LPPL Insurance Situations

Recently, our Health Minister launched four short social media clips to educate the public about health insurance, in particular riders for IP policies. The take-home message is that riders are expensive and get more expensive as the policyholder gets older. It may be better, especially for an older policyholder, not to buy riders or to buy cheaper riders. Of course, cheaper riders mean less coverage and more deductibles and co-payment. All very sensible. I urge you to watch the clips.

At about the same time, Singapore’s “Blogfather”, aka “MrBrown” aka “Kim Huat” also posted two clips to explain what some colloquial short forms mean. In the second of 2 posts so far, he explained what “LPPL” stands for¹.

According to him, LPPL stands for “Laugh Please, Please Laugh”. It can also stand for Log-Periodic Power Law in the field of economics and finance.

To this hobbit, it can also mean a certain location in the human body, namely “Longitudinal Perineum Permanent Location”.

For example, the government introduced the Cancer Drug List (CDL) in 2022. This was introduced ostensibly to empower the government to negotiate for better prices from drug companies and to discourage the use of certain cancer drugs for non-mainstream indications so as to curb rising costs of cancer treatment.

However, many IP insurers then quickly introduced riders to cover for the use of non-CDL drugs. Of course, such riders², while generating more work and income for some medical oncologists in the private sector, has the downstream effect of encouraging what the introduction of the CDL was meant precisely to discourage – more use of such drugs which will lead to an unnecessary and avoidable rise in prices and overall healthcare consumption and expenditure

The quick introduction of non-CDL riders by IP insurers effectively negates the policy intent of CDL. And we are back to square one and the government is caught in an LPPL situation. The only consolation is that such riders must be paid with cash.

Why does this happen and why do we allow it? This hobbit doesn’t have the answer. Or even if he thought he knew, he won’t say it here, that’s for sure.

The first thing to know is that we often (if not always) buy insurance because we want peace of mind. Peace of mind is a wonderful thing. But really, if you think about it, the flip side of peace of mind is fear. Fear and peace of mind are but two sides of the same coin. We buy riders for peace of mind, and we buy riders out of fear. The fear that in case we need these non-CDL drugs, we have no access to them and even if we had access, we can’t pay for them. So we buy these riders.

The IP insurers are making lots of money selling these LPPL non-CDL riders in return for giving us peace of mind, or feeding on our fear (depending on one’s perspective).

And as any psychologist will tell you, fear is a great driving force for animals with some intelligence (and that includes humans). The response to fear is a primal one, hard-wired into the human condition through hundreds of thousands of years of evolution, or adaptation, call it what you may.

While this hobbit really likes the Health Minister’s video clips on riders and that he is a great communicator, this hobbit is not sure the clips can countervail the power of fear and the natural response to fear. Especially when this fear and the response to it is also being actively cultivated and reinforced by many insurance companies and insurance agents who get to make a buck or two out of selling such LPPL riders.

Let us move on to another insurance-related matter that has garnered many eyeballs recently. While this matter is about a motor insurance claim, it is nonetheless medically-related.

It was reported that the Courts awarded $417,000 in damages in a traffic accident case. Unfortunately, this decision was arrived at some 5 years after the accident occurred, and only after the traffic accident victim had passed away. The son of the victim, who is his main caregiver for the many years the victim was incapacitated until his death, was the plaintiff.

The sheer callous temerity of the insurance company was most telling. In the opening paragraph of the Judgment³ given by the District Judge, it was stated, “This is a judgment that documents NTUC Income’s wholly unreasonably behaviour”. This hobbit has read quite a few Judgments before, but none has come close to such a resolutely damning statement right at the start of a Judgment document.

In summary, the case involved a person who was seriously injured by a traffic accident. This victim then made a claim against the driver that caused the accident.

It was noted by the Judge that NTUC Income effectively took over the defence of the case because it would have to foot the bill should the courts decide in the plaintiff’s favour.

NTUC Income efforts to deny the claim was akin to “the sort of casually impersonal stonewalling that some would associate with the worst administrative processes” (Judgment, para 3).

