Question 1:

How does a health insurance company make money?

Answer:

Its rather simple – the company collects more premiums than the pay-outs it makes to policyholders after accounting for business costs. If the pay-outs are more than the premiums collected, the company loses money. Plain and simple.

Question 2:

What is the usual narrative by the health insurance companies when they lose money?

Answer:

They blame the doctors. Doctors overcharge and over-service. Sometimes they also blame the hospitals and facility operators, e.g. day surgeries for over-charging. They also may blame the patients.

Question 3:

What is the health insurance companies’ biggest bargaining chip against politicians and patients to get them to cooperate and support their practices?

Answer:

The threat of higher insurance premiums.

Current Situation for Integrated Shield Plans (IPs)

The performance of IP insurers for 2019 has just been released. Two IP insurers are now making money: Prudential and Income. Prudential for the 2^nd year running, making $51.99M, while Income made a modest $4.21M for 2019¹. The remaining 5 insurers made a combined loss of $99.31M.

For 2018, only one out of six IP insurers made money (results from the latest IP insurer, Raffles Health, was not available yet) . Prudential made $42.73M while the other five insurers lost a total of $80.49M. In 2017, All six IP insurers lost a total of $145.88M. For 2016, combined losses from the same six insurers was $98.59M

And so, we are told that unless doctors don’t charge less or do less, premiums have to go up. This is taken almost as received wisdom and cardinal truth. Doctors earn a fair bit and are often seen as fat cats. It’s easy to lay the blame on them. No one doubts this ‘blame the fat cat’ logic.

This hobbit does.

Under-utilisation and Structural Under-capacity

Let’s look at how health insurance really works. It works by pooling of risk. In any given year, the people that don’t fall sick don’t make claims. Their premiums are used to subsidise those people who do fall sick and make claims.

There is no carry over beyond the same year. It is a pay-as-you-go system, year by year accounting. This is opposed to Medishield Life (MSL) where because it is compulsory and life-long, there can be “front-loading” of premiums. In other words, MSL collects more premiums from us when we are young, so that they can collect relatively less when we are old, even though we consume more health services as we get older.

Front-loading of premiums is not possible in IPs, because they are voluntary and commercial, there is no guarantee that a person will sign up again the following year when the current contract expires with the same IP insurer. Even though in most cases, the policyholders almost invariably sign up again. That’s because as you get older, you can’t change insurer as you develop more medical problems because these problems will be excluded from coverage when you sign up with a new IP insurer. In other words, you are stuck.

So in the usual case, a commercial health insurance company has to balance the books and hopefully make a profit by collecting enough premiums from healthy people to subsidise those who make claims. Nothing with wrong that. This is how health insurance is supposed to work.

In almost all other developed countries, a health insurance policyholder will exercise the full benefits of his policy. But in Singapore with regard to IPs, they don’t. This is very peculiar to Singapore.

For the purposes of this discussion, private healthcare is considered to be private hospitals plus A class and B1 class beds in restructured hospitals (RHs). MSL and IPs are mainly concerned with bigger bills generated by private healthcare as well as expensive outpatient treatment such as chemotherapy and day surgeries. B1 beds actually receive some subsidy, at about 20% of costs. But again for the purposes of this blogpost, we will consider them as unsubsidised.

The Life Insurance Association (LIA) reported that two-thirds of Singaporeans have bought IPs. In an article in Business Times dated 1 Oct 2020 by Ms Genevieve Cua, it was stated “An estimated 70% of Singaporeans subscribe to an IP plan, to complement their MSL cover”.

According to MOH website², in 2019, there are 11,321 acute hospital beds in Singapore. There are 1,629 beds in private hospitals and 288 beds in not-for-profit hospital (probably Mount Alvernia?), making a total of 1,917 beds.

It was also reported that 81% of RH beds are B2 and C class³. Therefore the remaining 19%  or 1,787 beds of the total number of 9,404 beds in RHs are B1 and A Class beds.

Total number of private healthcare beds (private hospital and A1 + B1) = 1,917+1,787=3,704 beds.

Therefore, private healthcare market share = 3704/11321 x100 = 32.7% or ~33%.

