Having more doctors on IP panels may lead to higher premiums: Life Insurance Association

Integrated Shield Plans insurers recorded rapid rises in claim costs from 2010 to 2015.
Integrated Shield Plans insurers recorded rapid rises in claim costs from 2010 to 2015.ST PHOTO: KUA CHEE SIONG

SINGAPORE - Having more doctors on the panels of Integrated Shield Plans is on the cards but they cannot expect default fees at the upper end of fee benchmarks set by the Ministry of Health (MOH), as this may lead to higher claim costs and consequently, premiums, said the Life Insurance Association (LIA) Singapore on Friday (April 2).

The topic of insurers having panel doctors is in the spotlight, as doctors and IP insurers fight over how the measure should be implemented.

In its second response to a position statement on IPs released by the Singapore Medical Association (SMA) nearly a week ago, LIA Singapore reiterated the link between an increased number of doctors and higher claims.

"If insurers recklessly increase panels, premiums will rise significantly, but if we increase the panel sizes in a careful manner, while paying the doctors reasonable fees, then the impact on premiums can be muted," said a spokesman from LIA Singapore.

The SMA has expressed unhappiness at the limited number of private specialists on IP panels, and the fact that they are mostly paid at the lower end of the fee benchmarks.

SMA argues that their costs are rising because of greater management expenses and commission costs for insurers, rather than higher claims.

LIA Singapore's point is that insurers' costs went up in the short term, but this may not reflect the long-term trend. "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," said the spokesman.

A spokesman from SMA said on Friday that the sole intention of its statement was to highlight the challenges faced by patients insofar as their insurance policies and claims.

"With MOH helming talks between LIA, AMS (Academy of Medicine, Singapore) and SMA, there has been some clarification and the beginning of a journey of understanding and collaboration," he said.

"A lot more work lies ahead as the various stakeholders need to hold honest and sometimes painful discussions on existing problems, potential solutions and trade-offs."

He added: "There has to be mutual trust and we will all have to work together to build a sustainable healthcare system, support a robust subsidised system and a fair private practice."

IP policies offer coverage for better-class wards in public and private hospitals, and the freedom to choose one’s doctors, among other benefits. Holders of these plans have seen their premiums rise over the years, particularly for add-on  plans known as  riders that help pay for entire hospital bills.

Healthcare costs here have risen in line with an ageing population, demand for new treatments and increased operating costs.  

In 2018, the Government said it would be phasing out the riders that covered entire bills, and such plans sold from April 2019 had to include co-payment. Now, even those on older policies will have co-payments on their riders when they renew these plans. 

The role of panel doctors

In its second response, LIA Singapore said a collaborative effort is needed to ensure affordable, quality healthcare for Singaporeans.

It said panels of doctors could be done away with but insurers would have to find other ways to reduce costs, such as by increasing premiums or co-payments, or pre-approving treatments.

IP insurers recorded rapid rises in claim costs from 2010 to 2015, and the Health Insurance Task Force was set up in 2015 to help rein this in, to avoid passing on rapid premium increases to policyholders.

The task force in 2016 recommended that patients pay a portion of their bills, as well as panels of approved healthcare providers be set up and fee benchmarks set, among other things.

However, the SMA argues that the problem was created by insurers themselves when they introduced plans that paid entire bills, thus leading to higher and more frequent claims.

Fee benchmarks not enough

LIA Singapore said having the MOH fee benchmarks is not enough to guide prices, as doctors do not have to follow them.

With panels, doctors sign enforceable contracts, and must charge within the agreed fee range, it said.

It also noted that on average, the upper end of fee benchmarks is 1.8 times higher than the lower end.

And, for approximately two per cent of procedures, the highest bound of the fee benchmarks is 4.2 to 6.3 times the lowest bound.

"Many procedures do not have descriptors for when a doctor should charge towards the upper end and when a doctor should charge towards the lower end," said LIA Singapore. Doctors have considerable discretion to decide what to charge.

