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MPs raise concerns over ElderShield premiums collected vs claims disbursed, criteria for ‘severe disability’

SINGAPORE – Several Members of Parliament (MPs) raised questions about the large discrepancy between ElderShield premiums collected and the claims disbursed when Parliament debated the motion on CareShield Life on Tuesday (July 10).

SINGAPORE – Several Members of Parliament (MPs) raised questions about the large discrepancy between ElderShield premiums collected and the claims disbursed when Parliament debated the motion on CareShield Life on Tuesday (July 10).

The MPs, including Nominated MP Ms Chia Yong Yong, Mr Zainal Sapari (Pasir Ris-Punggol Group Representation Constituency) and Mr Ang Wei Neng (Jurong GRC), sought clarification on why only S$133 million was paid out as claims under ElderShield even though S$3.3 billion in premiums were collected at the end of last year.

Responding to the questions raised by the MPs, Senior Minister of State for Trade and Industry Chee Hong Tat said it is "logical and necessary" for pre-funded insurance schemes like ElderShield to show a positive balance when its policyholders are younger and less likely to be inflicted with disabilities.

“This balance amount is not profit, it is to meet future liabilities,” stressed Mr Chee, who was formerly Senior Minister of State for Health.

The balance amount will gradually be used to pay for claims as policyholders grow older and more of them develop severe disabilities, Mr Chee explained.

“If a pre-funded scheme does not have a positive balance when its policyholders are younger, the scheme is actually in trouble. It means there will not be enough financial resources to meet future liabilities, and when policyholders grow older and more of them start to claim, the scheme will have difficulties making the payouts,” he said.

Mr Chee added that the Government is working with the three private insurers running the ElderShield scheme to ensure that the balance amount will be properly accounted for.

CareShield Life, the enhanced disability insurance scheme to replace Eldershield, will be launched in 2020. This scheme, which will be compulsory for Singaporeans and permanent residents aged 30 and above, will dole out higher and lifetime payouts — at S$600 per month instead of the current S$400 — to severely disabled Singapore residents, up from a cap of six years in the current ElderShield scheme.

Payouts will also be raised by 2 per cent per year in the first five years' of implementation. Premiums will concurrently go up by 2 per cent per year for the first five years, with subsequent adjustments to be determined by an independent council.

Parliamentarians also suggested expanding the criterion for “severe disability”, so that those who are unable to perform at least one or two activities of daily living can receive payouts.

As with ElderShield, the new scheme defines “severely disabled” policyholders as those who cannot independently perform at least three out of six activities of daily living — eating, bathing, dressing, transferring (from the chair to bed, for instance), going to the toilet, and walking or moving around.

Opposition MPs Sylvia Lim and Png Eng Huat, for instance, noted that a more flexible criterion would encourage older cohorts currently on ElderShield to come on board CareShield Life.

Ms Lim said: “I would like to emphasise the point that CareShield Life will be a compulsory scheme and young Singaporeans will have to pay 37 years of premiums. With this looming fact in mind, CareShield Life must have meaningful coverage. My view is that the three-ADLs (activities of daily living) test needs to be reviewed and adjusted.”

In response, Mr Chee highlighted the "trade-offs" between increasing payouts and lowering the claims criterion, versus keeping premiums affordable.

For instance, if monthly payouts were raised by the proposed S$600 to S$800, premiums for a 30-year-old male policyholder in 2020 could go up by a third, he said. If the claims threshold were lowered from three to two activities of daily living, premiums will have to increase by another third, he said.

Annual starting premiums could then go up to 70 per cent higher than the currently proposed amount of S$206, said Mr Chee.

It is also not feasible for policyholders who do not make claims to pay discounted premiums, said Mr Chee, in response to MPs who suggested the move to "incentivise healthy living".

As Eldershield and CareShield Life are pre-funded insurance schemes where policyholders pay premiums when they are young for lifetime coverage, one can only confirm that a policyholder is not claiming from the scheme after he or she has passed away.

The probability that some may not claim from the scheme because they will not become severely disabled is already incorporated in computing the premiums, he said.

In response to calls for comprehensive communication of CareShield Life, Mr Chee said the Health Ministry will leverage mainstream and social media platforms to engage prospective policyholders on the complex scheme.

Acknowledging that many members of public have shared that it is challenging to understand all the details of the scheme, Mr Chee said the authorities will make use of the period before the scheme takes effect to raise awareness. The Government will also step up public education on the risks of severe disability in old age and financing sources available to support Singaporeans’ long-term care needs.

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