Some insurers are offering massive additional coverage for cancer treatment through their riders. This is worrying.

First, it implies that their Integrated Shield Plans’ (IPs) cover falls far short of what is needed. Second, excessive coverage could undermine the national effort to reduce the cost of cancer treatments.

Hopefully, it will not trigger another round of competition among insurers that will end with the need for another bailout by the Ministry of Health (MOH).

This was exactly what happened when insurance companies shot themselves in the foot by offering “as charged” payments and first-dollar riders that paid for everything. Medical bills soared and the Government had to step in.

Are new caps pushing people to buy riders?

Most IPs have capped their cancer coverage for private hospital plans at five times the limits of MediShield Life (MSL), with plans targeted at the A and B1 ward class getting lower coverage.

Income, for example, is giving three times the MSL limit for its B1 class plans, and four times for its A class plans.

This means that depending on the drugs used, coverage of cancer drugs for patients on the B1 plan ranges from $800 to $28,800 a month, while cancer services are capped at $10,800 a year – or $900 a month. Cancer services cover all the non-drug costs, such as consultation fees, laboratory tests, scans and supportive medication.

MSL limits are targeted at subsidised care. Based on means testing, patients can get as much as 75 per cent subsidy on cancer drugs. However, the MSL insurance should generally provide sufficient cover even for people who get lower subsidies.

While the coverage provided by IPs will probably be enough for most cancer patients, it is unlikely to provide adequate cover for all. In fact, industry observers suggest that, at today’s prices, a significant number of private cancer patients might find the new IP coverage caps insufficient.

But the point of the changes to cancer financing is to reduce outlier prices.

Coverage may not be enough because private clinics generally pay more for drugs than the public sector, which buys in bulk and is able to negotiate for good prices. Some private clinics are also said to mark up the prices of drugs sharply, more than doubling them in some cases.

MOH has been able to bring down the cost of cancer drugs by about 30 per cent across the board by limiting insurance coverage to only treatments on the Cancer Drug List (CDL). Drugs that are considered too expensive do not get on the list.

However, the private sector, which lacks MOH’s bargaining power, can end up paying 20 per cent to 100 per cent more for the same drugs. And when private clinics mark up the prices further, the patient ends up paying even more.

This feeling that IPs might not sufficiently cover private-sector cancer care has prompted insurers to dangle additional coverage with their riders. Six of the seven insurers here are providing policyholders with riders that offer at least double the coverage of their private hospital plans.

In fact, three insurers are giving policyholders who have both private hospital plans and rider coverage caps of 20 times the MSL limits or more. The IP itself offers coverage of only up to five times the MSL limits.

People buy insurance for peace of mind should they develop a serious illness. Except for a small number of outliers, MSL and IPs are meant to cover 90 per cent of big medical bills – after the annual deductible of $1,500 to $5,250.

Riders, in general, are meant to cover the patient’s share of the bill – in other words, the deductible and 10 per cent of the bill.

But if patients require up to 20 times the MSL limits to have their bills properly covered by insurance, then the five times that the IPs cover is obviously inadequate.

On the other hand, the high rider coverage could simply be a gimmick by insurers to draw in customers, even though they do not expect to pay such high claims.

Such scare tactics could work. People may rush to buy riders when they see the difference in the amount of coverage that these offer. Already, about 100,000 new riders are sold each year.

According to the American Cancer Society, two in five people will get cancer in their lifetime. In Singapore, cancer is the top medical cause of hospitalisation.

Impact on national effort

Regardless of whether such riders are a gimmick or a reflection of reality, they could hurt MOH’s efforts to bring down the cost of cancer treatment that has been increasing at around 20 per cent a year.

Singapore used to be charged a lot more for cancer drugs than other developed countries in the region, such as Australia and South Korea.

MOH changed the game by limiting insurance coverage to treatments listed on the CDL, and by deciding the amount of coverage MSL can give for each treatment based on its efficacy and value. This meant that pharmaceutical companies that want their drugs on the list had to abide by the MSL limits.

From Saturday, all IPs will also have to follow the same limits – but they may do so at multiple times the MSL insurance cover.

Take the example of Income’s IP coverage. For a drug that MSL will cover at $2,000, the insurer’s B1 plan can pay up to $6,000 (three times that of MSL), the plan for A class up to $8,000 (four times MSL), and for the private-sector IP up to $10,000 (five times that of MSL).