This is a very interesting statistic. It shows that despite 70% of Singapore residents buying IPs, the entire healthcare system is structured such that only ~33% of beds are private. There is obviously a structural mismatch between demand for IPs and supply of private healthcare beds.

The private healthcare market share for day surgeries and certain expensive outpatient treatment that are covered by IPs may differ from the figure of 33%, but probably not by very much.

In other words, in the case of Singapore, IP insurers have a second source of policyholders to balance the books in addition to healthy people – IP policyholders who choose subsidised healthcare in RHs, even though they are entitled to private healthcare. This is self-evident because there won’t be enough capacity in the private sector if all 70% of IP policyholders really exercised what they are entitled to. This “under-utilisation” of IP benefits is very interesting and needs to be studied further. Hopefully MOH or MAS has the data on how many IP policyholders do not utilise their IP benefits fully but instead opt for B2 and C class services in RHs and this data can be made public for all to study.

It could be that Singaporeans are by nature very conservative and prudent and hence will choose subsidised care even when they have IPs. Moreover, this 33% capacity figure is actually a conservative one because it ignores capacity taken by foreigners who came to Singapore for healthcare in pre-Covid-19 days. If you take into the capacity taken up by foreigners, the figure is probably below 30% and the structural mismatch is even more pronounced.

The nett effect is that when these IP policyholders choose subsidised care, the government is actually subsidising the IP system in the form of B2 and C subsidises given to these patients who otherwise could have chosen care that could have been paid by IP funds instead.

Young Policyholder Pool

The next thing we have to note is that currently, IP policyholders are generally a younger lot. The first provider was IncomeShield in the late 90s. This was followed by AIA and Great Eastern in 2002 (please see previous posting). It was only in 2005 that IP formally came into being. So The history of IP is about 20 years or so, give or take a few years.

In other words, we can generalise that the oldest IP policyholders are probably only in their early or mid-50s, while the bulk of IP policyholders are younger, probably in their 30s and 40s. People fall sick and make big claims usually when they older, in their 60s and 70s or even older. But in all likelihood, these older people are NOT IP policyholders now.

Of course, there will be a day of reckoning when the bulk of IP policyholders get older and sicker and make more claims from their IPs.

In summary, to stay profitable, IP insurers have two big advantages when compared to private health insurance companies in other developed countries, e.g USA:

• Many Singaporeans under-utilise their IP entitlement and choose subsidised care.
• Most IP policyholders are young and therefore relatively healthy.

Yet, at last count, five out of seven IP insurers are losing money.

Incredible, isn’t it?

Yes, some doctors may over-service. A few doctors may even overcharge (which is unlikely as long as they adhere to MOH Fee Benchmarks). But surely these factors are more than adequately compensated by the IP policyholder pool being younger and government subsidies to policyholders who under-utilise their IP benefits?

So why are IP insurers losing money?

What Can “Affordable” IPs Really Afford?

The answer goes back to the adage by Deming: – Every system is perfectly designed to get the results it gets.

To understand this, we have to get back to the basics – The Golden Triangle of Healthcare: Affordability, Accessibility and Quality.

The lesson here is that because of limited resources, no healthcare system can achieve all three. A system can at most achieve two and compromise on the third.

A health insurance agent or company is incentivised to sell more policies and collect more premiums. The easiest way to sell more policies is to price these policy premiums as cheaply as possible. Which is probably what has happened as all IP insurers compete for market share. But these premiums cannot really pay for what the IPs purports to cover, even with the two advantages described above. So to balance the books, you compromise on accessibility- Small panels of doctors, pre-authorisation forms etc. Quality, too, can be compromised, e.g. by telling gastroenterologists they have to provide sedation themselves and not use an anaesthetist. These are all measures that can be considered to bring friction and obstacles into the system by limiting accessibility and quality, so as to balance the books.