Some particularly galling examples of this impersonal stonewalling –

Claims for pain and suffering and amenities was denied because the victim was comatose and could not have appreciated any pain and suffering at all, even though the victim was intermittently conscious until his death (Paras 14 and 17, Judgment)
Claims for loss of income was denied, even though the victim was working at the time of the accident (Para. 34)
Claims for ambulance-related expenses was denied (Para. 36 of Judgment)
Claims for milk powder for the patient was denied because it was too expensive as the patient could have used a cheaper brand such as “Ensure”. (Para. 61 of Judgment). This hobbit is not so sure if “Ensure” appreciates such publicity from NTUC Income.

And if you think this unreasonable behaviour was arrived at because NTUC Income received poor legal advice, the judge made it clear that the lawyers were merely conveying their clients’ instructions. The judge added that the lawyers’ “advocacy was candid, well-organised and fully in line with their duties to the court”.

Against the backdrop of the furore that ensued, the CEO of NTUC Insurance (NTUC Income was rebranded as NTUC Insurance recently) issued an internal memo addressed to “colleagues”. This hobbit obtained a screenshot of this memo, in which he explained the company’s position and then signed off with “Cheers”.

This hobbit must say he has no clue what is there to be cheerful about.

I think the incident shows publicly that the local insurance sector is truly now in a new era of American-style climate of “delay, deny, defend”, which many doctors are already familiar with while caring for IP policyholders in the private sector. So far, the private patients in A1 and B1 class have largely been spared of such agony because IP insurers generally do not question or apply friction to claims for care delivered in restructured hospitals. But who knows what will happen in the future? This may occur sooner than we think.

This case also illustrates the inadequacy of scope in what is offered by the financial and insurance industry to adjudicate claims before it reaches the courts in the form of civil suits. Today, if someone is aggrieved by an insurer, he can take up his case with the Financial Industry Disputes Resolution Centre (FIDReC) which is a platform to adjudicate disputes involving financial institutions (which includes insurers).

However, this is a platform that is only open to the insured (i.e. policyholders who make claims) and their beneficiaries as well as to those parties who have a “customer relationship” with the insurers

It also only covers disputes of up to $150,000.

In this case, neither the victim nor the plaintiff (the victim’s son) is the insured. They don’t have a customer relationship with NTUC Income either. Strictly speaking the plaintiff is not even a beneficiary of the policy as well. What is more, the amounts accumulated over a four-year period far exceed $150,000. So he can’t use FIDReC and so, he has no choice but to sue. But not many people have the financial resources to mount a civil suit. And of course, there is a lot to lose if he does not win the suit. The plaintiff’s legal costs may be easily six-figures if the suit is protracted, and in a worst-case scenario, costs may be awarded against him, i.e. he has to pay for the other party’s costs too.

The plaintiff in this case has obviously weighed his chances, examined his financial resources and then decided to pursue the civil suit route.

As for healthcare-related or IP-related matters, the situation is even worse off in at least three ways.

FIDReC is not open to service providers that provide a service or goods to the insured. So, hospitals and doctors who experience unreasonable delays and denials of claims cannot use FIDReC.
FIDReC also only handles complaints when a claim has been made, and not before. So FIDReC does not handle issues such as pre-authorisation or how doctor panels are constructed, because no claim has been made.
FIRDeC also only handles disputes that are clinical in nature on a voluntary basis. When such a dispute occurs, IP insurers can choose NOT to participate, even if the policyholder has lodged a complaint with FIDReC.

To use a partially real-life example. A patient has an anal fistula abscess. The panel doctor seeks pre-authorisation but is denied. Inexplicably, the case manager suggests that he tries to manage the anal fistula abscess “conservatively” (doctors and nurses reading this, please don’t laugh). This advice to treat an abscess conservatively is not made-up. It actually happened.

If you think the insurer’s case manager should and could be held accountable for making medically unsound and unsafe suggestions and recommendations, you are wrong. Insurers and their employees are not regulated at all for making recommendations and decisions that impact on the clinical aspects of healthcare delivery to their policyholders. For all you know, the case manager has a degree in art history and has recommended the use of Chlorox bleach to treat strangulated piles, and he can get away with such an unsafe recommendation with no consequences to himself or the insurer that he works for. Actually, I exaggerate. I know a few art history graduates who know more about healthcare and medicine than many IP insurers’ case managers. Let’s not unjustly belittle art history grads. They are good people doing good work, which is more than what I can say for many case managers.

OK, this is where the real part ends. We go on to the hypothetical part.

