In view of escalating costs of medical services, it is hardly surprising that three out of five Integrated Shield Plan insurers reported a loss last year.

While overcharging and overtreatment could have been contributing factors, there are other reasons for the escalating costs in our healthcare industry.

Certain policies that cover care at private health institutions pay according to how much doctors and hospitals levy.

Insurance companies also offer riders that enable their customers to pay nothing for costly medical treatments.

Such add-ons may include reimbursement for deductibles and co-insurance costs incurred by customers for physiotherapy services, accidents or planned surgery overseas, accommodation charges for an immediate family member when the insured is hospitalised, extended post-hospital coverage of more than six months, and so on.

When the bill is picked up by someone else, patients will insist on the best course of treatment, and doctors and hospitals will charge accordingly.

The outsourcing of claims processing to a third-party administrator also incurs additional costs, since it performs a task traditionally handled by the insurance company itself.

All this has an impact on the insured (in the form of rising premiums), as well as the insurer (in the form of lower gains), which is not sustainable in the long term.

Edmund Khoo Kim Hock