All these may work in the short term. But in the long term, all serious stakeholders must ask the tough questions that include:

• Do we really believe 70% of Singapore residents can afford private (especially) inpatient care? If so, what do we build so many subsidised beds in RHs?
• Why are we selling so many IP policies to so many people, many of whom will probably either won’t or can’t use their policy entitlement, but instead seek subsidised care in RHs?
• Is the current IP market really a sustainable one when it has to depend on policyholders under-utilising their IP benefits (and consuming government subsidies in the process)?
• What will happen if all 70% of Singapore residents exercise their full IP benefits?
• Should we private healthcare acute hospital beds only amount to 33% of all beds, when 70% of Singapore residents have IPs?
• What happens when the bulk of IP policyholders grow old and need more care? Will premiums shoot up then and many will have to give up their IPs just when they need IPs most?
• How fast will IP premiums go up? Already the MSL proration percentage for private hospitals has been cut from 35% to 25% which means IP premiums has to go up very soon.
• Going forward, what can “affordable” IPs really afford?

Yes, we can still continue with the tired narrative that doctors are mainly to be blamed for IP insurers losing money. But as this post has clearly shown, while doctors do make decisions that impact cost of healthcare, the long-term problems facing the IP industry in terms of sustainability are:

• A structural mismatch between private healthcare bed capacity and number of IP policyholders
• Misplaced incentives leading to unrealistically low premiums, i.e. IPs insurers are incentivised to sell as many IPs as possible to gain market share
• A possibly misplaced belief by many IP policyholders that their “affordable” IPs will give easy and wide access to quality private healthcare when the reality is much less exuberant.
• An IP industry that is indirectly dependent on government subsidies, i.e. IP policyholders under-utilising their IP benefits and getting subsidised care in the RHs.

Clearly, these icebergs are already visible now in the IP industry. In order to avoid ending up like the Titanic, we have to face the hard truths and make some painful adjustments now.

Unlike what Rose and Jack said in the movie, we have to let some things go. Because the disappointment and pain that will happen down the road will be much worse and widespread if we don’t make the right but difficult decisions today.

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¹Business Times: Most Integrated Shield insurers improve underwriting results in 2019, 5 Oct 2020.

²https://www.moh.gov.sg/resources-statistics/singapore-health-facts/beds-in-inpatient-facilities-and-places-in-non-residential-long-term-care-facilities

³https://www.moh.gov.sg/home/our-healthcare-system/healthcare-services-and-facilities/hospital-services

A recent letter from SMA to The Straits Times Forum brought to surface some of the unsavoury if not unjust and even unsafe practices of certain private insurance companies offering Integrated Shield Plans, usually called “IPs”.

Newly minted Chairman of the GPC (Government Parliamentary Committee) for Health, Dr Tan Wu Meng also quoted this letter in his recent Parliamentary Speech on 1 Sep 20 highlighting the problems facing people who have bought IP Plans.

He said,

“In a Straits Times Forum letter published on 29 Aug this year, the Singapore Medical Association shared that That some insurers are no longer allowing claims for diagnostic endoscopies even when medically necessary. This is a serious development. Implications for patient care. implications for patient safety. It is also a very visible sign that Individual patients, individual customers do not have bargaining power to stop insurance companies from such practices. When an insurance company moves the goal posts for an Integrated Shield Plan, it is not so easy for a patient to switch provider, because existing conditions become pre-existing conditions under the new policy”.

He further made the call for the authorities to step in, “The invisible hand of the market appears to have become unbalanced. And so I call upon MOH and MAS (i.e. Monetary Authority of Singapore) to look at this and to see if the visible hand of the regulators need to come in, to level the playing field and our people”.

Dr Tan is a medical oncologist, and he knows better than anyone else what are the consequences when a diagnosis of cancer is missed or delayed because people cannot get a diagnostic endoscope done because there is no cover under an IP. Some of the commonest cancers in Singapore need endoscopies for accurate diagnosis – colorectal, nasopharyngeal, stomach, bladder and so on.

As we all know, many Singaporeans buy such IPs. In the October 2016 Report of the Health Insurance Task Force (HITF), it was reported that about two-thirds of Singapore residents have an IP Plan, of which half (i.e. one-third of Singapore residents) have bought IP riders that pay for the co-payment and deductible requirements of IP plans. These IP riders are paid with cash while IP can be paid for by Medisave. This is a big-money business by any measure.

History

The precursor of IP was called PMIS or Private Medical Insurance Schemes. The first to offer PMIS was NTUC Income. By 2002, AIA and Great Eastern also offered PMIS. PMIS was a standalone product that was unlinked with Medisave or Medishield. They paid for expenses incurred when a patient consumes medical services in private hospitals or in unsubsidised wards (i.e. B1 and A Class) of Restructured Hospitals.