"Through panels, insurers can help address this by setting a default fee below the upper bound, as well as allowing charges above the default for cases which are more complex than the norm," it said.

"So long as insurers are fair in allowing deviations, this should be a reasonable way to conduct panels."

High panel fees can lead to higher premiums

Setting panel fees at the upper bound of MOH's benchmarks is likely to lead to escalating claims, it warned.

Panels may be new to many IP policyholders, but the idea is not new, and most people in the workforce would be familiar with the idea of seeing a company doctor, said LIA Singapore.

The underlying concept of a panel is where the insurer uses its bargaining power to negotiate preferential rates from healthcare providers in exchange for higher volumes, it said.

SMA charged that many IP insurers have "highly exclusive" panels, which not only affect doctors who are excluded, but also policyholders wanting more freedom in the choice of doctors.

Some may want to seek help from a doctor recommended by a friend or relative or stick with a familiar doctor who is not on the panel.

LIA Singapore said panels would continue to expand as it is in the interest of insurers that panels be comprehensive, so policyholders can avoid "having to consult non-panel doctors, which incurs higher costs".

Another sticking point for the SMA, however, was the lack of transparency in how doctors are selected for the panels.

LIA Singapore said insurers typically review the prospective panel doctor's past claims to see if they have been reasonable, whether there are any red flags in terms of volume of suspicious claims, and available markers of quality such as re-admission rates.

"The process includes looking into doctors' overall reputation, doctors' training records and credentials, as well as checks on whether there are any disciplinary issues with the Singapore Medical Council."

Implications of a continued rise in the claim rate

Claim cost increases for insurers are due to either higher payouts or an increased number of claims. The former has remained somewhat steady in the past few years, but the latter - the claim rate - rose very sharply from 2013 to 2017, and has continued to climb.

Currently, there are 25 claims for every 100 policyholders. If claim rate continues to climb at a compound annual growth rate of 10 per cent, there will be 40 claims for every 100 in five years and 64 claims for every 100 in a decade, said LIA.

It said this is unsustainable because at some point, the risk pooling effect may break down.

LIA Singapore said deeper analysis is required to guide further actions to ensure the sustainability of IPs as a healthcare financing tool, including assessing what types of claims are driving the rise in claim rate.

Managing insurers' costs

Doctors have called on insurers to look at managing their own costs, instead of pointing fingers at them and their patients.

SMA said such management expenses and distribution costs, rather than claims, are primarily responsible for cost increases experienced by insurers. It highlighted the growth in insurers' management and commission costs as outstripping that of claims in recent years.

LIA Singapore said this could be due to the implementation of the task force recommendations, which not only pushed up insurers' expenses in recent years but also moderated claims growth.

While it agreed that it was important to control non-claim expenses, it maintained that claims are still the main source of overall cost increases.

It is now working with local academics to further analyse the drivers of IP cost increases and will share these findings publicly, it said.

To instil cost discipline in IP insurers, SMA had said the authorities could consider making sure a greater amount of premiums collected is spent on claims, like in the United States.

It suggested regulating the so-called medical loss ratio, where insurers are required to spend above a defined percentage of premiums on claims.

LIA Singapore argued that the 80 per cent to 85 per cent ratio mandated in the US may not work here as insurers there operate at a much larger scale, premiums are much higher and healthcare costs are also generally much higher than here.

LIA Singapore said it will defer to the relevant regulators to make a more detailed analysis and determination on the feasibility and value of introducing such regulations for policyholders.

The SMA spokesman said they are happy to note that the discussion has now been refocused on the financial sustainability of IP. 

"Every party is expected to make sacrifices for a more sustainable system to emerge," the spokesman said. 

"We can revisit whether IP insurers should embrace the upper end of MOH fee benchmarks after the insurers bring down the rapid growth in their management expenses and ensure that at least 80 per cent of the premiums collected are spent on claims."

Finally, LIA Singapore advised policyholders to use the insurer's established appeal process or go to the Financial Industry Disputes Resolution Centre for adjudication, instead of going to the complaints committee that SMA is setting up for IP-related matters.