Since patients on B1 and A class plans would generally seek treatment in the public sector, the cost of drugs would be what the public sector pays.

Clinics in the private sector, however, pay more and will charge their patients even higher.

This will not be a problem for policyholders who have riders that pay 20 times the MSL limit or more. But it can have unintended consequences.

With such rider coverage, there is little incentive for pharmaceutical companies to reduce the prices of their drugs. This defeats MOH’s efforts to bring down the cost of cancer treatments.

About 70 per cent of Singaporeans and permanent residents have IPs. That’s about 2.9 million people. Of them, two in three have riders.

This means pharma companies and profiteering doctors can continue to charge excessively for drugs as those with riders will pay. It also means the cost of cancer treatment in the private sector will continue to spiral.

The losers will be the one in three IP patients who do not have riders and whose IPs cannot pay the bulk of their bills; and Singapore as a whole, since how much is paid in the private sector will affect overall national healthcare expenditure.

Will history repeat itself?

In 2018, the MOH stepped in, at the request of IP insurers, to mandate that patients have to pay part of their big hospital bill, by stopping the sale of full riders that paid for everything.

Between 1994 and 2005, the various private plans had set limits to claims, so there was a ceiling up to which insurance would pay for treatments. In 2005, Aviva (now Singlife), a new entrant to the market, became the first to offer to pay bills “as charged” by doctors and hospitals.

Given the highly competitive market, by 2006, “as charged” became the norm for all IPs.

Because IPs are paid for with MediSave money, MOH mandated that they have an annual deductible and co-payment – since it felt that people would be more prudent if they had to pay part of the bill.

But then in 2006, insurers also started offering riders that paid the patient’s entire share of the bills. By 2011, 19 per cent of local residents had riders. Today, almost half have them.

Between “as charged” plans and first-dollar riders where patients didn’t have to pay a cent for their medical treatments, claims soared. So too did premiums.

A Health Insurance Task Force, comprising industry and government representatives, was set up to look into the matter and, in 2016, it recommended several actions to stem healthcare inflation that was running at 50 per cent higher than general inflation.

The main concern was escalating bills from private hospital treatments. More than half the IPs are private hospital plans for treatment in the private sector. Between 2012 and 2014, private hospital bill sizes went up by 8.7 per cent a year compared with a 0.6 per cent rise in public hospital bills.

The task force found that those with riders were not just chalking up more bills, but that their bills were also 20 per cent to 25 per cent higher than those of people on the same IP plan who didn’t have riders.

All the IP insurers were facing underwriting losses. They asked MOH to bail them out.

Why MOH needs to act now

MOH agreed to step in then, because healthcare costs were shooting up in the earlier, free-spending regime.

In 2018, it made it a rule that even those with riders had to pay a minimum of 5 per cent of their bills, subject to a cap of $3,000 each year.

The launch of the CDL for IPs this Saturday means that cancer care will no longer be covered “as charged”, but be subjected to limits.

But this move could be totally undermined by riders that provide what can only be termed as ridiculously high cover.

This time, MOH should not wait till competition among insurers trying to outdo one another pushes up cancer care cost in the private sector.

It should nip the problem in the bud.

Over the past couple of weeks, insurers have kept tweaking their rider benefits in order to outdo one another. This competition is likely to spiral out of control without government intervention.

That’s because no insurer would dare become the first to cut benefits, even when facing hefty claims that affect its profits. This has been tried before, and failed. In 2008, Income had tried to offer only riders with partial coverage, but had to reinstate full riders after losing market share to the other IPs.

The Competition Act bars the insurers from acting in concert to do something about these riders. Sooner or later, MOH will likely have to step in again, so it’s best to do so now before the practice becomes entrenched.

Yes, riders should be allowed to augment the payment by IPs, but this amount should be within reason. Riders also pay for non-CDL treatments, with coverage as high at $250,000 a year, which IPs are not allowed to. This, too, is fair, since some patients might require such treatment and are willing to pay higher premiums to ensure good coverage.

But MOH should cap what riders can pay for CDL drugs and, perhaps, also for cancer services – the two things MSL is tackling. Only this will force drug companies and private clinics to keep prices in check.