In 2005, Medishield was reformed and PMIS was renamed IP, IPs were linked to Medishield and Medisave in that they could be funded by Medisave monies. So far so good.

The problems really started when one IP provider started providing as-charged plans in 2005 and by 2006, all IP providers followed suit. In 2006, IP providers also provided the aforementioned IP riders, which paid for the deductible and co-payment parts of the bill. This is called “first-dollar” coverage in the insurance industry because the policy holder doesn’t even have to come up with one dollar before the policy kicks in to cover you. Someone dropped the ball on this in MAS and MOH obviously because the experience of this the world over is that first-dollar coverage will lead to more frequent claims. This is not rocket science.

Then in 2007, the SMA Guidelines for Fees (GOF) was outlawed by the then Competition Commission of Singapore (CCS). Which meant there was now no clear guidance really for private sector doctors on how to charge. And with as-charged plans being offered by all IP providers, this expectedly led to higher claims, as well as more frequent claims.

Looking back, this Hobbit thinks the main root cause was both under-regulation and over-regulation. The insurance industry was somehow under-regulated, leading to proliferation of undesirable IP products such as as-charged plans and first-dollar coverage riders. On the other hand, CCS over-regulated the SMA GOF to its eventual withdrawal by SMA. It is this Hobbit’s opinion that these two events led to both an increase in number of IP claims and IP bill sizes.

It wasn’t before long the IP providers realised the error of their ways and then as the Hokkien saying goes, these providers “Cry Father, Cry Mother” about rising healthcare costs associated with IPs, especially those that come with as-charged and first-dollar coverage plans. But who came out with these IP products in the first place? Not doctors. Not patients.

Certain IP providers (i.e. members of the Life Insurance Association or LIA)!

Their trade association, LIA then wanted to address this problem. The Health Insurance Task Force (HITF) was thus formed in early 2016, with representatives from LIA, CASE, SMA, MOH and MAS.

The Report of the HITF was published in Oct 2016. Some of the major recommendations included:

1. Have a new set of Fee Benchmarks or Guidelines
2. Introducing Panel of Preferred Providers
3. Pre-approval of Medical Treatment

The government kept its side of the bargain and MOH came up with its Fee Benchmarks for the commonest procedures in Nov 2018, after extensive consultations with stakeholders including LIA, doctors, hospital administrators, CASE and even the unions. So after 11 long years, the role that SMA GOF served in controlling healthcare costs was resurrected as the MOH Fee Benchmarks in a wonderful act of policy necromancy.

The Current Situation

You would think that all IP providers, being members of the LIA, will support the fee benchmarks. After all, this is what we would expect out of good faith and especially the benchmarks were from the government, no less. But it turns out that several IP providers have since reimbursed doctors at rates that are at the lower end or even below the low end of the fee benchmarks. Those that now go below the fee benchmarks make a mockery of the process and maybe even a betrayal of the hard work that has gone into making the fee benchmarks a reality.

Next, we look at the issue of IP providers coming with panels of preferred providers. A few IP providers have done so. One or two have done so in the wrong spirit. In the original HITF report, it was written that these panels are to be appointed in the hope of “Enhancing Insurance Procedures and Products Features. To achieve so, IP providers are  “To enhance and ensure transparency of the arrangement (e.g. disclosures on the healthcare provider selection process)” (Page 16 of HITF Report)

The exact opposite has happened. No IP provider has come clean to state what are the exact criteria they are using to select and empanel doctors. Some panels are restrictively small. Some specialties, especially the smaller ones, have no representation on the panels at all.

Many IP providers say they have many doctors on their panels, but on closer scrutiny, many of these are actually specialists from restructured hospitals (RHs) and very few are actually from the private sector. It is obvious that many IP providers are trying to shift work from private hospitals to the RHs by having panels that are heavily weighted towards the RHs and sparsely populated by private sector specialists.

In the current climate, all healthcare providers are functioning at reduced efficiency when compared to pre-Covid. The appointment and waiting times at RHs are already more trying during this Covid-19 pandemic. Do the RHs need any more business? On top of that, some IPs guarantee that their policy holders can get a specialist appointment within 48 hours, which as we all know, is practically an impossibility in most RHs.

