.

Demand Side

First, on the demand side, there will be a healthy interest in buying these riders:- The whole purpose of buying IP is to finance a person’s medical expenses in the private patient classes (A1 or B1 class) of a restructured hospital or in a private sector hospital when he gets a catastrophic disease. Cancer is an example of a catastrophic medical event and more than a quarter of Singaporeans will die from it and more than 40% will get it in their lifetime, i.e. getting a cancer is NOT a remote and rare event.

So it usually makes little sense if I have an IP but it is perceived that the IP is insufficient to fund private oncology care (Restructured B1 or A1 or private hospital patient). If I have an IP now I would be inclined to buy the rider, just for peace of mind and the high probability that I will need and use the rider, unless I find the rider really quite unaffordable.

There are also secondary factors that contribute to uncertainty and hence create more demand for riders (and for peace of mind):

• The current messaging is not good for IPs that are sold without a rider. The new limit of paying only for the most expensive cancer drug (should more than one be used at the same time) gives the impression that a IP policyholder sans cancer rider has to pay out of pocket for the remaining drugs, should the policyholder need more than one drug, even though the reimbursement limit is actually quite generous.

• The monthly limit for CDL claims can be seen to be archaic when chemotherapy cycles are now commonly 6 weeks along, leading to unutilised claim limits in some months and bursting the limits in other months, in which case the policyholder may have to top-up the difference in these other months.

Supply Side

On the supply side, there are two structural problems with the current IP environment that leads to the situation where the IP sector is unable to effectively complement Medishield Life (MSL). As this hobbit will show you, it can even undermine the policy intent of MSL. By design, the IP policy sits on top of MSL so the two are entwined like Siamese twins. If one of the twins are unwell, the other feels it too.

Problem #1: MSL Is For Life While IP Is An Annual Plan

Being an annual plan means the IP sector is in permanent dissonance with MSL. This dissonance is not just structural, but strategic, financial and behavioural as well. While MSL looks at the lifetime needs of its policyholders, IP executives and financial advisors are incentivised to think mainly short-term.

The executives who run IP providers are rewarded mainly for the IP’s financial performance on a year-by-year-basis. Financial advisors’ commissions are also heavily front-loaded and diminish very significantly after a policy is sold after say, about 2 to 3 years.

Problem #2: Too Many IP Providers

According to the financial advice website Singsaver, there are close to 3 million IP policyholders. This is about right if you consider the oft-quoted claim that close to 70% of Singapore residents (i.e. citizens and PRs) have bought IPs. Most insurance experts will tell you that 3M is a rather small pool to be shared among seven providers. It is quite unlikely that market penetration will rise much beyond 70% because the poorest 30% will probably find IP premiums very unaffordable.

To sustain seven IP providers, each IP provider will have to look for new customers to sign up. These new customers can come from either other IPs’ customer base or those that have not signed up with any IP, especially young adults entering the workforce and earning a decent salary. In any case, because of the relatively small pool of addressable IP customers, there is intense competition for new customers among all IP providers so that the IP providers can maintain or grow their market share.

One of the most important determinants of selecting an IP is of course, price. IP providers have to compete on price. But an interesting facet of the IP industry is that price competition is only critical when a person decides to buy an IP and when he renews his IP while he is still young with no pre-existing diseases. Once an IP policyholder has pre-existing diseases he is basically stuck with the same IP provider if he wants to continue having IP coverage for these diseases. He then effectively has only two choices – stay on and pay the increased premiums with the same IP provider or drop out of the market completely.

In other words, once pre-existing diseases kick in, IP is a very sticky business. Which is why despite some IP providers periodically “cry father, cry mother” about how tough and unsustainable the IP market is, no provider has exited the scene yet. Customer stickiness is a good thing when you are a business owner or operator.

And So….

In summary, this culminates in a situation whereby IP providers compete aggressively for customers up front by slashing prices but do not similarly compete so intensely on “after-sales” service and care quality later. That is why they do not have to respect MOH fee benchmarks in its entirety and also seek not to have more doctors empanelled. When you’re stuck to your IP provider because of pre-existing diseases, you’re stuck real good.

We say that healthcare is ultimately determined by the Golden Triangle of Affordability, Accessibility and Quality.

But in reality, the business model of IP is probably based on maximal affordability up-front and denial or limitation of accessibility later with minimal if any respect for quality, so that profits can be maximised.

This can be largely attributed to the two features described above:

• IP policies is an annual plan while MSL is for life, resulting in multi-faceted dissonance between the two and
• There are too many IP providers fighting for a small pie up front which paradoxically becomes a sticky business post-sales.

So it is likely that cancer riders will be popular because there are factors on both the demand and supply side that lead to such a fertile milieu for the sale and purchase of these riders.

But what if the revenue from these riders cannot adequately pay for the cancer services incurred later on? As usual, IP providers can raise premiums to a limited extent before policyholders drop out, or restrict accessibility by empanelling as few specialists as possible.

They also have a third trick up their sleeves – which is to blame service providers such as doctors and hospitals for being expensive as well as chastise pharmaceutical companies for excessive mark-ups. And then the cycle may repeat itself – there may be some task force or committee formed that will try to control costs by introducing measures that mainly target healthcare providers while IP providers pay lip service to the recommendations that would have been  put up, which is essentially what happened with the HITC’s work (Health Insurance Task Force) a few years ago.

If you think about it carefully, the interests of IP providers and their financial advisors are almost diametrically opposite to that of the government. The government is always about long-term sustainability while the IP sector is short-term. The government doesn’t want too many buying such riders lest the problem gets socialised. The IP sector on the other hand wants more and more people to buy riders, thereby indirectly socialising the issue. This applies to cancer care and can be applied to the whole IP industry as a whole. The money trail starts with the how the IP sector is structured while at the same time there are too many IP providers for a relatively small market. And these lead to other consequences when other stakeholders also want a piece of the pie. The trouble is everyone wants the biggest slice of the biggest pie. And somehow the insurance industry has been the most adept at this game so far, by blaming others and positioning itself as mostly blameless.

But the truth is, everyone is human and human nature prevails. Unless you’re a hobbit.

Previous posts on the subject of IP:

https://wordpress.com/post/hobbitsma.blog/865

https://wordpress.com/post/hobbitsma.blog/773

https://wordpress.com/post/hobbitsma.blog/757

https://wordpress.com/post/hobbitsma.blog/749

https://wordpress.com/post/hobbitsma.blog/731

https://wordpress.com/post/hobbitsma.blog/709

https://wordpress.com/post/hobbitsma.blog/664

On 15 Aug 22, The Business Times reported on the financial performance of insurers providing Integrated Shield Plans (IP) for 2021 – “Strong profits for most insurers’ Integrated Shield portfolios, but brace for premium hikes”.

This opening paragraph highlights the situation facing policyholders this coming year: “Despite markedly stronger underwriting results in 2021, most insurers with Integrated Shield (IP) plans will raise premiums this year, mostly for private-hospital base plans and riders”. The article goes on to state that 5 out of the 7 IP insurers will raise premiums this year.

The article contained a table of the IP insurers underwriting results from 2016 to 2021 (6 years). There are a total of 7 IP insurers, with Raffles Health being the smallest and latest provider. It started operations in 2018 and only posted full-year underwriting results from 2019. It has reported small losses for 2019 to 2021 (<$3M each year). In any case, Raffles is an “integrated healthcare group”, which means that its policyholders usually obtain healthcare services from Raffles Medical Group. It can probably afford to sustain small losses in its insurance arm while it makes money from the healthcare provider arm to balance the books. So let’s ignore Raffles Medical Group for now in our discussion.

Of the remaining 6 IP insurers, here are the results:

Year	Number of loss-making IP insurers (out of 6)
2016	6
2017	6
2018	5
2019	4
2020	1
2021	0

Total underwriting profit was about S$170M for 2021. Singlife with Aviva made money for the first time in 6 years and said that its profit of $32.71M could be once-off (compared to only $680K for 2020) due to a “one-off release in reserves that was kept to cater for Covid-related costs”. Let us remove the effect of this one-off surplus of $32M from Singlife with Aviva and the total underwriting profit for the 6 IP insurers would still be in the region of $138M. In 2020, these 6 IP insurers’ combined nett underwriting profit was about $107M. From 2016 to 2019, collectively, the 6 IP insurers did not make money.

Now, let’s turn back the clock a little to the time when times were bad, when most of the insurers lost money. Then, the insurers said that the IP industry was unsustainable and argued for lower reimbursement rates for healthcare providers, especially the doctors. This led to the formation of the Health Insurance Task Force (HITF) and the subsequent introduction of the MOH Fee Benchmarks and Preferred Provider Panels in an attempt to lower costs.

