ElderShield review

ElderShield premiums can be expected to go up with higher payouts: Experts

Ageing population means more payouts, especially amid rising healthcare costs

Recommendations made on Tuesday by the ElderShield Review Committee included removing the option to opt out. PHOTO: ST FILE

The proposed expansion of the national disability insurance scheme will offer a better safety net for an ageing population, but people should expect their premiums to go up as payouts rise, said experts.

While the committee reviewing ElderShield has yet to make its final recommendations, experts said an ageing population means more payouts, especially amid higher healthcare costs.

In fact, higher premiums are "inevitable", said Dr Loke Wai Chiong, healthcare sector leader for Deloitte South-east Asia and Singapore. Speaking of the country's "silver tsunami", Dr Loke said premiums will go up "due to the risk pool diminishing in size with lower birth rates, causing the risk borne by insurers to go up".

In Parliament last year, Health Minister Gan Kim Yong said $2.6 billion in ElderShield premiums was collected between 2002 and end-2015, and around $100 million was paid out in claims.

While premiums collected may be far in excess of payouts thus far, the gap has been shrinking and will continue to close, he said.

Recommendations made on Tuesday by the ElderShield Review Committee included removing the option to opt out, thus making the scheme compulsory for new cohorts, and lowering the enrolment age from 40 to 30.

Committee chairman Chaly Mah said it had received feedback that payouts should increase because of rising healthcare costs.

"We are looking at the premium structure at the moment," he told reporters on Tuesday. "As you all know, there is no free lunch."

Experts said a change in the scheme's age criteria could help to mitigate the rise in premium costs.

Said Ms Woo Shea Leen, who is insurance leader at PwC Singapore: "Bringing forward the enrolment age will help slow down the increase in premiums associated with the rising cost of healthcare."

Currently, premiums depend on biological sex and the age at which a participant joins the scheme.

A man who joined at age 40 in 2009 and remained healthy until he turned 65 would have paid $174.96 every year for 26 years. This amounts to about $4,550.

If he had to make a disability claim later on, he would get monthly payouts of $400. Assuming he got these payouts for the maximum of six years, this would come up to $28,800.

Ms Lim Shujun, who is an actuary and director at financial advisory firm InsureDIY, said: "There are products already in the market that can pay much higher benefits - for example, up to 80 per cent of your pre-disability income and for a longer duration. Of course, these are more expensive."

She added that ElderShield benefits and payouts must be improved in order for the scheme to meet Singaporeans' needs. "But this should be balanced with the need to keep the scheme affordable for the lower income," she said.

Ultimately, ElderShield - like MediShield Life for large hospital bills - is meant to provide only basic coverage, said experts.

Assistant professor of economics and public policy Joelle Fong, who is from the Lee Kuan Yew School of Public Policy, said: "I believe it is designed to be an inexpensive, bare-bones severe disability insurance scheme for everyone."

She added: "Of course, to have a meaningful scheme, monthly payouts should also be adequate."

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A version of this article appeared in the print edition of The Straits Times on February 01, 2018, with the headline ElderShield premiums can be expected to go up with higher payouts: Experts. Subscribe