On 6 Jul 2017, the Eldershield Review Committee issued a press release, announcing their recommendations and seeking public consultation. The committee advised the government on two major changes.
1) To have the government manage Eldershield itself.
2) To make Eldershield mandatory
While we understand that some well-known Singaporeans have issues with shadowy ministerial committees, this is not the case here. The Eldershield Review Committee has been publicly announced by MOH and you can see their handsome and pretty mug shots here.
We are pleased to declare that we have no personal contact with any of them and thus, clearing ourselves of any conflict of interest. Before we start our complaints in true Singaporean fashion, let us introduce the subject-matter first.
What is Eldershield?
Eldershield is a severe disability insurance scheme that pays you when you are unable to perform 3 out of 6 Activities of Daily Living (ADLs).
Depending on which scheme you are on, it pays you either 60 instalments of $300 or 72 instalments of $400. The premium is payable via CPF Medisave account and you are automatically enrolled into the scheme once you turn 40. Unlike Medishield Life, you can opt out though.
Currently, this insurance scheme is being administered by 3 insurers – NTUC Income, Great Eastern & Aviva. Each insurance company offers both Eldershield 300 & Eldershield 400 as well as their own enhanced versions of the disability insurance.
You might as well upgrade your Eldershield plan if you are eligible to sign up for one. The basic Eldershield claim payouts of $300 or $400 are too little to actually maintain a subsistence living. Not only are the monthly proceeds low, the period of compensation is too short. Indeed, 25% of the claimants outlive their Eldershied period of coverage!
In our opinion, all these shortcomings have handicapped this severe disability insurance (pun intended)!
The Problem with the Eldershield Review Committee Recommendations
To be fair to the committee, they have also highlighted that there is a need to improve the accessibility of information on the ElderShield claims process. This is not widely reported in the media. Many patients are unaware that they are eligible to make a claim and thus, may have missed out on their entitled benefits. Therefore, it is laudable for the committee to bring up this point.
Besides that, we do have major grouses about what effectively is the nationalising of Eldershield. The proposal is to have the government administer it on its own or with the help of private insurance companies. On top of that, they are considering if Eldershield should be made compulsory.
The rationale of this proposition is to pool the risk pool together so as to achieve happiness, prosperity and progress for our nation. (Sorry, we got too confused with our national pledge.)
In any case, the idea is to simplify processes and to reduce premiums. This also means that everyone is mandated by law to join the scheme.
In short, it is like Medishield Life but with older folks and lesser benefits.
We humbly opine that this will not work.
The lack of competition.
We need to take you back in time.
On 4 Dec 2001, a tender for Eldershield was opened to the private sector. It was meant to generate greater private sector participation in the severe disability insurance market. More importantly, there was this point about competition. We quote from MOH:
Through such a competitive bidding process, the Government would be able to get the best value for the premiums that ElderShield members would be paying. Similarly, the administration of IDAPE would also be tendered out to private insurers.
Why would a single provider reduce costs when there is no competition at all? In economics, this is called a monopoly. The best one can hope from a benevolent monopoly is that they have the resources to develop new technologies to lower the prices and provide superior products.
However, this is an insurance contract that we are talking about. We are unable to see how the government is able to lower the cost of administration through economies of scale. In fact, the cost will definitely increase in the transition period as unnecessary administration cost will be incurred.
The lack of competition coupled with an inexperienced civil sector handling Eldershield will likely result in inefficient administration of Eldershield scheme, contrary to what has been reported in the papers.
Expanded Pool equates to Higher Premium.
Have you noticed about this IDAPE scheme from the quoted comments from MOH?
IDAPE is a lesser known social assistance plan that caters to Singaporeans who are not eligible to join ElderShield due to pre-existing disabilities or age limit with basic financial coverage against severe disabilities.
It is managed by NTUC Income but funded by the government.
When Eldershield is nationalised, this particular risk group enters the main pool. As we have experienced with Medishield Life, the premium increases across the board due to adverse risk selection. This is definitely not good news for us as consumers.