In an about face, the IP insurers (other than Income) did not respect the full range of the MOH Fee Benchmarks because it said doing so will lead to higher premiums for policyholders. Some IP insurers also said that having more inclusive panels (i.e. more specialists) would also lead to higher premiums as well. In other words, it was signalling to policy-makers that any move along these two directions would inevitably lead to policyholders suffering financially. And with almost 70% of Singaporeans being a IP policyholder, this was a powerful signal indeed. Till now, most of the IP providers do NOT reimburse to the higher limit of the MOH Fee Benchmarks, and Preferred Provider Panels still exist, although they have increased in size.

It is therefore quite jaw-droppingly shocking that with record profits in 2020 and 2021, and with IP providers still not respecting the higher limit of fee benchmarks, IP providers still want to raise premiums this year. And the reason given? The same as when times were bad, to keep the IP sector “sustainable”. The word “sustainable” has become a word for all seasons for IP insurers.

The Business Times article reported “Insurers cite a number of challenges in the quest to keep IPs sustainable (emphasis mine), including an ageing population and rising medical inflation which is significantly higher in private hospitals compared to public or restructured hospitals” and “increased use of newer and costlier treatments have resulted in an increase in both the frequency and severity of claims”.

To sum it up, in bad years, some IP insurers will say they need to raise premiums and cut reimbursements to keep IPs sustainable. In good years, like in the last two years, IP insurers will say they need to raise premiums because of an ageing population and rising medical inflation, so that the IP business is sustainable.

So in other words, they have given reasons to raise premiums in both good and bad years. Isn’t that a case of “heads you win, tails I lose”? Looks like these guys have figured it all out – they will raise premiums under any circumstances to keep things “sustainable”. Brilliant.

This hobbit thinks the main problem with IP is structural – IP is an annual policy. The IP provider probably views the sale of IP policies as an annual affair and no more. Premiums are collected annually and reimbursements are made annually. They will argue that there is no guarantee that a policyholder will renew the policy, which is technically true but practically not so – as often cited, a policyholder with pre-existing conditions cannot switch IP provider yearly. Once there are pre-existing conditions, policyholders are essentially stuck with the same IP provider unless they choose not to have any IP plan at all. So the best strategy for a profit-maximizing IP insurer is to raise premiums as much as possible without losing policyholders. This was pointed out by Dr Jeremy Lim in the aforesaid Business Times article, “Hence, despite improving economics as reflected by the latest numbers, insurers would still want to maintain premium increases to improve their profit margins and also keep policyholders ‘used’ to regular premium increases” and “annual premium increases (should not be) so dramatic that policyholders choose to discontinue”.

As IPs are structured as a yearly insurance contract between the policyholder and insurer, the IP insurers have no incentive or interest in smoothening out business cycles or to share some profits with their policyholders. The IP insurers’ main interest is to maximise premiums and profits every year and thereafter extract maximum commissions and bonuses for the company and for their employees

This is in contrast to say Medishield Life (MSL), which is a not-for-profit scheme and premiums are paid on a life-time basis. For example, there is “front-loading” of premiums when a person is young, healthy and usually having a good income in MSL. MSL policyholders pay more than they consume when they are young and the surplus is then used to fund policyholders’ premium shortfall when they are old and they consume more healthcare but may probably be retired with no or less income.

The question before us now is that with the way the IPs are currently structured, do IPs best serve the healthcare financing needs of Singapore going forward? In the name of sustainability, we have seen how IP insurers have justified their decision to raise premiums no matter if times are good or bad and if they are loss or profit-making. There is no mechanism to return a bit of the profits to the policyholders when times are good so as to lessen policyholders’ premium burden.

This hobbit thinks the whole business of IP has become a frightening beast that will continue to inexorably grow at the expense of the interests of policyholders and healthcare providers. It has become painfully obvious that if we are to tame this all-devouring IP beast, the whole sector needs to be fundamentally restructured and tightly regulated. The way IP businesses are run now appears to be only sustainable for IP insurers, but not for policyholders or healthcare providers.

Recently, there was a report in mainstream media about how an Integrated Shield Plan (IP) provider refused to provide cover for a patient who was suffering from cholangiocarcinoma. The reason given was that the immunotherapy drug was normally used for breast cancer and not for cholangiocarcinoma. The use for cholangiocarcinoma was “off-label”. (Cancer patient ends up with $33,000 bill after insurer refuses to pay for drug).

Two letters from members of the public (both doctors) were published in The Straits Times Forum on 24 April 22 and then MOH and Life Insurance Association (LIA) subsequently weighed in with letters on 25 April 22.

Military colleges often teach that a country fights a war for usually two reasons:

• It thinks it can win the war, thereby achieving the objectives it has set out for the war, so it fights, or
• If it doesn’t fight the war, the country, culture and society as they know, will be destroyed and it may well cease to exist. i.e. the conflict poses an existential threat to the country.

For example, in the current Russian invasion of Ukraine, Putin is claiming the second reason, but his calculus for starting the war was probably that of the first. Ukraine on the other hand, is fighting obviously based on the second reason.

While the arguments put forth by LIA and MOH are not invalid – cancer drugs can be frightfully expensive and their use needs to be controlled in some way, the elephant in the room in this case is that the patient is alive, and appears to be having a decent quality of life. In other words, the immunotherapy drug Pertuzumab worked.

This is quite remarkable given that cholangiocarcinoma patients often live for several months only and the patient is alive and walking around 22 months after diagnosis. The other salient point is that Pertuzumab was not given callously. It was only given after two other conventional drugs had failed.

The last point that should be noted was that we are arguing over $33,000 for something that worked and gave someone a decent quality of life for many months. Not exactly a sum that will sink the system in Singapore, even though it may be a lot to an individual. Putting a patient on a ventilator in ICU for about a week often costs that much if not more, and as we know, many a time the patient ends up not making out of the ICU alive.

It is true that there is scant evidence that Pertuzumab works for cholangiocarcinoma. But we need to remember that clinical evidence is based on inferential statistics – the science of probabilities based on assumed distribution of values (e.g. the bell-shaped curve of a normal distribution).

Let us now return to this patient at hand, Ms Koh Ee Miang. Probability-based and evidence-based medicine mean little to her. Only one thing matters – either she lives on, or she doesn’t. And at only 45 years old with a teenaged daughter, the will to fight for her right to live on (and again this hobbit stresses – with  a decent quality of life), must be very strong. She will fight. She has to fight. She is fighting based on the aforesaid second reason – if she ceases to fight, death will beckon quickly and she will cease to exist.

And indeed, this is exactly what has happened. She has gone to the press so that her plight gets highlighted. And really, the answers and replies so far from the establishment aren’t exactly useful to her or her oncologist.

What does the oncologist do now? Stop the medicine? Should she not have even given her Pertuzumab in the first place? Just let her be overwhelmed by the cancer after the two conventional drugs failed? She’s 45, not 85…..

And then there’s the issue of off label and on label use. The letter from LIA makes it sound like off label use is always an undesirable thing. But that is simply not true. Whether something is considered off label or on label use may be just a commercial consideration.

Let’s take the example of Sildenafil – what is now commercially known as Viagra. Viagra is now famous for being a drug used to treat erectile dysfunction. But Sildenafil was originally put on clinical trial for use as a drug to treat pulmonary hypertension. However, it was then serendipitously discovered that many trial (male) subjects had erections and viola, Viagra was born.

As far as this hobbit knows, the use of Viagra in Singapore for erectile dysfunction is on label but not pulmonary hypertension. It is not because Viagra is not effective against pulmonary hypertension. After all that is what it was intended for and there is clinical evidence to support this. The drug company just didn’t apply for it with the drug regulation authorities for reasons best known to itself. It could be the market for pulmonary hypertension is much smaller than erectile dysfunction and also because of risk management. When a drug is used off label, the doctor and hospital bears the risk. When it is on label use, that risk is shared with the drug company. Since the market for treating erectile dysfunction is such a big and lucrative one, why should a company take on the additional risk of it being used as a pulmonary hypertension drug?

Whatever the case may be, whatever is on label is at the discretion of the drug company when it puts up the drug for registration with the authorities. The authorities can reject the application because of lack of scientific evidence, but they have no powers to ascribe something as on label if that is not applied for by the drug company.

It is noteworthy that the MOH letter to The Straits Times Forum did not mention on label or off label use. It talked about scientific evidence. Because on label or off label use is not quite the gold standard of appropriate use it has been made out to be. There are many drugs that are being used off label in both private and public sector healthcare settings. It doesn’t mean that off label use is always imprudent or unsafe.