Suppose the surgeon and patient agrees to surgically drain the abscess anyway (because as any 2^nd year medical student will tell you, abscesses must be drained – just in case any case manager is reading this and is confused). However, for reasons beyond anyone’s control, the 70 year-old patient with well-controlled diabetes gets pneumonia post-op and gets hospitalised for longer than expected, and the hospitalisation includes 2 days in the ICU.

The claim for the hospital stay is denied because the doctor and patient did not first try “conservative” treatment. The patient/policyholder then files a complaint before FIDReC. The insurer declines to take part in the FIDReC process citing that this is a clinical matter.

What is the patient, surgeon or hospital now to do? The total bill could be say, about $30,000. The aggrieved parties may think that well, the legal fees for bringing this to court alone could well be close to or exceeding $30,000. The surgeon may be fearful that should he pursue the civil suit route, the insurer may well remove him from the insurance panel after this. After all, no reasons need to be given for selecting or removing a doctor from the panel.

And so, all the other stakeholders are again stuck in a LPPL situation, with the insurer being the only party to benefit from such LPPL situations.

Whether we want to admit it or not, “Delay, Deny, Defend” works most of the time. Such is life. LPPL.

1 https://www.youtube.com/shorts/RCSvZUgOCgM

2 https://www.singsaver.com.sg/blog/best-ip-riders-and-supplementary-coverage-for-cancer-protection

3 https://www.elitigation.sg/gd/s/2025_SGDC_150

An Insurer Can Do Many Things

I read with interest this rather long opinion piece by an ex-ST journalist in The Straits Times “Some practical ways to rein in rising healthcare costs, premiums” (Claire Huang, 21 May 25, The Straits Times)

In particular, one section highlighting Integrated Plan (IP) insurer Great Eastern Life deserves scrutiny.

Let’s reproduce the section here,

“What an insurer can do”

“IP insurers are constantly looking for ways to sieve out doctors and hospitals that like to maximise profits.

In this area, Great Eastern Life might have found an achievable and pragmatic way out.

In October 2024, the insurer launched its own medical care concierge, where its in-house officers help match patients to doctors, based on their IPs.

These 10 officers, who are experienced in handling patients or are medically trained, are employed by the insurer and receive a fixed salary.

They first determine what benefits apply based on the policy the patient has, then they recommend specialists who are on Great Eastern’s panel.

Patients can also choose to seek treatment from specialists who might not be on Great Eastern’s panel.

In such an instance, the co-payment amount will logically be higher and some benefits may be moderated if the specialist is not on the panel.

The cost estimates and differences will be made known to the patient.

Those who opt for panel doctors will receive pre-authorised certificates and their claims will be guaranteed by the insurer.

Already, the scheme has worked for Great Eastern, whose concierge team has processed more than 1,100 policyholders so far.

Besides preferred doctors, insurers also have their preferred hospitals.

The preferred hospitals approach functions on the basis of the insurers’ bargaining power, which has grown as medical tourism here dries up.

Some insurers secure bill discounts for patients by agreeing to send these patients to preferred hospitals.”

Let this hobbit now comment and offer another perspective on this subject in addition to this piece of awkward journalism.

In particular this statement, “IP insurers are constantly looking for ways to sieve out doctors and hospitals that like to maximise profits”.

This is true to a certain extent. But then, to be fair to both doctors and hospitals, aren’t the insurers, as companies responsible for maximising shareholder value, almost always trying to maximise profits too? Why only focus only on doctors and hospitals? Should IP insurers also be sieved out when they maximise profits?

Anyway, in this hobbit’s opinion, let us look at some past behaviour and practices as well as the track record of GE to see if it is as good as it is made out to be by this article.

In the 2022 IP Providers’ Ranking Survey conducted by SMA which was published in the SMA News June 2023 Issue, GE did not do so well: (https://www.sma.org.sg/news/1953/June/SMA-Integrated-Shield-Plan-Providers-Ranking-Survey-2022).

In fact, of the 4 largest IP insurers, (Income, AIA, Prudential and GE), it regularly came in last on many fronts. The Survey involved respondents who were doctors. Out of a scale of 1 to 5 (5 being the best), it achieved an overall score of 2.5, which was only higher than the two smallest IP insurers: Singlife and Raffles (which has an employee-physician model). Overall, it was placed 5^th out of 7 IP insurers.