So let us now get back to the centre of healthcare, the patient. The IP patient to be exact. He or she has paid good money to get an IP. Half of these folks have even forked out cold, hard cash to get these IP riders.

What does he get in return? Well, it all depends. If you are an Incomeshield IP plan holder, (like this hobbit), you can sleep reasonably well. Because as long as the specialist adheres to charging to within the fee benchmarks, there is little fuss. But woe be unto you if you have signed up with the “wrong” IP provider. You may well discover that one or more of the following:

1. The doctor you have seen in the past is not an empanelled doctor
2. You have to jump through hoops to see him,
3. Your non-panel doctor has to justify at length why some admission or procedure is needed and what are his estimated charges, and seek approval from the IP provider
4. The approval may take days which leads to anxiety and delay, or the approval may never come and you are forced to see someone else if you want coverage or ease of coverage
5. Now you have to pay cash up-front to see a non-panel doctor and wait for the IP provider to reimburse you later, and there is no assurance they will do so
6. The panel does not even contain a private specialist in the hospital or speciality that you need or want
7. Certain things you assumed were covered no longer are – like diagnostic endoscopies such as colonoscopy. Even though you have a family history of colorectal cancer and needs periodic screening
8. You cannot change IP provider because no new IP provider will cover you for conditions related or can be associated to e.g.  a small benign polyp that had been taken out 5 years ago during a colonoscopy

even though you have been paying years of riders for first-dollar coverage and covering as-charged bills

It is the “unbalanced” hand of the market at work, unbalanced in favour of the IP provider.

What is really the point of having IPs?

But let us take a step back and ask what is the policy intent of having IPs offered by private insurance players in the first place?

This hobbit thinks IPs were allowed by the government so that more Singapore residents can receive private healthcare. Private healthcare means primarily private hospitals, but for completeness’ sake, will also include the unsubsidised care in RHs. But RHs’ private or unsubsidised patients were not and is not the main intent or focus of IPs. Why is this so?

Think about it, the government owns MOHH which in turns own the clusters and RHs. They have great influence over how cluster boards are run and how top hospital management are appointed.  In other words, there is great influence (if not a strong degree of control) over both costs and pricing.

There is really no need for the private insurance companies to participate in IPs if the intent was for IPs just to mainly cover consumption of B1 and A class services in RHs. The government can definitely do a better job and save patients money by cutting out the middleman (i.e. the private insurance companies).

So the apparent strategy by some IP providers to try and shift work to RHs is doomed to fail in the long run.

This hobbit thinks it is perhaps time to exclude private companies from offering IPs that cover RH services. After all the government has done a good job running Medishield Life which covers C and B2 classes (i.e. subsidised classes). It doesn’t take much more to extend Medishield Life to B1 and A services.

Then, we can leave private insurance companies to only offer private insurance plans that can be partially funded by Medisave monies for those Singapore residents who wish to be served in private hospitals only. And that we can stop these IP Plans from trying to shift work to RHs and derive big profits from doing so when this was probably never the policy intent of IPs.

Regulatory Lacunae

What about the un-covered diagnostic endoscopes that we talked about earlier on? Well, we hope the guy with the regulatory muscle, MAS, will do the right thing and sit on these IP providers who are obviously doing the wrong thing. Now that it is out in the open and even discussed in Parliament, this hobbit thinks something will happen. Some authority will tell the insurance company or companies that this is not right and these companies will comply and cover diagnostic scopes once again.

This is the nub of the problem because with such a regime, people are motivated to try their luck every now and then and come up with money-making ideas at the patient’s or doctor’s expense.

Part of the problem of regulating IPs is that it perhaps falls through the cracks. IP providers and insurance companies are licensed and regulated by MAS. But really, MAS has no expertise in healthcare. And perhaps they have bigger fish to fry than IPs. On the other hand, MOH has the healthcare expertise of course, but they have little or no regulatory muscle to compel insurance companies to do the right thing because MOH really does not administer any law that can punish insurance companies.

