ELDERSHIELD SCHEME

Mr Gan Kim Yong asked the Minister for Health (a) what were the main reasons for the large number of people opting out of the ElderShield Scheme; (b) will his Ministry consider improving the Scheme so as to encourage more people to participate in it; and (c) what can his Ministry do to help those who have opted out of the Scheme.

The Minister of State for Health (Dr Balaji Sadasivan) (for the Minister for Health): Mr Speaker, Sir, out of 1.2 million Singaporeans and permanent residents aged 40 to 69 years, more than 800,000 are covered under ElderShield. To have more than 800,000 persons now covered under a severe disability insurance plan is a reasonably good start.

We had initially expected the majority of those who opted out to be from the very low and very high income groups. This is because those in the low income groups may worry about not being able to sustain the premium payments, while those in the high income groups may have other alternatives to take care of their care expenses in the event of severe disabilities. We had also expected the opt-out rate to increase steeply for the older age groups. This is because the premiums for them would be relatively higher even with the premium subsidies provided by the Government, and older persons tend to have less understanding of insurance.

However, as it turned out, the opt out rates did not vary that significantly across income and age groups as expected [see Annex A and B (Cols. 1661-1664)]. In Annex A, Members can see that the opt-out rate of the low income group is 35%, slightly higher than the average opt-out rate of 33%. In Annex B, Members can see that the opt-out rate of the older age-group is 40%. We still managed to attract 60-65% of the older age group and the lower income group to enroll for ElderShield. Chart - Proportion opted out within each monthly income group (as at 30 Sep 02) (Cols. 1661-1662)

Chart - Proportion opted out within each age band (Cols. 1663-1664)

There could be a few reasons why one third opted out of ElderShield. First, Singaporeans may not understand fully the benefit of risk pooling and a pure insurance scheme, without death benefits or a savings investment feature. Many may perceive it as money down the drain if they eventually do not get to claim the benefits. However, this is precisely what insurance is all about - you buy protection but hope that you would not be unlucky enough to claim it.

Some Singaporeans may also have opted out because they think ElderShield does not offer good value for money. They may have underestimated the risk of disability because our population is still generally young today. They may also not have taken into consideration the feature that once you have joined ElderShield, the premiums do not increase as one grows older, and coverage is for life.

Furthermore, the ElderShield is run by the private sector. Some Singaporeans may have preferred that the scheme be administered by the Government. I would like to highlight that ElderShield is awarded to the two private insurers - NTUC Income and GE Life Insurance - through competitive tendering process. The Ministry has also put in place a framework on premium rebates and limits on premium adjustments based on actual claim experiences to safeguard the interests of Singaporeans.

ElderShield is one of the many schemes that the Government has put in place to help Singaporeans pay for their healthcare costs. For the low-income group who have opted out, they would be helped through other means. VWO residential step-down care facilities are affordable as they are subsidised, with charges at between $300-$500 a month, after 50-75% subsidy from Government. Low-income Singaporeans who still cannot afford the subsidised charges will be eligible for Medifund assistance through the step down care providers.

Going forward, the immediate task of the Ministry and the ElderShield insurers is to ensure the smooth operation of the scheme and that it serves the needs of the policyholders. The scheme has just rolled out. When we have gained sufficient experience on the scheme, we will work with the ElderShield insurers to offer enhanced benefits such as higher monthly payouts or payouts over longer periods.

For those who have opted out, the deadline for opting-back into ElderShield has been extended to the end of this year. I would like to urge them to re-consider their decision.

Dr Lily Neo (Jalan Besar): Sir, the Minister for Health mentioned that ElderShield will provide an enhanced scheme. May I ask the Minister of State whether now is a good time to introduce an enhanced scheme in view of the large number of people opting out of ElderShield?

Dr Balaji Sadasivan: Sir, first of all, I would like to disagree that a large number have opted out of ElderShield. It is all a question of opinion. A few months ago, very few Singaporeans had any kind of insurance against disability. Today, 800,000 people are covered. This is a very large number being covered today. As for looking at enhanced benefits, the scheme has just started. We need to monitor it over a period of time to see how the scheme works, and then we will review it.

Mr Gan Kim Yong: Sir, could the Minister of State tell us how many people have opted out of the scheme because of the difficulty to qualify for the pay out, and how many have opted out because the pay out is too low in terms of quantum and too short in terms of duration?

Dr Balaji Sadasivan: Sir, we have not surveyed the people who have opted out. There is still time for people to opt in, and this is something that we can look into when the scheme closes. However, this is an insurance scheme. In an insurance scheme, the premium is related to the pay out and benefits. This is a scheme that we have just started and, obviously, it covers what is the minimum requirement and the premiums are as low as they can be.

Mr Gan Kim Yong: Sir, I would like to ask the Minister of State whether he would consider it important to find out what are the reasons that our citizens have opted out of the scheme - whether it is because of the pay out or whether is because of the difficulty in qualifying for the pay out.

Dr Balaji Sadasivan: I have spoken to Singaporeans who have opted out. Some of the reasons given are that they feel the pay out should be more. Others felt that the premium should be less. This is quite natural. Most people want to pay the least premium and expect the highest pay out. But for an insurance scheme to be viable, there has to be a balance between the two. That is why we tendered out the scheme and selected the two insurers who offered the best deal for the public.

Dr Lily Neo: Mr Speaker, Sir, to me, about 400,000 people who opted out of ElderShield is a large number. I would like to ask the Minister of State whether he is aware that many older and poorer Singaporeans opted out of ElderShield because they cannot afford to pay the premium. Will the Minister of State extend more help to this group of people who are most in need of ElderShield?

Dr Balaji Sadasivan: Sir, we realise that in the older population group, there may be people who cannot afford the premiums. But under our current system, should they become disabled, they still can get assistance when they enter into nursing homes with disabilities. And in the event that they cannot afford to pay their bills, there is still MediFund assistance through the nursing homes.

Miss Penny Low (Pasir Ris-Punggol): Sir, insurance is based on the pooling of risks. So we need a minimum number. What is that minimum number to make the scheme viable? That is my first question. My second question is: given that about 400,000 people opted out, will there be a risk of anti-selection? If that is the case and, in future, if the claims experience do stress on the system itself, will that lead to a revision of the premiums? Is there any guarantee of premium status quo?

Dr Balaji Sadasivan: Sir, I am not an expert on insurance. The insurance companies are quite satisfied with the numbers as being viable.