In terms of doctor-panel management, GE did pretty well in the 2022 Survey, in terms of inclusiveness and transparency of criteria for doctor selection, scoring 2^nd out 7.

But for 5 out of the remaining 6 questions asked, it ranked a poor and consistent 5^th place out of 7 insurers, above Singlife and Raffles but consistently below Income, AIA or Prudential. These 5 questions are: ease and timeliness of pre-authorisation, timely payment to doctors and appropriateness of fee scales and putting up obstacles to dissuade policyholders to see non-panel doctors.

Of course, one may say well, this is all about doctors’ perspective which may be biased. Well, let’s look at MOH data then.

Lest we think that panel management is something that GE is good at, and maybe that is the case in 2022, latest and official MOH data suggests otherwise: (https://www.moh.gov.sg/managing-expenses/schemes-and-subsidies/integrated-shield-plans/about-integrated-shield-plans/)

Let’s look at what happened in 2024 for the Big 4 IP insurers according to MOH data

Panel	No. of Private Specialists (Total)	No. of Private Specialists Who Left	No. of Private Specialists who Joined
AIA	594	25	12
GE	779	126	74
Income	807	37	93
Prudential	814	16	154

The data provided by MOH claim with this footnote/disclaimer:

“The higher private specialist attrition in 2024 was due to Great Eastern Singapore’s planned panel review. Great Eastern Singapore continues to maintain a large pool of private specialists on its panel”.

I would hazard a guess that this footnote was inserted at the insistence of GE but to be fair, one does not really know who wanted it to be there. But the MOH numbers speak for themselves.

Adding on new specialists is always a good thing for policyholders because it gives them more choice. But removing specialists may not be a good thing. It leads to loss of choice and more importantly, continuity of care probably suffers. 126 out of 779 is a turnover rate of 16%. The footnote only states that it was due to a “planned panel review”. The statement doesn’t state how often such planned panel reviews occur. Could it be yearly, or more frequently or less frequently? Anyway, if you remove 16% of specialists each year, you can effectively turn over the entire panel in 6.25 years, and that is assuming you top up each year with the same number of new specialists that you remove, which is not even the case here. The panel size actually shrank in 2024, because GE only added 74 private specialists while it removed 126. The panel size of GE for 2022, 2023 and 2024 were 764, 831 and 779 private specialists respectively.

As a policyholder, one should assess an IP insurer’s panel management not just on the absolute number of specialists and whether the panel size is increasing, but also the amount of turnover (number of specialists leaving and joining). The worst scenario is when panel size decreases and at the same time the panel experiences high turnover. You have less choice and continuity of care suffers as your preferred doctor is removed from the panel.

One can easily access MOH data from the link given above and see for yourself and come to your own conclusions as to which IP insurer is better managing their panels for the benefit of policyholders and not just for other reasons, e.g. profit maximisation.

Next, we come to look at some examples of how GE (or rather their appointed third party administrator, Adept Health) communicates with some of their panel specialists. Several specialists have surfaced essential copies of the same letter to this hobbit sent out in Aug 24. An excerpt from this letter reads

“XXH Privileges, Great Eastern (GE) is pleased to announce that XX Hospital (XXH) has been designated as the priority and preferred hospital for Great Eastern Life customers. This selection is based on XXH’s commitment to delivering exceptional care, which aligns with the goal of providing the best possible healthcare experience for the customers”

If the panel doctor does not play ball and admit GE policyholders to XXH, then they may receive another letter several months later. Excerpts from this letter (which this hobbit received with the doctor’s name redacted, so the doctor’s identity is unknown even to this hobbit):

“We have recently noticed that the clinic has not been prioritizing admissions to GE preferred hospitals, such as the XXH. This may result in non-compliance with our guidelines.

As a result, Dr. YYY name is currently removed from the Health Connect website.

If you are accredited, we kindly request that you prioritize admitting patients to GE preferred hospitals during this 3-month observation period.

Should you have any questions or require clarification, please do not hesitate to contact us.

Dr YYY, apparently appealed, because a month later, the TPA replied with an email. Again, excerpts from this email,

“Thank you for allowing us the time to review this matter.