There is thus no real punishment for the party that comes up with these unethical and dangerous ideas that compromise patient rights, patient safety and clinical standards. Today it is diagnostic scopes, tomorrow it may be biopsies.

Today, if a doctor does something that compromises patient safety or autonomy like taking a patient consent that does not meet the basic standards of the SMC Ethical Code and Ethical Guidelines (ECEG), he may be sanctioned by SMC. But will MAS, the regulatory body of insurance companies sanction or punish an insurance company for forcing doctors to adopt clinical practices that compromise patient interests (like treating patient with hydrogen pump inhibitors before scoping)? They probably do not know what are correct clinical practices in the first place.

So clever insurance people will continue to exploit this lacunae in health insurance regulation and try to push their luck. I don’t blame them. The system is performing exactly the way it is designed to. There is no downside other than the IP provider being told to withdraw the undesirable practice.

The way forward is perhaps for every IP provider to have a registered medical practitioner as medical director before an insurance company can be accredited as an IP provider. This medical director is like the head of compliance in a bank; he has double reporting lines, one to the bank CEO and one to MAS, the regulator of banks. Should the CEO of the bank try something funny, it is his duty to advise the bank CEO. If the bank CEO doesn’t comply, then he can report the CEO’s plans or deeds to MAS. If he fails to report the CEO to MAS, the head of compliance can be sanctioned too. I am told by a banker this is how bank regulation works in Singapore and every head of compliance of a bank has to be approved by MAS before he can be offered the job by the bank.

This hobbit thinks it is high time that the health insurance industry is regulated in a similar way. The medical director can report to the insurance company CEO and  to someone in MAS, perhaps a Health Insurance Commissioner seconded to MAS from MOH. If the medical director fails in his duty to ensure that the insurance company does not put up practices and policies that compromise patient safety and interests, then the medical director himself can be reported to SMC for investigation and possible punishment.

Simply put, we have to put in place a regulatory regime that has a deterrent effect, one that stops people from pushing their luck to try something that is bad for patients and the healthcare system.

In life, there are errors of commission, and there are errors of omission. Dr Alan Ong’s opinion piece in The Straits Times on 7 March is of the latter. His column “The coming healthcare crisis: Unsustainable financing” talks about the dangers of having runaway healthcare inflation and offers several solutions.

He is the medical director of AIA Singapore, a major player in healthcare insurance locally. Therefore he must know what he is talking about. And what he commits or omits glaringly is most worthy of our attention.

What does he commit in the abovementioned article?

• Singapore needs to have a financially sustainable healthcare system
• Integrated Shield Plans (IPs) will become unaffordable if current healthcare inflation trends persist
• We need to maximise the value or healthcare outcome out of every healthcare dollar spent

The healthcare insurers feel that to maximise the healthcare outcome of every healthcare value spent, the following needs to be achieved:

• Appropriate healthcare behaviour
• (better) Collaborations between healthcare providers and insurers
• Greater transparency in outcomes

In providing recommendations and possible solutions to the above, Dr Alan Ong quotes extensively from the recommendations of the Health Insurance Task Force (HITF) Report. The HITF was a Taskforce that comprised representatives from Life Insurance Association (LIA) of Singapore, SMA, CASE, MOH and MAS (Monetary Authority of Singapore) and it was chaired by an independent chairperson. The Report of the HITF was published in October 2016.

He states that MOH’s move to stop the sale of full riders (as recommended in the HITF Report) and introduced co-pay riders for new IP plans will promote appropriate healthcare behaviour.

He further opines that the appointment of certain doctors to preferred provider panels will improve collaboration between insurers and healthcare providers. He gives an example of healthcare screening as an example of how having empanelled doctors will prevent consumption of unnecessary tests. He further states by steering higher volumes of work to empanelled providers is good for these select few who will benefit from more work and policy holders will also likewise benefit as insurers negotiate better treatment pricing for them from these empanelled providers.

Dr Ong then goes on to discuss pre-authorisation, which is also a recommendation of the HITF, and says that with the implementation of this through a standard industry-wide form, the insured will have better peace of mind that their claims will be covered.

On the issue of costs, Dr Ong states that “Singapore already has a fair degree of transparency”. What Singapore needs is more transparency on clinical outcomes and quality indicators so that patients can make better informed choices, providers can improve and insurers can know what they are paying for.