Let us now return to the patient. Since missing Pertuzumab for one session in January, her cancer markers have shot up by about 50%. In fact, it was reported that the oncologist may have to change to another even more expensive HER-2 drug because the effects of Pertuzumab are “waning”.

As Dr Jeremy Lim implied in his letter in The Straits Times Forum on 24 April 22, in the age of precision medicine, (e.g. immunotherapy), some finesse is needed. In evidence-based medicine, all of us have been taught that the 95% confidence interval and p<0.05 are sacrosanct. But 95% is not 100% and what about the remaining 5%? What if somehow something that falls outside the 95% actually works for this individual, do we deny this person care? Especially when we are pretty sure that this denial will lead to a quick and premature death?

This hobbit would like to see if some IP providers will think out of the box to address these issues instead of drawing a line in the sand about on or off label use. For example, it could have covered the treatment for just two to three months to see if the treatment works. If the treatment doesn’t work then by all means withdraw cover. But if the treatment works then it should continue cover but the coverage would be subject to reimbursement caps that are stated upfront.

Personally speaking, I would have thought that the IP provider should have just paid out the $33,000 for a treatment that manifestly worked for their policyholder, a living human being. All IP providers profess to care about their policyholders in their marketing materials and public communications. But here again, this hobbit is reminded that insurance companies are business entities designed to maximise shareholders’ value. Bad press, public opinion or the almost certain prospect of an unnecessarily premature death matter little when their bottom line is hit by about $33,000.

Why do some people turn to a life of crime? Or at the very least, why do some people live their lives skirting and flirting with the edges of the law?

There could be many reasons, but they probably fall broadly into these three mutually non-exclusive categories

1. Times are very bad and the person turns to crime to survive. That’s why crime rates go up when unemployment rates go up.
2. The person has a pathologically criminal mind and he loves breaking the law, much like what you see in the villains that Batman battles – the folks found in Arkham Asylum like The Joker, Penguin, Two-face etc
3. The person desires to have extraordinary or supernormal profits or pay-cheques that normal business and employment activities cannot match. These people are usually motivated by greed, and their greed overcomes their fear of the law or whatever social stigmata that comes with the running of such (legal) “shady” activities

Obviously, many of these infamous KTV outlets are operated by people belonging to the above third category. These outlets are usually called KTV clubs, bars or lounges. There are also many “family” KTV outlets which are indeed bright and wholesome (which this Hobbit sympathises with – they should indeed be statutorily classified differently from KTV clubs). But those pre-Covid KTV clubs that come with hostesses are obviously not without social stigma, yet they exist because there is demand for them and there are people willing to run these businesses because the profits and margins are very attractive.

Taking this into consideration, this hobbit cannot help but wonder – what makes some people think that by just giving them Food and Beverage (F&B) licenses, these KTV club and lounge operators will suddenly be willing to pivot to a life in the slow lane of humdrum F&B normalcy? Especially when many of these outlets don’t even have commercial kitchens. And why would anyone go to these kitchen-less F&B outlets for the food? Couldn’t they get food delivery to deliver the food to their homes instead?

In addition, it was reported in The Straits Times on 22 July 2021 that “Only 18 ex-nightlife outlets (were) given support packages to switch to F&B” by Enterprise Singapore (ESG). It was reported that 400+ such nightlife establishments pivoted to the F&B industry and yet only 18 received these support packages. This would imply at least two things – the grant was exceedingly hard to get, or that the vast majority of the 400+ outlets did not apply for the package. If the latter is true, the next question that needs to be asked is why would people not want the grant? Take the example of couples who buy a property near their parents and qualify for a government housing grant. This hobbit has never heard of anyone who would not take this grant. People who have nothing to hide will take grants if they can qualify for them. On the other hand……

To this hobbit, this episode of the KTV cluster really shows a lack of understanding of the imperfect human condition and what drives people to do what they do. And yes, it would have been quite hilarious, if not for the serious public health consequences that had arisen from it.

It’s gotten so bizarre that on 25 July 2021 (“Group wants tougher penalties for errant nightline operators”), The Straits Times (ST) reported that “the Singapore Nightlife Business Association (SNBA) also recommended that the 400 nightlife establishments that switched to the food and beverage sector last October come under police supervision”.

This is the first time in a long time in super-safe Singapore that anyone or any organisation has volunteered to come under police supervision. The only folks we run towards here, regardless of race, language or religion, are the parking ticket aunties and uncles who are about to issue a parking ticket to your vehicle. We usually run away from police supervision, not towards it.

OK, so much for the light-hearted stuff. We move on to something more serious and saddening.

On 17 July 21, a letter to the Forum of The Straits Times by a Ms Denise Ho said that her hospitalisation insurance claim for stage 2 breast cancer treatment and claim for critical illness payout were rejected on the grounds that she had failed to report she had vertigo and asthma. These diagnoses were purportedly made after she made visits to a GP for dizziness and cough.

On 26 Jul 21, the Life Insurance Association (LIA) responded by giving by what can be described as a legally correct and general answer. The reply did not comment specifically on the case at hand, but gave the general principle that “in order to reject a claim or invalidate a policy, life insurance companies are responsible for proving that the non-disclosure of the health condition to a question asked in the application form is material to the underwriting outcome…”

LIA also said a person could seek redress with the Financial Industry Disputes Resolution Centre (FIDREC), and finally an aggrieved person can also explore legal action.

On 29 Jul 21, a letter from Mr Chia Boon Teck to the same ST Forum revealed important information. Apparently FIDREC does not allow for involvement by lawyers and “has a claims cap of only $100,000”. So for higher claims, the policyholder has to get legal help, which Mr Chia rightly pointed out, “victims in such scenarios would hardly have any money for their medical treatment, let alone for legal expenses”. Ouch.

Now the LIA reply took pains to say it “is not in a position to comment on any assessments by any specific insurer”, this hobbit is not bound by such self-imposed and convenient rhetorical handcuffs and mufflers of the LIA.

Interestingly, up till now, the relevant regulatory authorities have also kept silent on this matter.

Let’s now really examine the case at hand – breast cancer with a possible history of vertigo and asthma.

Anyone who is medically trained will wonder what has vertigo and asthma got to do with breast cancer. But according to the reply by LIA, the key words are “underwriting outcome”, which means anything that would have altered the insurance policy’s terms, such as loading of insurance premiums or limitation of coverage may allow the insurance company to “reject a claim or invalidate a policy”. This is evidenced by what LIA’s stated condition: – “the terms of the policy would have been different from the terms that were actually offered and issued”.

So while vertigo and asthma have got nothing to do with breast cancer, the fact that these conditions may lead to different terms of the policy from the terms that were actually offered and issued already entitles and justifies an insurance company’s action to deny a claim for breast cancer.

To this hobbit, this is the legally correct but amoral world that policyholders and healthcare providers have to contend with when we deal with insurance companies. It is effectively heaping misery upon misery on a sick person. It is bad enough to have cancer, but the policyholder has to now also contend with the shock and dismay of knowing the hospitalisation insurance policy is not providing coverage because of a technical breach of a contract and face the terrible consequences of this reality.

As a wise dwarven lord told me once, “Always look for the money trail”. On 2 Aug 21, Business Times (“Claims management measures help boost Integrated Shield 2020 results”) reported that Integrated Shield Plans (IP) insurers performed much better in 2020 than 2019. In fact, in 2019, only two (out of seven) IP insurers were profitable, in 2020, all but two insurers were profitable. In 2019, the seven IP insurers incurred an underwriting loss of $43.11M; in 2020, the same insurers made an underwriting profit of $103.75M, a swing of $146.86M!

The most impressive performance was put in by Great Eastern (GE), which went from losing 57.88M to making a profit of $23.29M, a swing of 81.27M. It also somehow managed to cut its management expenses from $33M to $22M from 2019 to 2020.

But let us briefly return to the KTV club sector again. Many KTV hostesses are poor young foreign women who may be brought here to be exploited as hostesses. That in itself is immoral. But many are also here of their own volition to earn a quick and big buck. In which case, other than the fact that there is a lot of negative stigmatisation, everyone gets what they want – the KTV hostess and operator gets paid by the client and in turn the client gets what he wants – varying degrees of physical (maybe carnal even) and emotional satisfaction.

Contrast this to the insurance industry. This industry is ostensibly here to serve their policyholders. But in so-called serving their policyholders, they have elaborate systems, contracts and processes designed to deny certain policyholders what they have actually paid for and now need. It appears they do so by relying on technicalities that few laymen would understand when they bought the policies. The interesting thing is, these insurance companies’ practices are probably deemed acceptable by the authorities, which is why no relevant regulatory authority has yet commented on the abovementioned series of letters in the ST Forum.