Based on our PAC issuance data of Year 2024, we do observe there are patient admission from Dr YYY mostly at ZZ Hospital (You can refer to the PAC data captured at DA Adept records for your reference). As we are also informed by GE side of data (for non PAC cases) it was observed with similar trend as well.

We are open to understand more from Dr YYY if there are any challenges or concerns in supporting this initiative.

Please note that despite the temporary removal of Dr. YYY’s name from the website, Dr YYY still remains as a panel specialist under GE Shield. This change will not impact Dr. YYY’s PAC requests”.

Finally, Dr YYY was terminated from the panel recently by email:

“We regret to inform you that we’re serving this termination notice on our Health Connect Provider Agreement”. No specific reasons were given for the termination, but one can reasonably come to your own conclusions from the sequence of events and previous communication the reasons for the termination.

A few points are worth discussing here. As an insurer, it is free to source for the best deal from private hospitals, generally speaking. But as a doctor, I can tell you, there are hospitals and then there are hospitals. This is the same for restructured hospitals. There are things that SGH can do, that well, Sengkang General cannot support well as a hospital. There are complicated stuff that NUH can do, that NTFGH cannot. MOH acknowledges this as much – different restructured hospitals have different levels of capability.

And so it is too with the private sector. There are complicated procedures that XXH cannot support, that another private hospital can. Of course these better equipped and staffed hospitals are often more expensive. To simply say that one must admit their patients to a certain hospital just because an insurer has a special arrangement with that hospital ignores the complicated nature of medical practice and hospital capabilities, and may even promote unsafe clinical practice just to satisfy an IP insurer’s commercial interests.

Please also note in the above correspondence that the TPA did not once claim Dr YYY was expensive and did not follow GE’s fees schedules. The professional fees charged by Dr YYY was never highlighted as an issue.

More importantly is the whole idea of transparency. Has GE informed its policyholders in the first instance that panel doctors who don’t use their preferred XXH hospital will be penalised? And perhaps even eventually removed from the panel? One must tell the good news with the bad news. One should not only tell policyholders that they will get free parking and a free fruit basket etc if they go to XXH. They should also tell them that there is a risk of their preferred panel doctors being removed from the panel if they do not agree to being admitted to XXH, leading to a loss in the continuity of care.

In fact, the IP insurer should tell potential customers of their IP plans upfront that their choice of care is largely limited to certain preferred hospitals, or rather private specialists admitting to these preselected hospitals before IP policies are sold or purchased. Then folks shopping for an IP policy can then make an informed choice of which IP insurer to use or buy their IP policies from. What GE is doing is essentially selling a “bundled” IP product, with preferred specialists and preferred private hospital(s) bundled together. Nothing wrong with that, but they need to tell everyone upfront, including existing policyholders and potential customers who are seriously considering buying their IP policies. They can then compare the price of a bundled product with the price of another IP product that gives them more choice of not just doctors, but hospitals as well.

Back to the subtitle in the opinion piece in The Straits Times, “What an insurer can do”. There are many things that an insurer can do. Perhaps too many. This is because the clinical aspects of the IP sector are largely unregulated while the assigned regulator, the Monetary Authority of Singapore (MAS) is interested mainly in ensuring that an insurer is financially viable and does not go bust. Indeed, the insurer can do many things legally. But should they?

Now, based on the above information, would a hypothetical construct called “the reasonable lay-person” still buy an IP policy from GE? Perhaps he will, perhaps he won’t. This hobbit doesn’t know. Perhaps Ms Claire Huang may know and you can ask her.

How You Pay Affects How Much You Pay (and How Much Taxes We Pay)

Last month, DPM Gan Kim Yong and Health Minister Ong Ye Kung gave an interview to The Straits Times’ Ms Salma Khalik (Healthcare financing in Singapore: 10 Questions for DPM Gan and Health Minister Ong, 10 April 25). These are two persons who collectively have run MOH for 14 years and they really know what they are talking about.

But for the avoidance of doubt, the serious smart money is on the interviewer, Ms Salma Khalik, who has been covering health for ST since BC times (Before Clustering) and possibly even before there was Internet and the smartphone. This hobbit thinks only Senior Consultants can safely claim they were already born when she started covering health matters for ST.