All this sounds fairly reasonable. Now let’s look do a deep dive into the facts.

The whole gist of Dr Ong’s article is that as long as there is no unnecessary consumption of healthcare, financing will be sustainable. Actually, that is one big assumption. Sometimes even when there is no unnecessary consumption, financing is still insufficient or unsustainable, because the premiums collected are just plainly not enough or when the middle-man takes too much. Middle-man being people like Managed Care, Third Party Administrators and even folks like actuary practitioners and insurers.

In any case, let’s give him the benefit of the doubt, since he is a public health specialist (i.e. with specialist knowledge of healthcare policy and financing, presumably). Unnecessary consumption can be therefore divided into two categories – overpricing and over-servicing. Often, it is a combination of both.

HITF’s #1 Recommendation

The HITF report made several recommendations. Two were stated in the article, preferred panels of providers (doctors) and pre-authorisation.

Very interestingly, he failed or omitted to mention the FIRST recommendation of the HITF, which is the recommendation to have Medical Fee Benchmarks or Guidelines. Arising from this recommendation, MOH formed the Fee Benchmarks Advisory Committee in January 2018. In Nov 2018, this Committee published fee benchmarks for 222 commonest procedures covering the vast majority of procedures performed in private hospitals in Singapore.

All IP providers in Singapore are members of the LIA, which in turn was represented on the HITF. The HITF had government and consumer representatives as well, in addition to SMA, which represented doctors. Arising from the HITF’s recommendations, the MOH (i.e. government) formed this Benchmarks Advisory Committee which promulgated the fee benchmarks in November 18. It must be stated that these benchmarks serve as guides, and there is no legal obligation of providers to adhere to them. But nonetheless, doctors, being generally obedient people, largely do charge according to these benchmarks nowadays, since they are issued by MOH.

Therefore, in theory and on moral grounds, all IP providers should respect and subscribe to the recommendations of the HITF (because there were members of LIA), as well as the benchmarks published by a Committee appointed by MOH (MOH being a fair, neutral arbiter). Adherence to these benchmarks will effectively stamp out overcharging and go a long way in making healthcare financing sustainable in the private sector.

An Error of Omission

But this is what actually happened. In a brief survey done in late 2019 for common procedures done by doctors, a year after the benchmarks were published, only ONE IP provider fully respected the fee benchmarks: NTUC Enhanced Incomeshield. Incomeshield will pay its empanelled doctors as long as they charge within the benchmarks. AIA and Prudential reimbursed doctors at the lower end of the fee benchmark bands. AIA basically took the lower limit of the band and added another 10%.

For example, the MOH fee benchmark for gastroscopy was $600 to $1000, AIA’s reimbursement rates was $660. For removal of single breast lump, the benchmark was $2500 to $3200, AIA’s reimbursement rate was $2750.

To be fair, that is still OK, because the AIA reimbursement rate falls within the range of the MOH fee benchmarks, albeit at the lower end. But another 3 IP provider’s reimbursement rates fall below even the lower limit of the MOH fee benchmarks!

Frankly, for the MOH fee benchmarks to work (to make healthcare financing sustainable), everyone needs to play their part and NOT UNDERMINE these benchmarks. This would mean doctors must not charge beyond the higher limit of the benchmarks, and payers, such as IP providers, must not reimburse below the lower limit. If IP providers do NOT RESPECT the benchmarks at the lower end, why should doctors charge within the higher limit?

This hobbit is quite sure an experienced industry player like Dr Alan Ong knows all this. But he has not mentioned any of these practices of other members of the healthcare insurance industry. In fact, he makes NO mention of the MOH Fee Benchmarks at all! It is as if though MOH Fee Benchmarks have no role in making healthcare financing sustainable and averting his “coming healthcare crisis”. Hello, these are MOH fee benchmarks, not the hobbit’s grandmother’s benchmarks, ok?

Incredible isn’t it? I call this an error of omission. And a glaring one. As to why this omission happened, you, the alert reader of this inconsequential column, had better ask Dr Ong yourself. Did The Straits Times run out of newsprint because all the paper has been redirected to make toilet paper? But we do have the online version now after all…..