If you asked this hobbit, maybe the insurance industry should be the one that comes under police supervision instead of the nightlife sector.

Life can be legal, and also not fair. Get used to it

Happy 56th National Day

After SMA’s Position Statement on Troubled IPs (29 March), the Life Insurance Association (LIA) responded with 2 and a half documents:

• Industry Response dated 29 March 21
• (Updated) Response dated 31 March 21 (This hobbit gives discount, count this as half document)
• Position Statement (1 April 21)

Talk about overkill.

If you have trouble following their chain of thought and writing, this Hobbit will now give you an easy to understand informal guide to the highlights of these documents. Unless stated, the quotes refer to the Position Statement dated 1 April 21. Quotations are given in italics.

Highlight #1: What Has LIA Got To Do With Cost Containment?

Page 1, Last Paragraph lists the various cost containment measures: panels, copays and pre-authorisation, fee benchmarks to nudge positive changes in healthcare providers’ behaviour.

Page 2, Paras 5 to 7 states:

“The question really is, what balance should be struck between various cost containment measures?

The honest answer is that LIA Singapore and individual insurers do have a definitive answer as to what the right balance of measures is”

It will need to be an iterative process, because there will be trade-offs between the interests of policyholders, patients, and healthcare providers that all parties need to accept. Insurers are in the middle trying to seek the best balance to this equation in a sustainable manner”.

Please note that all the containment measures mentioned involve policyholders, patients and healthcare providers. They do NOT involve insurers. Insurers are just “trying to seek the best balance”.

Hello, dude, how about containment measures involving direct action by insurers, such as cost cutting insurers’ commissions and management costs?

In a newspaper article, the LIA spokesman further added, “Insurers agree that we should control our own costs but we don’t really think there’s a lot of fat in our expenses to be cut,”. [1]

Ownself say ownself got little fat, with no substantiation. This is really quite laughable and not worth the paper it is printed on. It’s like an alcoholic saying “I don’t booze too much”.

If every stakeholder also just say categorically, “we don’t really think there’s a lot of fat in our expenses to be cut” then everyone can just suck thumb, drink coffee and nothing will get solved. 

So these guys are still in denial that they are part of the problem. Sorry, but the Singapore Actuarial Society (SAS) has numbers to prove otherwise. Bloggers such as life finance also think insurers are a big root cause of the problem of IP sustainability.

Highlight #2: Possible Anticompetitive Behaviour By A Trade Association

Industry Response (29 March 21) (Page 2, Para 2)

The upper bound of the MOH Fee Benchmark range for a procedure can be up to five times of the lower bound4 . As such, proceeding per SMA’s suggestion without calibration may lead to substantial cost increases and further premium increases for policyholders.

Industry Response (31 March 21) (Updated) (Page 2, Para 2)

The average ratio of upper bound to lower bound for surgeon fee benchmarks is 1.84 . As such, proceeding per SMA’s suggestion without calibration may lead to cost increases and further premium increases for policyholders.

Position Statement (1 April) (Page 3, Last Para)

“Given that the upper bound is, on average, 1.8 times of the lower bound, setting panel fees at the upper bound of the MOH Fee Benchmarks will likely lead to escalation in claims costs and, as a consequence, premiums.”

These are very serious statements to make in the face of countervailing evidence; in particular, with respect to that of the high probability, if not inevitability of premium rises.

The SMA has, in its Position Statement on 28 March, called for all IP insurers to respect the full range of the MOH Fee Benchmarks instead of clustering their reimbursement fee scales around the lower end of these Benchmarks. The SMA further stated that one IP insurer (NTUC Income?) was in fact able to reimburse the full range of the Benchmarks, i.e. as long as panel doctors charge within the range of the Fee Benchmarks they will be paid as such.

It is therefore surprising to see the above quotes from LIA stating that premium rises are very likely?

How did LIA which can be considered a trade association of sorts, come to this conclusion when already a major IP insurer (NTUC Income) can reimburse up to the upper bound of MOH Fee Benchmarks without increasing premiums and in fact apparently generated a profit in 2019?

This statement by LIA therefore essentially tries to exclude or at least diminish the possibility that an IP insurer can respect the full range of benchmarks without raising premiums when an alternative reality already exists.

Therefore, this statement can be construed to either be encouraging IP insurers to set their fee scales to cluster at the lower end of MOH fee benchmarks and not to reimburse using the full range of MOH fee benchmarks or persuading IP insurers to raise their premiums should they respect the entire range of fee benchmarks, even when they may not have to do so in order to achieve profitability. The latter is clearly against consumer and even public interest, especially when about 70% of Singapore residents have bought IPs.

Declaring that increasing premiums as the preferred or most probable solution when other options and alternatives already exist can be considered to be an indirect form of price-fixing by a trade association such as LIA.

Relevant regulatory authorities may want to look in this possibly anti-competitive behaviour by a trade association.

Highlight #3: The Truth is OUT, Panels Are Really About Fee Control, not Quality Control

Page 2 Para 10 states “the underlying concept of a panel is to use the insurer’s bargaining power to negotiate preferential rates from healthcare providers in exchange for higher volumes. This is the way panels work in the employee benefits space in Singapore, and in multiple markets overseas. It is no different from the use of group procurement in industries outside healthcare. So long as a reasonable fee is left on the table for the doctor, and savings are passed on to policyholders in the form of lower premiums, this is a reasonable approach to take. Insurers are playing the role we should in stretching the healthcare dollar for policyholders.”

Bluntly put, as the above quote shows, panels are about fee control. But with IP insurers’ fee scales already clustered around the lower end of the Fee Benchmarks, how much lower do these IP insurers (sans one) want to go? Obviously they intend to bargain Panel Doctors to the bone and go below the benchmarks. If not why have panels when prices are already at the lower end of Fee Benchmarks?

So for those specialists who think short term and want volume now, be warned that you may be squeezed and squeezed on price later on. This reminds this hobbit a little of what Churchill said about appeasers and crocodiles.

The LIA has repeatedly claimed that larger panels will increase prices. Page 2 Para 4 states “Removing panels as a control measure means that insurers would have to seek other ways to compensate. These would likely take the form of increased premiums, increased co-pays, and/or stricter application of pre-authorisation.”

This statement has perplexed many doctors. If the insurers already control the fee scales, why would larger panels necessitate increases in premiums and co-pays?? In such an environment, overcharging is almost impossible and fee scales already cluster at the lower end of the Benchmarks. That leaves overservicing as a possible problem which can be easily solved by audits, hopefully independent audits.

So the real issue here is again, that with larger panels, insurers cannot bargain with doctors to offer their services at ever lower and lower prices. Larger panels do not by themselves contribute to higher premiums, especially if the services offered are clinically indicated and when insurers already control reimbursement rates.

In fact, as one smart observer mischievously commented, “if larger panels entail higher costs and premiums, then no panels will have no costs and lower premiums”.

A more subtle reading of this LIA claim is that perhaps insurers want to shift work back to the Restructured Hospitals (RHs). When panels are large, a policyholder can easily find a specialist. When panels are small, the policyholder may just give up and go back to RHs. There is nothing wrong with this, if MOH wants more work for the RHs.

This is already happening. As of 1 April 21, a major IP insurer revamped its offering to that of claims-made premiums. There are several premium levels a policyholder can pay. If he claims less he pays less. Nothing wrong with that. But it also states that if you seek care at private hospitals and the claims exceed $1000, your premiums (or premium level) go up. But if you go to a RH, your premiums go down one level (unless you are already at the lowest level then your premiums can’t go down anymore), irrespective of how much the claims are.

Again, nothing wrong with that as an incentive to control claims cost by insurers, because this hobbit is neither for or against RHs or private specialists. But good luck to our already very crowded RHs with long waiting times. One must also question if this is in-line with the government’s policy intent of having private hospital IPs in the first place.

Highlight #4: The Smoke Grenade of Enforcement

Page 3 Para 1 states “the fee benchmarks do not include an enforcement mechanism”. LIA goes on to say in the next para, “This issue of enforcement can be addressed through the appointment of panels, within which doctors sign on to enforceable contracts, and are therefore legally bound to charge within the agreed fee range”.

This really takes the cake, folks. Doctors and facilities get paid by an IP insurer AFTER a service has been rendered and resources consumed. What is there to enforce?

All the IP insurer has to do is state up front their fee scales and state they will NOT reimburse above this scale. This is not a situation whereby the doctor already took the IP money and the IP insurer is trying to claw back the money and therefore need some enforcement mechanism.