A few things struck me in that interview, which includes lightning, since it was so near to the General Elections 2025 when the interview was given. The first notable point is that by 2030, the MOH Budget likely to approach the eye-popping figure of $30B. To revisit the first of Minister Ong’s two truisms of healthcare which he mentioned last year in Parliament (6 March 24) – the people always pay. This $30B will be paid by the taxpayers, since MOH Budget is mainly funded by government revenue.

Another important point made in the interview and also previously on other occasions is that one in two persons with Integrated Shield Plans (IPs) and riders opt for subsidised care.

These two points are worth mulling over especially in the context of Minister’s Ong’s second truism – How you pay affects how much you pay.

Personally and selfishly speaking, I do hope that people with IPs and riders do not opt for subsidised care. The logic is simple: – subsidies are always paid by every taxpayer, and that includes me. But if folks use more insurance to pay for their healthcare expenses, then the taxpayer pays less. It’s almost literally a zero-sum game because insurance is funded by policyholders and returns from investments by insurance companies using the premiums collected.

However, whenever folks do NOT utilise their IP entitlement and go to the subsidised classes, taxpayers end up paying most of the bill. Even for B1 class, taxpayers pay because B1 class is subsidised a bit. Only A class is unsubsidised.

The next question to ask is then why are so many people with IPs and riders opting for subsidised care? There are many reasons but one of the most often quoted reason is that they worry about difficult access to subsidised care after a hospitalisation or procedure. Current IP plans all cover the patient at the outpatient level only for a very limited period after a hospitalisation or a procedure. After the coverage expires, the patient has to pay the expenses himself. And once a patient opts for private hospital care or A or B1 care in the restructured hospitals, he will continue outpatient follow-up care with either private specialists or the private (unsubsidised) clinics in the restructured hospitals. Many such conditions are chronic ones and they require a long, if not life-long, outpatient follow-up and many people need subsidies due to the high cost of such long-term follow-up.

The end result is that many people then opt for subsidised care despite having bought IPs and riders so that they can avail themselves to these subsidies during follow-up.

To better understand this flight to subsidy safety among IP policyholders with riders, we can conceptually divide policyholders into three groups:

• Group 1: Folks who will always use private sector services for inpatient and outpatient care
• Group 2: Folks who will select between private sector and subsidised services depending on insurance coverage and subsidy policy
• Group 3: Folks who will always use subsidised care (basically, they didn’t really know what they were buying when they bought an IP)

For the avoidance of doubt, “private sector services” refer to services that are completely unsubsidised – private sector hospitals and clinics and also A class inpatient and private (unsubsidised) specialist clinics in restructured hospitals (RH) since the latter do not consume government subsidies.

The 2nd group is what concerns us today. As aforesaid, because of the bundling of subsidised inpatient care with subsidised outpatient care, many policyholders forgo the use of private inpatient services so that they can enjoy subsidised care during follow-up. And as our population ages, the follow-up of chronic conditions discovered during before or during an inpatient episode can be for a long time, if not life-long.

This results in unnecessary consumption of the MOH Budget (i.e. taxpayers money).

This policy has been in place for a long time because policy wonks are worried that folks will game the system. I.e. these folks want the best of both worlds: by consuming inpatient services paid for insurance and then using subsidised services when insurance coverage ceases. But in reality, as we shall see, this worry has been downgraded somewhat in recent years.

If one thinks about this again, by continuing with this policy or practice, many people end up using subsidised, inpatient services unnecessarily which generally speaking, are a lot more expensive to the taxpayer than outpatient services. Again, we have to remember it is better if policyholders finance their healthcare needs with insurance monies than with tax revenue.

However, if we truly allow patients to cherry-pick (by using insurance-funded inpatient services and taxpayer-funded subsidised services), then a problem will arise with the first and second groups. The attraction of subsidies is so great that some folks in these groups will migrate towards outpatient subsidised services.

There is already some pre-existing friction put in place to discourage this because one cannot choose the specialits of his choice in subsidised services, whether inpatient or outpatient. Also, appointment times for private SOCs are significantly shorter than subsidised SOCs. But this hobbit readily admits this friction or obstacle is not really big enough to prevent overconsumption of subsidised services. Further trade-offs may be therefore necessary.