We now go on to empanelling doctors, otherwise as “preferred providers”. He gives the example of how unnecessary screening can be curtailed with this. This hobbit is confused. Since when did IP Plans cover screening? Also, if you want to curtail unnecessary screening, just state clearly what an insurer would pay (and how much) and what it wouldn’t pay for. It’s that simple.

The second point on empanelling is even more disturbing. He wrote “Patients will benefit too, as panels allow insurers to negotiate better treatment pricing, leading to lower co-payments and premiums”. It means it empowers insurers to extract even lower prices from providers (including doctors) when half the IP providers are already reimbursing below the lower limit of the MOH Fee Benchmarks. AIA is now at “lower end+10%”. How much lower do you want doctors to go, Dr Ong?

In itself, pre-authorisation is not a bad thing. But the information sought for in this standardised pre-authorisation from the LIA members initially did not give the assurance that the information will not be used against policy holders when they renew their policies. It was only after repeated attempts by SMA to get this assurance for patients and SMA’s initial refusal to support the pre-authorisation form that LIA finally clarified and assured that information collected from the pre-authorisation form was to be used solely for pre-authorisation.

The Big Picture

Let’s now get back to the big picture.

Private insurance plays a small part in the health financing of Singapore. 40% of the financing comes from government. A lot of the remaining 60% comes from our savings in Medisave, State-run insurance Medishield-Life, employment benefits and out-of-pocket payments.

While private healthcare insurance plays an important part in the bigger scheme of things, fixing it alone won’t make healthcare financing sustainable. This is important to note, in case anyone gets delusions of importance or grandeur with regard to private healthcare insurance. We are actually not as dependent on private healthcare insurance as many other developed countries.

Secondly, there are four big stakeholders in the private healthcare insurance space:

• Patients
• Government
• Providers (including doctors)
• Private Healthcare Insurance Companies (especially IP providers)

Trust

The patient is at the centre of it all. Who does he trust most? In Singapore’s context, it is probably the government, often seen as a fair (albeit stern) arbiter of various stakeholders’ interests

Who does the patient trust more, after the government? I think if you were to poll many patients and ask them to choose between doctors and private insurance providers, most of them will choose doctors.

This hobbit’s hunch is that generally speaking, the public trust private insurance companies less than the government or the medical profession.

And of course, doctors trust the insurance industry even less.

Life is tough when you have a deficit of trust from both patients and doctors. I don’t know how much the government trusts the insurance companies, so I won’t comment on this aspect.

What can the insurance companies do to improve the situation? The answer is in what Dr Ong went to at length in the second part of his column: transparency

Transparency

He mentioned about the need for cost transparency, transparency on quality and clinical outcomes. This hobbit would like to suggest a few more areas in which we can have much more transparency:

• Can the insurance companies be transparent about the criteria by which doctors are empanelled? And why some doctors cannot be empanelled? No one now knows how insurance companies select doctors to be empanelled.
• If we extract price savings from doctors, how much of these savings will be passed onto as savings on premiums of insurance policyholders by the insurance companies? How many cents for the dollar? Some listed companies have a dividend policy, promising X% of their profits will go to paying out dividends to shareholders. Can IP providers make such a commitment? If so, doctors may be encouraged to cut fees  to ease the policyholder’s burden.
• Can we be transparent on what is reimbursable and what is not and publish these online, so that not just doctors, but policyholders can also see clearly for themselves?
• Can we also be transparent on doctors’ reimbursement rates to policyholders? As a policyholder holder myself, I would like to select my IP provider based on several factors. One of which must be how the IP provider pays the doctors that take care of me. I might want to choose the IP provider that pays the doctor the most, or the least. That choice should be for me to make as a consumer or patient. But this information is now not available to the public.
• How many doctors are empanelled in each IP provider? Will every IP provider publish this important metric? I think MOH also has a role in ensuring better transparency in this aspect. If the IP providers do not want to publish this individually, for a start, it can publish how many empanelled doctors there are in each of the IP providers. Split the data into two categories: private specialists and specialists in the restructured hospitals. It would empower the public to make an informed choice when they buy an IP Plan.

Trust and transparency. We all need them to make healthcare financing sustainable in the private sector. The private healthcare insurance sector included.