The IP insurer just pays up to its fee scale and the doctor cannot do anything much. What are the chances the doctor will sue and get more money than what is stated upfront on the fee scale, and more importantly, what are the doctor’s chances of winning such a law suit?

In fact, doctors and facility providers are the parties that really need an “enforcement mechanism” to ensure insurers pay up and pay up promptly, not the other way around!

Highlight #5 : Five Is NOT Equal to ALL Seven

LIA gives us some interesting data in Annex A, which hopefully the regulators can verify, because doctors and policyholders can’t. More Interestingly, it only has five out of seven IP insurers’ data, which means it is an incomplete picture, unlike SAS’s data which is based on all seven insurers.

It shows, as LIA has claimed, that insurers do pay above Fee Benchmarks some times. But obviously panel doctors are paid less than non-panel ones generally.

But the fact remains we do not know who these two omitted insurers are. Until data from these two insurers are out, it is not possible to draw conclusions at the national level, which is the most important thing for a meaningful discussion to take place. After all, these two omitted insurers may be large players with very sizeable market shares and therefore data presented in Annex A may be therefore significantly skewed.

 Highlight #6: Medishield Life’s Claim Rates May Be Excessive

Page 4, Para 6 states

“That IP claim rate trends are similar to Medishield Life’s claim rates trends are not surprising and implies nothing about whether or not the claim rate inflation is excessive”

SMA benchmarked the IP claims rate to that of Medishield Life’s (MSL) because that is the best SMA has at hand. By making this statement, LIA is suggesting that MSL Claim Rate may be excessive, even though MSL has features such as copayment and deductibles in place to address overconsumption.

Since this involves MSL, the government should come out and explain its position and understanding of the situation  – whether the MSL Claims Rate is excessive or not. It can either agree with LIA or refute it. Either way, this should be done and the public will be better informed for it.

Highlight #7: The Second Smoke Grenade of Longer Analysis Periods

Page 4, 3^rd Last Para:

“Based on aggregate amounts, cost per claim has not risen in recent years . However, IPs have been around for many years now, and 2016-2019 is a relatively short part of this history. We should therefore take a longer-term view to understand the fuller picture”.

LIA went on to then analyse data from 2010 to 2019 (instead of Singapore Actuarial Society’s 2016 to 2019) and concluded “cost per claim rose very sharply from 2010 to 2014” to justify why recent rises for claims were more moderated (~ 10%). The longer dataset was used to justify that increases in management costs and commissions were actually more moderated over time (Page 6, Figure 2).

When it comes to prices and costs, recentness is everything. Can you imagine trying to recruit a person for an executive opening and saying he is offered the post for a salary of $2500 because that was the salary given for that job in 2010? The candidate will laugh at you.

Or the government saying property inflation isn’t so bad because over the last 10 years, the rise was moderate? Potential property buyers take reference from recent price increases, not what happened in 2010.

In fact, why stop at 2010? Maybe if we extrapolate back to 1965, the Compound Annual Growth Rate (CAGR) for management costs will drop to 1%. Who knows? And if you go back to when Sir Stamford Raffles landed in Singapore, the CAGR will drop to 0.3%.

As the saying goes, no need to talk about the time when policeman wore shorts. For issues such as costs and prices, it is here and now. Or the recent past few years at best. The older the data, the less relevant it is to addressing today’s problem on costs and prices.

Highlight #8: If 10% is bad, 15%/16% is worse!

Page 5, Para 2:

“The key question, which remains unanswered, is whether a 10% CAGR in claim rate is appropriate and manageable. The implications of continued claim rate inflation of this magnitude are potentially serious”.

The hobbit agrees that 10% CAGR may be actually bad.

As a first step to achieving sustainability, all cost components must have a CAGR that is less than the premium CAGR. Claims rate CAGR is now 11%, just 1% more that premium CAGR. We can talk about lowering the premium CAGR to less than 10% when cost components are approximate at the premium CAGR.

This is why a 15% to 16% CAGR for commissions and management costs is even more unconscionable and needs to be tackled aggressively and immediately.

So I don’t know what LIA is trying to say. Especially the LIA spokesman with his/her “there’s not a lot of fat” statement. There is a lot of fat in a 5 to 6 percentage point gap between commissions/management costs and premium CAGR!

Highlight #9: Rolling 3 Year CAGR from 2013 to 2019

LIA uses the tool of 3-year Rolling CAGR to bolster its argument that the phenomenon of “Growth in management expenses and distribution costs have generally lagged that of claims” (page 6, para 3), and this trend reversed in 2017.

It further stated in the next para. “One possible explanation is that insurers started implementing the HITF recommendations, and incurred management expenses for doing so. At the same time, the implementation of these recommendations may have had the effect of moderating claims growth. If this is true, then on an overall basis, the HITF recommendations have had the beneficial effect of moderating overall cost growth”.

Except that this is not necessarily true. A 3-year Rolling CAGR includes data from the previous two years. For example, 2015 data actually includes data from 2013, 2014 and 2015, hence the term 3-year Rolling CAGR. It is important to look at absolute numbers but it is also important to look at the trend. As the saying goes “The Trend Is Your Friend”

The HITF Report was published in October 2016, which means that its recommendations will only have had any efficacious effect with effect from 2017 at the earliest, if not 2018.

Taking a closer look at Figure 3 on Page 7 will reveal that 3-year Rolling CAGR for Gross Claims have been falling quickly since 2015, and 2015 Includes data from 2013 and 2014. Whereas Commissions have been rising since 2017 (which includes data from 2015, and Management costs also rose sharply since 2018, which includes data from 2016.

In other words, the recent trends of declining 3-year CAGR for claims and the unfavourable trends for rising 3-year CAGR trends for commissions and 2016 for management costs started before HITF recommendations were implemented.

Chew on that, folks

Highlight #10: Will New IP Entrants Ever Reach Economies of Scale?

Page 6, Last Para:

“Another factor to consider is that 2016 and 2018 saw new entrants into the IP market. As new entrants have relatively small portfolios, they will tend to have higher management expenses as a fraction of premiums. In addition, distribution costs are higher for policyholders in the first year of a policy, as considerable work is involved in the inception of IP policies.”

The IP market is at a high of 70% market penetration already. Will more Singapore Residents buy IP such that the market penetration goes up much further? This hobbit thinks not.

In other words, new entrants will continue to have “relatively small portfolios” unless it can gain market share from other established players. This is unlikely unless these established players do not defend their turf and roll over and let the new players take their cheese.

The distribution costs (i.e. commissions) may come down as policies age, but certainly management costs will not come down much in this scenario.

This hobbit is glad that LIA has stated that they will share their findings on this matter “publicly”. Let’s wait and see then.

Highlight #11:  The Policyholder Should NOT Be Paying For Lack Of Economies Of Scale And Other Inefficiencies

Page 7, Para 2:

“it may not be appropriate to directly transplant Obamacare regulatory requirement of an 80-85% loss ratio to the Singapore context”.

LIA goes on to give several reasons why this is so, such as lack of economies of scale among local insurers when compared to USA ones and that health insurance premiums are much higher in USA.

It is true USA insurers are larger and have economies of scale. But unlike Singapore, there is practically no “voluntary downgrading” effect in USA. As stated in Parliament and SMA Position Statement, voluntary downgrading inadvertently consumes public healthcare resources and subsidises the IP insurers. This actually means that IP insurers already have more fat built into the system than American insurers.

American healthcare is one of the most litigious in the world and legal costs are factored into the premiums. On the other hand, we are nowhere as litigious as America and again IP insurers benefit from this.

In addition, Singapore is well known for our efficiency and cost-effectiveness. So why should we settle for a system that is even less efficient than the notoriously inefficient American healthcare system (i.e. less than 80 to 85% gross claims or medical claims ratio)?

This should again draw the spotlight again on the fact that perhaps there are too many IP insurers in a slow-growth market. Policyholders are in fact paying higher prices in a market that is not truly free, i.e. policyholders with pre-existing diseases who are stuck with the same insurers, and paying for insurers’ inefficiencies arising from their lack of scale.

Highlight #12: Who Is The REAL Misleading Party?

The LIA Industry Statement has a whole section devoted to this on page 2:

Misleading analysis should be avoided

“It is important that organisations put out objective analyses which avoid biased conclusions. In this regard, we find SMA’s analysis of insurers’ costs and claims costs to be misleading. Claim increases are the main driver of premium increases. LIA Singapore will fully address this in due course, along with more detailed comments on the rest of SMA’s position statement”.

If one reads the LIA’s Position Statement, LIA makes no serious attempt to prove that SMA has misled anyone in the SMA Position Statement. LIA has not managed to debunk the SAS data in any way. The SAS table remains correct down to the last digit and LIA did not contest the table’s figures when it could have. SMA’s numerical inferences (in the last two rows of the table, absolute & increase and CAGR) therefore remain consequently 100% correct.