Moreover, access to subsidised specialist outpatient clinics (SOCs) and services have been made much easier in recent years with the CHAS, Pioneer and Merdeka Generation benefits. It used to be that only polyclinics and A&E referrals will give a patient access to the subsidised SOCs. But now any Healthier SG family physician can make referrals to the subsidised SOCs and their patients will enjoy subsidy levels according to their CHAS, Pioneer, Merdeka Generation card status. This is what I mean when I say the worry of overconsumption of subsidised services have been downgraded somewhat in recent years.

This hobbit doesn’t have the data, but it would be good if someone with the data does a simulation on how much of the MOH budget is used to finance subsidised inpatient cases that come from IP policyholders who voluntarily downgrade at the inpatient level. These are the potential savings from that could have been realised if inpatient subsidies were not doled out to this group.

This hobbit would like to suggest that to reduce the number of IP policyholders voluntarily downgrading to subsidised services without using their IP benefits, it is worthwhile to just allow IP policyholders to choose a private service for an inpatient stay and then let them have the option of choosing subsidised SOC services when they go for follow-up. If the policy wonks are worried that this would lead to everyone choosing subsidised SOCs, then we can perhaps strike a compromise – we would limit this option to conditions that had been newly diagnosed (i.e. just before or during the inpatient stay) for the purposes of this inpatient or procedural episode.

For example, if a patient goes for a Total Knee Reconstruction (TKR) at a private hospital or as a Class A patient in a RH, but is diagnosed to have diabetes just before admission as he is being assessed by the anaesthetist, then he should be given the option after the operation to be followed up at the subsidised SOC at a RH. The subsidised SOC can then decide to follow-up this patient or discharge him to the polyclinic when his diabetes stabilises.

Today, certain RHs already allow for downgrading to subsidised SOCs after B1 or A class inpatient episode. But to further discourage unnecessary downgrading, we should maybe allow private hospital inpatients (not just RH’s inpatients) to use subsidised SOCs as well after IP coverage expires.

If the patient or IP policyholder is given this optionality of delinking outpatient subsidy from the inpatient episode, we can perhaps get more IP policyholders to use their IP benefits at the inpatient level and rely less on funding via subsidy, i.e. how much the government or taxpayer pays.

IPs: We Need A “Policy Reset” Here Too….

Recently, the Health Minister described the intense competition that exists between Integrated Plan (IP) insurers as “a race to the bottom”.

He was speaking at the Securities Investors Association (Singapore) or SIAS’ 25^th Anniversary Members’ Night on 12 July 24. This was extensively reported in the press. https://www.straitstimes.com/singapore/ip-insurers-risk-a-race-to-the-bottom-as-they-compete-to-win-market-share-says-ong-ye-kung

The context of this race to the bottom analogy is that IP insurers “have been offering very attractive terms to encourage sign-ups and win market share. This includes IPs that promise no claim limits, and riders to protect policyholders from co-payment” which contributes to the buffet syndrome occurring downstream. The outcome for IP insurers is that “with escalating claims, insurance companies are hardly making profits on their health insurance portfolios”

The minister further opined that “we may be in a health insurance vicious cycle, of overly generous insurance policy design, buffet syndrome leading to more non-critical or even unnecessary tests and treatments being prescribed, which in turn leads to bigger bills and higher premiums for all. We are chasing our own tail, and everyone is just getting worse off eventually”.

This hobbit largely agrees with what the Minister has said. However, this race to the bottom is largely of the IP insurers’ own making. Nobody asked them to offer as-charged plans or first-dollar coverage riders. You made the bed you now lie in.

While it is easy to blame doctors and patients for the buffet syndrome (the more “professional” term for this in health economics is “moral hazard”), it should be stated here that the Minister himself has said this is “human nature”. With the exception of this mythical hobbit, doctors and patients are humans. Can we change human nature resolutely and permanently? Probably only with great and sustained effort. If it were not so, there will be world peace and everyone will have a healthy lifestyle. But instead, we have to wage war against diabetes and now against instant noodles as well.

More importantly, doctors’ professional fees as a component of the total hospital bill have been decreasing over the years. In other words, in terms of dollars and cents, the doctor is NOT the main beneficiary of this buffet syndrome. Private sector specialists who have been out there for some time now often remarked that their professional fees have fallen from about one-third of total hospital bills 15 years ago to about 25% or even 20%. Hospital component of bills have increased significantly. But since there are so few private hospitals out there, they have pricing power and IP insurers cannot or aren’t willing to pressurise them to lower their charges. Hence, IP insurers continue to pay for lobsters and steaks found in inpatient bills while they hire armies of case managers to ask doctors stupid questions and deny insurance claims from policyholders.