Someone suggests the Government will also be better positioned to contain healthcare costs. Well, someone must be confused with Medishield Life and should read our introduction about Eldershield.
It is about providing cash benefits and has nothing to do with healthcare cost.
There is no way the government can make the $400 claim benefit last longer unless it can magically reduce the cost of living in Singapore. Which we are acutely aware that such a situation will not be happening anytime soon.
There is no good reason to make every resident in Singapore co-share the risk. In economics, the role of the government has always been to provide public goods where the free market cannot. This is a perfect situation whereby the government should use the tax money to provide for the less fortunate instead of spreading that load equally amongst the population.
Better Choices Out in the Market.
The problem with Eldershield is its meagre payouts.
To illustrate the point, a male who joins Eldershield400 at the age of 40 will pay a total premium of $4,548.96; a female counterpart pays a grand sum of $5,661.76.
In the event of a claim, he or she will receive $$28,800 in total.
Whether it is a good return or a sufficient one, we leave that for our readers to decide. However, the heart of the problem is the claim amount of $28,800. It is not an insurmountable amount to most of us. With disciplined saving, it is quite possible to save up that amount in no time. Thus, some may prefer to keep their Medisave account intact by opting out of Eldershield and that is perfectly alright.
The stringent qualifying standard is yet another reason why people might abandon Eldershield. While Disability-income (DII) insurance is a little different from Eldershield, it addresses the same disability risk. However, DII provides a more lenient definition than Eldershield – simply the inability to work in your own occupation or any occupation suited by virtue of training, education or experience.
With the myriad of commercial products out there, it does not make sense to enrol into an inferior, expensive disability plan. Making Eldershield mandatory for all of us goes against the concept of meritocracy that Singapore upholds.
Our main complaint with Eldershield is with the low payout and the overly-rigid claim conditions.
It is incidentally the same issue that is brought up by the people we have spoken to.
That is why we think that the committee is barking up the wrong tree from their recommendations.
On the claim compensation part, there is a simple solution.
Just increase the amount already! And throw in a longer period of coverage too!
To ease the concerns about opening claim floodgates when the qualifying conditions are eased, we suggest having different tiers of compensation. Should one be unable to meet the 3 ADLs standards; a pro-rata claim payout can be dispensed instead of the full amount. This way, it can allow people with greater need to have access to more assistance while providing some help to those who just need a little help to get back on track.
One other point that peeves us is that there is a fee for disability assessment! While it is reimbursed by the insurer upon a successful claim, we cannot help but think that some potential claimants may be put off by this requirement. Also to prevent abuse, we will suggest for a one-time waiver of assessment fee to set the patients’ heart at ease since the patients have no way of knowing how high the standards are set.
Some may argue that there is a need to balance between premium and claims. We assure you that we are not suggesting a raid on our reserves. Instead, we are merely proposing to draw down on the enormous billion-dollar Eldershield surplus. This is what our health Minister Mr Gan has said.
“From 2002 to end-2015, about $2.6 billion have been collected in premiums for ElderShield insurance and around $100 million have been paid out in claims, adding that about $130 million in premium rebates have been given to policyholders so far, the first tranche in 2007 and another in 2012.” – Hansard
Lend Us Your Voice!
Eldershield is a disability plan that must be improved to serve the needs of our ageing population.
Who should manage the scheme is of secondary concern. By improving the benefits, it will naturally improve opt-in rate. With greater participation, whether to make it mandatory or not shall become a moot point.
While the primary concern about the Eldershield is due to the benefits, we cannot help but think that the committee has overlooked this glaring deficiency. Nevertheless, we have to speak up for the committee as they have only spoken to the industry stakeholders but not the public yet.
Public consultation is on now.
Before we put forth any suggestions, we would like to hear your thoughts on the above.
If you agree or disagree, your input will be much appreciated.
Alternatively, you can make your own feedback or suggest ours to the committee right here.
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