What LIA has done is to offer an alternative perspective using a longer timeline (from 2010 instead of 2016) and to use 3-year Rolling CAGR. This hobbit has already addressed these two points earlier on. When we look at prices and costs, the importance of recentness is paramount. Please don’t tell me my kopi-O in SGH Houseman Canteen cost only 50 cents 20 years ago. That’s irrelevant to the pain or prices people are facing today.

In a valiant attempt to levy a false accusation against SMA, the LIA claimed that SMA’s position was that management costs and commissions were the main reasons why premiums were increasing. The SMA made no such claim. What the SMA said was “We (i.e. SMA) suggest that the IP industry should take a hard look at how it justifies its management and commission costs as the first step in ensuring the IP industry is sustainable” (SMA Position Statement, Para 26).

This was repeated again in Para. 27: “Instead of repeatedly lamenting that healthcare providers and policyholders are to blame for the losses incurred by some IP insurers through overconsumption, overservicing and overcharging, IP insurers should take the necessary steps to explore cutting their own management and commission costs to enhance the sustainability of the IP sector”

The biggest component of premiums is claims, but the biggest contributor to the lack of sustainability are the fastest growing components – management costs and commissions.

By conflating cost composition and unsustainability, it is LIA that is misleading.

In summary, SMA and LIA can argue whether using data from 2016 or 2010 is better, but there is nothing misleading about SMA’s analysis. The internal validity and external validity of SAS’s numbers and SMA’s elaboration on them remain intact and congruent.

Conclusion

This hobbit will end with this parable:

There was once a manager who wanted to buy lunch once a month for his team: a monthly team-building lunch for his five-member team.

He gives $100 to the office pantry aunty to do so. The aunty buys $75 worth of food and drinks for the team. She spends the rest on transport, such as taking the bus or even a taxi or car-hire services, which is of course necessary. The manager is kind and tells her to spend some of the remaining $25 on herself for a meal, which she duly does, such as buying a cup of tea and a bowl of noodles for lunch at the coffeeshop. Then, this aunty goes from eating noodles to economy rice (2 meats + 2 vegetables) and consumes more of the remaining $25. The manager doesn’t think much of this and thinks it fine too.

After a few more months, the manager finds out the pantry aunty is now treating herself to more and more things, such as a beer and even gourmet burgers and is taking premium car-hire services.

Finally, after a few more months, the pantry aunty now tells the manager that $100 is no longer enough, and she wants $110. But the amount actually spent to buy food and drinks for the five-member team remains at $75. Alternatively, the pantry aunty says she can live with $100 but then tells the manager that only $65 will be spent on food and drinks for the five-member team, down from $75.

What shall the manager and department do with this pantry aunty?

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[1] Having more doctors on IP panels may lead to higher premiums: Life Insurance Association, The Straits Times, 2 April 21

It is not every day that SMA hits the front page of three newspapers: The Straits Times, Business Times and Lianhe Zaobao. But that’s exactly what happened on 29 March 2021 in response to the abovementioned Position Paper. The paper was already released to SMA members I think about a day earlier.

The reporting on 29 March focused on “Future SMA Initiatives” which involves ranking of IP insurers and setting up of a SMA Complaints Committee for IPs and Health Insurance.

But this Hobbit thinks this this is not the real main thrust of the paper.

The main narrative of the paper is how and why we got to where we are, and draws a BIG question mark on whether IPs, the way it is structured, sold and managed, is sustainable at all.

Blameworthy or Blameless IP Insurers?

The first point made in the paper is to debunk the narrative that doctors and patients are the chief cause for overservicing, overcharging and overconsumption that are seen more commonly in as-charged plans and comprehensive first-dollar riders. They are bad, but the SMA puts a large part of the blame back at the IP insurers who first offered these insurance products. SMA is right. The IP insurers narrative of assigning blame to doctors and patients is like saying the cigarette companies are complaining about rising rates of lung cancer amongst smokers and blaming the smokers for this and that the cigarette companies who created and sold the cigarettes are themselves blameless.

The HITF Report Recommendations

The SMA clearly draws the line in the sand with how it sees the Health Insurance Task Force (HITF) Report’s recommendations vis a vis LIA.

In her letter to the ST Forum on 18 March, The Life Insurance Association’s Executive Director, Ms Pauline stated that “The HITF, which included the SMA, recommended a suite of measures to do so, including panels, pre-authorisation, fee benchmarks and co-pays”, in an apparent attempt to infer what the IP insurers are doing has/had the blessings of SMA through both parties’ membership in the HITF.

In this Position Paper barely 10 days later, the SMA resolutely states (para 18) “the SMA council wishes to make clear that it is unable to support the way how the LIA and many of its members have implemented these recommendations”.

It is clear that from SMA’s perspective, LIA and many of its members have misinterpreted and misapplied the HITF recommendations. Which party is right here? This is a point that is worth mulling over.

The Cookie Monster

This is going to take a bit longer to explain but please bear with this Hobbit. The HITF was formed in 2016 and the Report released in October 2016. Buttressing this Report is a 26-Page “LIA Study On the Cost Of Health Insurance In Singapore” (Annex D of HITF Report). It is with this study that LIA made the case that healthcare costs with respect to IPs were increasing at an alarming pace and measures to control this increase were urgent and necessary. The Study used data mainly from 2012 to 2014, a three-year period or a Compound Annual Growth Rate (CAGR) over 2 years.

Now what did this LIA Study actually say?

For the study period, it showed that IP inpatient bill sizes increased by a CAGR of 8.1% vs 2.1% for A class beds in Restructured Hospitals (Page 8: Table 1). According to LIA, this 8.1% is a very bad thing.

The Study then broke down the inpatient bill further into Room and Board Charges, Surgery Charges and Implant Charges (Page 11: Chart H). The CAGR for the same period (2012 to 2014) for the three categories were 8%, 10% and 13% respectively for private hospitals. The corresponding figures for A class were 4%, 1% and 0%. Doctors are responsible for surgery charges and 10% CAGR was held up to be a very bad thing as well.

So this was the starting point or platform for the HITF which the LIA had constructed in 2015. They obviously did their homework and credit must be given when credit is due.

Unfortunately, they stopped their homework after the HITF Report was published. Or at least if they didn’t, they chose to ignore some very significant and odious trends that were building up post-LIA Study (2015) and post-HITF Report (2016).

They probably thought everyone bought their “Insurers are sibeh cham” narrative. As recently as 18 March, in the aforementioned letter to ST Forum, Ms Pauline Lim mentioned, “(the HITF measures) are collectively intended to address overcharging, overservicing and overconsumption of healthcare services”. She was implying clearly that the HITF recommendations (implemented in the manner that LIA’s members see fit) were necessary because the three evils of overcharging, overservicing and overconsumption still existed.

Then came the Singapore Actuarial Society’s 100 mega-ton warhead “SAS Comments: Medishield Life 2020 Review” document (https://actuaries.org.sg/sites/default/files/2021-01/SASResponseMSHLReview2020FINAL.pdf)  which was published just in January this year. The Review used more recent data and a longer period covering 2016 to 2019.

It countered LIA’s claim that (at least in this period) there was overcharging, because Average Payout Per Claim went down by 1% (not up!) over this period.

It also completely countered LIA’s claim there was overservicing because the claims incidence rate for IPs (9%) was actually 1% lower than for Medishield Life (10%). It is noteworthy that this is a good comparison because Medishield Life (and Medishield before this) is well designed with copayment and deductibles being a part of the product design as compared to the as-charged and comprehensive riders being offered by IP insurers in the past

Overconsumption = overcharging X overservicing.

If there is neither overcharging nor overservicing, then it is nigh impossible to have overconsumption.

But hang on folks. There is more.

From the table given in SAS’ Comments (Page 20: Table A4), it can be inferred that the CAGR in Management Fees (16%) and Commissions (15%) were growing at much faster rates than that of Gross Premiums (10%) and Gross Claims (11%).

Gosh, how the tables have turned! The 16% and 15% are much higher than the numbers used in the 2015 LIA Study to justify their call to control doctors’ fees (10% for 2012 to 2014)  through fee benchmarking and over-provision of services through panelling and pre-authorisation. This hobbit won’t say it’s disgraceful, but these figures collectively interpreted are pretty embarrassing for LIA.

In case anyone thinks that a few percentage points do not make a big difference, please note these are COMPOUNDED rates, and they tend to have a multiplicative, explosive effect with time. This can be seen by the fact that Gross Claims increased absolutely by 35.9% over four years (when its CAGR was 11%) and Management Expenses increased absolutely by 56.6% (when its CAGR was 16%). A five-point CAGR difference translates into an absolute 20.7% difference over a four-year period. And this absolute difference will increase more rapidly with time as long as the gap exists.