But these are at best peripheral questions. Ultimately, the Minister’s observation that “with escalating claims, insurance companies are hardly making profits on their health insurance portfolio” needs to be reflected upon. Against this backdrop, there are a few noteworthy points that bears highlighting:

The implementation of the MOH fee benchmarks a few years ago means it is very difficult for private specialists to overcharge. There are a several imaginative ones that over-service and multi-code. But with MOH Claims Management Office now in place, it will be even harder for these shenanigans to occur going forward. And as aforesaid, with doctors’ professional fees becoming a smaller and smaller component of total bill size, the key factor responsible for growth in total bill size must lie elsewhere. This is borne out by statistics released by MOH: the Compounded Annual Growth Rate (CAGR) for Median Total Private Bill Sizes from 2007 to 2021 was 4.3%. The CAGR for median private hospital bill size was 4.5% for the same period while the CAGR for Median Total Private Doctors’ Professional Fee was only 2.7% (as reported in The Straits Times on 14 June 2023). This is a point that no IP insurer or facility operator mentions, much less acknowledge.

The claims ratio in Singapore was 73% during the Covid years of 2019 to 2022. In the few years preceding this period it was 75% (2016 to 2019).

The claims ratio is the percentage of insurance premiums that is actually paid out to healthcare providers when claims are made. In USA, Obamacare demands that the claims ratio must be at least 80 to 85%. If IP insurers cannot make money with a claims ratio that is only 75% or less, then it stands to reason that the other costs are too high. Other costs would include distribution costs (i.e. commissions etc.) and management costs. Another factor could be too much of the premiums collected are parked in reserves. Some IP insurers also made large investment losses. https://hobbitsma.blog/2024/04/26/the-quest-for-value-based-insurance/

And here’s the rub – it was observed that “about half of holders of IP and riders actually end up using subsidised healthcare in public hospitals”. In other words, half of the IP policyholders did not utilize the IP benefits they paid for but instead went back to subsidised healthcare so as to be subsidised by the government (which in the end means largely subsidised by taxpayers).

So, this hobbit asked an old friend who has migrated to Australia a long time ago and is now involved in insurance oversight and regulation work Down Under. He was very absolutely floored when he found out that IP insurers cannot make money when only half of those who are insured actually make claims when they require healthcare that is insured by the policies they had bought.

He remarked wryly that any commercial insurer in the real world would love to be an IP insurer where only half of the entitled policyholders actually made a claim and the claims ratio was around 75% – This is the closest to “insurance heaven” one can get. But that is the “real world” we are talking about, not the world or narrative that IP insurers would like the public and the government to believe – which is it is very difficult to make money when claims ratio is 75% and only half of the entitled policyholders actually make claims.

The numbers speak for themselves: A 75% claims ratio implies there is a lot of headroom for the insurers to manage the issue of increasing bill sizes and the insurers are getting a free lunch out of half of their policyholders since only the other half make claims that they are entitled to with their IP policies.

This race to the bottom is therefore really a well-cushioned race for the insurers. The proof is in the pudding in that no one has dropped out of the race yet. If we are to believe that capitalism still works, (i.e. the efficient deployment of capital) there should have been some blood on the streets by now with insurers exiting this race amid this vicious cycle. But we haven’t even seen a bruised buttock yet in this well-cushioned race, let alone any IP insurer packing their bags.

But in the larger scheme of things and policy intent, we must still return to the original purpose of having an IP industry. Letting and having IP insurers remain viable as a business is not an end in itself from the national perspective. The whole purpose of the IP industry is that IPs is a health financing tool for the majority of Singaporeans, based on the principle of risk-pooling. The whole idea of the IP industry is to serve the public, not the insurers or healthcare providers.

From the looks of things, the conclusion must be that the IP framework has failed as a risk pooling and healthcare financing tool when IP insurers find it hard to make money even with such odds stacked in their favour. (i.e. Only half of entitled policyholders actually make IP claims and the claims ratio is at best 75%)

Maybe it is time this sector undergoes a big “policy reset” as well, to borrow and paraphrase a term that was used by our new Prime Minister in his first National Day Rally.