As it turns out, the SAS Comments paper have revealed why there seemingly aren’t enough cookies in the jar – there is a cookie monster helping itself to more and more cookies. And the greatest irony is that the one party complaining most loudly and frequently about not enough cookies is the cookie monster itself!!!

Expensive Tradeoff Between Risk-Pooling And Cost Of Running IP

Another snippet is that that Gross Claims accounted for 75% of gross premiums collected. This means for every four dollars collected, one dollar goes to non-healthcare cost items. Insurance, at its core, is a construct that is supposed to extract more funding efficiency through risk-pooling. But if the “funding efficiency” is only 75% (i.e. only 75% goes to healthcare providers to pay for healthcare), one must wonder is this risk-pooling worth the bother at all. In the Affordable Care Act (i.e. Obamacare), it is mandated that 80% to 85% of premiums must go to healthcare providers, so as to maintain a baseline efficiency in the system. This is also why SMA calls for a 85% to 90% Gross Claims figure to be imposed on IP insurers so as to “instill cost discipline”.

One Payor To Rule Them All

Which leads us to the last point SMA was trying to make – the prospect of a single-payor system that can extract far more efficiency than the current IP sector involving seven players. In 2019, $363M was spent on management costs and commissions. This is a huge sum. If a single payor can run the whole IP system for say $63M, that is $300M in savings. This hobbit is told $300M is the ballpark figure a ‘smaller’ restructured general hospital receives in operational subsidies a year. In other words, the savings so gained can be used to fund another general hospital the size of KTPH or maybe even NTFGH. Alternatively, the money can be put into Medifund to help poor patients in the subsidised healthcare sector. This hobbit can think of no better single payor system operator than MOH. If MOH can run Medishield Life, it can certainly run IPs.

The counter argument to all this is that market competition is good and market forces must be allowed to play themselves out. But as experience has shown, the IP market is hugely imperfect as policyholders cannot freely switch IP insurers once they have pre-existing disease(s). That is why IP insurers can raise their share of the pie in terms of management costs and commissions with relative impunity.

Bad Apples and Dirty Linen

Finally, we come to some of the concerns raised about SMA’s big pushback against IP insurers. People are concerned that with SMA’s Position Paper, the LIA, its members or just their sympathizers will push back with horror stories of unethical doctors overcharging, overservicing etc. In other words, they will publicise all our bad apples and wash our dirty linen in public.

There are some 2000 specialists in the private sector and there will always be bad apples to show and dirty linen to wash. In fact, this hobbit knows quite a few examples too. But that is NOT the point. No matter how many bad apples we have (and this hobbit would like to think there are but a few) and dirty linen to wash, they are ALL encapsulated in the 11% CAGR in Gross Claims. That’s it.

This 11% is just one percentage point higher than the CAGR for Gross Premiums. It means that Gross Claims growth is very close to growing in tandem with Gross Premiums, which is the first precondition to making the IP environment financially sustainable. Now contrast this 11% to the 15% to 16% figures for commission and management costs and one will quickly realise who is the main culprit in this whole issue of IP sector being unsustainable.

Conclusion

The 15% to 16% CAGR for commissions and management costs makes IP unsustainable. Period. Extracting more friction through pre-authorisation, higher deductibles and copayment when using non-panel doctors or having highly restrictive panels won’t address the root cause of the problem. Reimbursing doctors at even lower rates than now may help, but at current rates how much lower can you go? MOH might as well throw in the towel and concede defeat to LIA and its members by withdrawing its Fee Benchmarks if the IP insurer fee scales go any much lower than now.

The SMA Position Paper highlights the findings of the SAS Comments on Medishield Life, and points the way to where we should look for solutions. With payout size stable and claims incidence rate for IP being 1% lower than Medishield Life, the focus of efforts to make IP sustainable must now be on the IP insurers themselves.

The numbers don’t lie….

Empanelling: Trust Me, You Will Take The Blue Pill

Over the last few days, a series of letters to The Straits Times Forum has appeared that commented on some of the choice-limiting practices of Integrated Shield Plan (IP) insurers. (Mr Tan Siak Khian, 19 and 24 Feb 2021; Dr Tony Ho, 22 Feb 2021)

It deals with the “restrictions” placed on IP policyholders’ choice of doctors when they use their IPs. To be fair, there are no “hard” restrictions – every IP insurer will tell you (and the regulators) that policyholders can still see the private specialist they want, subject to certain processes and approvals being obtained. There are no hard restrictions or outright bans on seeing an “un-panelled” private specialist for a certain condition or procedure that is covered by the IP.

In short, the system is designed to impose “friction” on the policyholder, such that the policyholder is “disincentivised” from seeing a non-panel doctor. The policyholder has to jump through a number of hoops before he has access to the doctor he wants. These hoops include coming up with a cash deposit himself that the IP insurer will probably (not 100% guarantee) reimburse later, the non-panel doctor has to seek pre-approval by filling up a long form trying to justify the procedure and include more than enough information necessary for a pre-approval to be processed.

Added to all this friction is the ultimate deterrent – the need for cold, hard cash. The Straits Times Invest Editor, Tan Ooi Boon highlighted this “When cash is needed for those big hospital bills” on 28 Feb 2021. The column highlights the burden that IP insurers pile on policyholders when they see non-panelled doctors by issuing Letters of Guarantee (LOGs) that may not cover big hospital bills and the policyholder has to fork out the remainder while the claim is processed (with no guarantee the claim will be fully paid).

The whole process is designed to sow fear and uncertainty in the policyholder and to inconvenience him to the point that he chooses a panel doctor. In other words, although there are no hard restrictions as to what doctor you can see, the system is designed so that you, the policyholder, is likely to cave-in to the IP insurer’s preferences and use a panel doctor. Please note, it is not a demand, as in a hard requirement, but a preference of the IP insurer. But for this to happen, the policyholder must cave-in, and believe you me, the insurers are very good at making you cave-in. It’s like the movie Matrix, no one forces you to take the blue pill, but by jolly, they make it so tough for you to take the red pill that you cave-in and take the blue pill. But they will tell you it’s your choice that you did not take the red pill. No one really forced you. This hobbit calls this the veneer of choice or pseudo-choice.

Half the IP insurers claim to have lost money on IPs in 2019. Some have lost for several years. In the business world, if you lose money in a certain business segment for a few years you will think about exiting this segment. But no one has done so. No one has even threatened to do so. That means either they are very charitable or something else is afoot.

Nothing Personal, It’s Just Business

In Malaysia, it is very difficult to buy personal hospital insurance unless you also buy a life insurance product. The two are usually ‘bundled’. This is because life insurance products are almost always profitable while personal hospital or healthcare insurance may not be. But personal hospital or healthcare insurance is a ‘loss leader’; i.e. the insurance company accepts that it will likely make losses in this segment but he will make money in the life insurance bit.

Here, there is no bundling, but it may be that insurance companies want to enter the IP segment so that they offer a complete suite of products and services so that they can sell more insurance policies in the profitable segments. This hobbit really doesn’t know, to be honest.

A blogger has examined the IP industry and have commented that neither ‘kiasu’ patients and greedy doctors are to blame of IP insurers losing money. The blogger has written twice on this topic. Go to lifefinance.com.sg. It’s all there. It’s a treasure trove of information and analysis about IPs.

Basically the blogger concluded that IP insurers are in the red mainly because of:

• Lack of economies of scale
• High management costs
• High distribution costs (what insurance agents and financial advisors earn from selling IPs)
• An ageing population. (The ‘first’ generation of IP policyholders are now nearing 60)

The blogger further stated there is no clear evidence that doctors’ fees is the main cause of the IP as losses the claims ratio is manageable. In fact between 2016 to 2019 the average pay-out per claim fell by 1% per year!

A note to add here is that management costs is a highly variable thing. It can be high because of inefficient management, or inappropriate cost apportionment or that people are simply paid too well to run the IP business. Claims ratio is an objective measure. Claims ratio is a measure of how much is paid out as claims as a ratio of premiums collected. Distribution costs is what is actually paid to the insurance agents and hence is also a more objective measure.

But the fact that no IP insurer has exited the IP segment because of repeated losses implies that IP business can well be a loss leader. Or that the losses are simply due to apportionment of costs which could be accounted for somewhere else. Food for thought.

Further food for thought is what if an IP insurer actually exits the scene? Let’s say company IP X exits the business. What will happen? For a start, all of the folks who bought IPs from IP X now have no IP cover after their current contracts expire. IP policies are bought and renewed on an annual basis. These folks would have no cover in months. Can they buy from another IP insurer? The answer is yes. But it is a BIG conditional yes. The new IP insurer is under no compunction to cover for any pre-existing disease that the policyholder had developed during the time he was covered by IP X. Healthy policyholders may not be affected adversely as they can get an IP from another insurer easily, but those with pre-existing diseases may experience the following

• Loading of premiums for pre-existing diseases
• Denial of coverage for pre-existing diseases
• Unable to buy an IP altogether  

This hobbit hopes the regulators have drawer plans in place for this scenario so that IP policyholders are not left high and dry.

LIA’s Letter to ST Forum

On 27 February 2021, The Life Insurance Association (LIA) of Singapore’s Executive Director replied in The ST Forum to the three letters. This hobbit has reproduced the entire letter here from the 3^rd paragraph onwards (in bold and italics). The first two paragraphs are really administrative in nature. Like how a histopathologist examines a space occupying lesion excised for suspected cancer, slide by slide, this hobbit examines this letter paragraph by paragraph and also asks some inconvenient questions.

3          Integrated Shield Plan (IP) insurers have an interest in ensuring that their panels are comprehensive, as this increases panel usage and helps IP insurers better manage costs. In line with this, insurers are continuing to expand their panels.

Comment: Not really true. Data shows that each IP insurer have only about 20% of private specialists on their panels. Even if an insurer double the panel size it would be only 40%. Insurers do not make money by having comprehensive panels. Some insurance companies promise panel doctors large volumes of work in return for low doctor fees. Small panels shift the balance of bargaining power from the panel doctor to the insurer and the insurer can extract lower and lower fees by promising more and more work to a small group of doctors.  Can LIA recommend a target for its members – like what percentage of private specialists should be on an IP panel?

4          Life Insurance Association (LIA) Singapore has also provided guidelines on the implementation of preferred healthcare panels, which includes the need to ensure that the network is sufficient to offer a wide range of medical services to policyholders.

Comment: The original document that recommended panels was in the Health Insurance Task Force (HITF) Report. It stated “To enhance and ensure transparency of the arrangement (e.g. disclosures on the healthcare provider selection process)”.  I.e. IP insurers should state the criteria used to select doctors to be on a panel.

To date, not one insurer has disclosed what is the selection criteria for healthcare providers (i.e. why a doctor is selected to be on a panel while another is not). Can LIA make its members (i.e. IP insurers) come clean on what is the selection criteria and remove this opacity? Not just general statements about criteria etc but actual quantitative or qualitative measures that make up these (now secret) criteria.

5          Mr Tan asked what happens if a doctor is removed from the panel. IP insurers generally decide to remove doctors from a panel only as a last resort or in extreme circumstances. Should removal of a doctor be necessary, an adequately long notice period will be given to allow patients to transition to another doctor, should they wish to do so.

6          Doctors may also choose to leave panels for various reasons, and this is not within the control of IP insurers. Should there be transfers of care, doctors are professionally obliged to provide sufficient documentary medical information to enable continued quality care.

Comments: It is true that that IP insurers seldom remove a doctor from the panel. But the whole point is not whether a doctor is removed, but rather if the panel was adequately constituted in the first place! If you start off with 20% of private sector doctors then it is manifestly inadequate even if you do not remove any doctors from any panel.

The Executive Director then tries to give the impression that a significant root cause of the problem is that  doctors choose to leave panels voluntarily. Doctors leave for one reason and one reason alone – the IP insurer is paying badly. If you reimburse at below or at only the lower end of the fee benchmarks, then some doctors may and will leave. Why would a doctor otherwise leave when being a panel doctor usually means more work and more earnings?

This hobbit has not heard of anyone wanting to leave NTUC Income’s panel. This is because NTUC Income pays the doctor as long as he charges within the entire range of MOH’s fee benchmarks. Doctors will leave panels because they perceive the insurer is not giving them a fair deal.

7          Mr Tan also asked whether there are checks in place to ensure insurers do not make unfair changes to terms of contract.

8          IP insurers do not make changes to their insurance contracts lightly, particularly when it comes to changes that affect in-force customers, and such changes go through extensive internal review.

9          In addition, all contractual changes to IPs must be approved by the Ministry of Health.

Comments: This is technically true and the policyholder is apparently protected. But again in real life it is not so. If the contract is well constructed then the policyholder is protected. But if the contract is lax and amorphous then good luck. Which is exactly what happened when Aviva unilaterally stopped coverage of diagnostic scopes in its IP Plans. The contract was so loosely worded that it could do so (i.e. not reimburse for diagnostic scopes) without changing contract terms. This incident showed that Aviva (and by extension, any other IP insurer) could withdraw coverage for something as fundamental as diagnostic scopes without changing its contractual obligations. Chew on that, folks.

10        Finally, the Monetary Authority of Singapore requires representatives to disclose at point of sale that IP and rider contract terms allow insurers to change the terms and conditions. IP insurers must notify policyholders before doing so.

Comments: I hope MAS is enforcing this through routine checks. For a start it could send in some “mystery shoppers” to purportedly buy IPs and see if the agents are doing so. Also please note that LIA has said that contractual terms cannot be changed without MOH’s approval but insurers can change terms and conditions. This hobbit doesn’t really know what this means in real life. Maybe someone can educate the public on this oddity.

11        LIA Singapore and IP insurers are committed to playing our part in ensuring the continued accessibility of healthcare in Singapore.

12        We urge all parties involved to play their part, too.

Comments: On the bright side, this hobbit suspects that 2020 was a good year for IP insurers. This is because in Covid-stricken 2020, people generally loathed going to hospitals. Healthcare-seeking behaviour changed drastically as people feared getting infected with Covid-19 at healthcare facilities. Many electives were postponed and people only sought urgent or emergency care and absolutely essential care in 2020. In all likelihood claims ratios will drop even further while IP insurers continued to collect premiums.

Can LIA “play their part” by cutting 2021 premiums?   Please don’t  pocket all and return some of the 2020 profits to the policyholders? Please…..?

Summary

In summary, doctors in the private sector have long known how the IP insurers behave to stack odds in their favour. There is little trust between them and the IP insurers. In fact, this hobbit would say there is no love lost between the two.

Of course, in defence, IP insurers will highlight how some specialists have “over-charged” in the past but this issue is now already dealt with by the MOH Fee Benchmarks. In any case, “overcharging” became commoner after the SMA Guideline of Fees (GOF) were removed reluctantly by SMA because the government had outlawed such guidelines. The SMA had warned everyone about the negative consequences of withdrawing the GOF to no avail. You can’t just lay 100% of the blame on doctors. The regulators allowed such an (GOF-less and benchmark-less) environment to exist which led to rapidly increasing doctors’ fees between 2007 and 2016.

Private sector doctors saw how some insurers seemingly took and twisted the recommendations of the HITF Report to their maximal benefit. Having small panels and reimbursing below MOH Fee Benchmarks are two such examples.

Some have said this is akin to religious extremists twisting and contorting mainstream orthodox religious teachings to their own benefit, but this hobbit readily admits this is too serious a charge to levy on IP insurers. IP insurers are not extremist. They are probably just profit-maximising, business people.

But now the public have also gotten wind of these practices and now realise they too could well be receiving the short end of the stick.

IP insurers should know that losing the trust of doctors is one thing, but losing the trust and confidence of consumers is another thing altogether. Trust is hard-earned but easily lost in the twinkle of an eye.

I hope regulators empathise with the patient, because obviously we should not trust IP insurers to, going by past behaviour. In the current climate, the only real choice the patient has is to decide whether he should buy an IP or not and which IP to buy. After that he only has the veneer of choice or “pseudo-choice”, or no choice at all:

• He falls sick and it is not a choice to fall sick (assuming he led a reasonably healthy lifestyle)
• He can technically choose a specialist, but in reality he has to choose from a very limited panel of specialists (pseudo-choice) even if the specialist he prefers charges responsibly (according to MOH Fee Benchmarks)
• He grows old and develops pre-existing conditions (not a choice) and he cannot switch IP insurers unless he incurs significant additional costs or suffers penalties (pseudo-choice)

Finally, some say light is the best disinfectant and indeed the IPs offered by insurers can benefit from much more light indeed. Independent bloggers such as those in lifefinance.com.sg and journalists such as Mr Tan Ooi Boon play an important role in educating the public about the whole IP milieu which is hitherto shrouded in jargon and complexity. People always talk about reducing the information asymmetry between doctors and patients. It is also time now to reduce the information asymmetry between IP insurers and patients as well.

Let there be light.