CENTRAL PROVIDENT FUND (AMENDMENT) BILL

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CENTRAL PROVIDENT FUND (AMENDMENT) BILL: Order for Second Reading read.

4.51 pm

The Minister for Manpower (Dr Ng Eng Hen): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, this Bill seeks to amend the CPF Act to enable the privatisation of Dependants' Protection Insurance Scheme (DPIS) as announced in June last year. The Bill also seeks to amend the Act to allow for the MediShield reform changes announced by the Minister for Health, in particular the privatisation of the MediShield Plus scheme.

Privatisation of the DPIS

The DPIS provides financial help to the families of insured CPF members who pass away or become permanently disabled. Since 1989, more than 28,000 families have received benefits totalling about $1 billion from the DPIS.

The Economic Review Committee (ERC) recommended in 2002 that the Government devolve CPF-based insurance schemes to private insurers. It was hoped that healthy competition would bring about greater efficiencies and benefits for

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members. This was the specific outcome to be achieved as the CPF Board evaluated submissions from private insurers. I am happy to report to this House that the insurers appointed to take over DPIS, namely, Great Eastern Life Assurance Company Limited (Great Eastern Life) and NTUC Income Insurance Co-operative Limited (NTUC Income), are able to offer better terms to all members currently under DPIS. After privatisation, all members will enjoy an immediate increase in coverage from the current $44,000 to $46,000 with premiums unchanged. This is for existing and new members. In addition, members who are aged 55 or older will enjoy a reduction in premium from $360 per annum to $260 for the same level of coverage. This reduction replaces the existing loyalty premium discount given when members reach the age of 55 under the current scheme.

The Dependants' Protection Insurance Fund (DPIF) is established under section 46 of the CPF Act. DPIS premiums are currently paid into this fund, and DPIS claims are paid out from this fund. After privatisation, the fund would be dissolved, and the amounts standing in the fund would be transferred to the appointed insurers so that they can take over the insured CPF members' liabilities. Clause 9 will repeal section 46 and dissolve the DPIF established under this section. Clause 11 will insert new sections 49A(1) and 49B to allow for the transfer of CPF Board's liabilities under the DPIS to the appointed insurers as well as the necessary funds from the dissolved DPIF to meet the transferred DPIS liabilities. CPF Board will retain part of the dissolved fund to pay for liabilities incurred before privatisation.

Clause 11 also inserts a new section 49A(3) to empower the CPF Board to require, when the need arises, any appointed insurer to transfer its liabilities under the DPIS to another appointed

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insurer. This is to cater for a situation where one of the appointed insurers becomes unable to execute its responsibilities.

To enable the appointed insurers to administer the DPIS after privatisation, CPF Board will need to disclose certain information on insured members to the appointed insurers. Clause 11 inserts a new section 49C to empower the CPF Board to provide such information to the appointed insurers. To ensure that members' privacy and rights are protected, the appointed insurers will only be allowed to use the information provided for the purposes approved by CPF Board.

Section 45 of the CPF Act currently provides for the deduction of DPIS premiums from the insured members' accounts. Clause 8 amends section 45 to clarify that, upon privatisation, DPIS premiums will be deducted from the insured members' CPF Ordinary or Special Accounts and paid to the appointed insurers.

Sir, let me now move on to explain the amendments to facilitate the MediShield Reform.

MediShield reform

Sir, from 1st July 2005, the Ministry of Health has introduced various changes to MediShield and the Medisave-approved private insurance framework. These changes will prevent cherry-picking by private insurers, restore the integrity of the MediShield risk pool, and bring about a more competitive and dynamic private medical insurance market. The key changes pertain to the privatisation of the Medi

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Shield Plus Scheme operated by CPF Board, and the restructuring of the Medisave-approved private insurance plans.

Sir, as part of the package of MediShield reform, the existing MediShield Plus Scheme operated by the CPF Board will also be privatised through a competitive tender. This will speed up the development of stronger competition in the Medisave-approved private insurance market. CPF Board aims to award the tender and transfer all MediShield Plus policyholders to the new insurer by October 2005.

As with the privatisation of the DPIS, the existing liabilities under the MediShield Plus Scheme will need to be transferred from the CPF Board to the private insurer appointed to take over the MediShield Plus portfolio. Clause 15 inserts a new section 56A(7) to allow CPF Board to transfer part of the MediShield Fund to the appointed insurer to meet the transferred MediShield Plus liabilities, such as long-term commitments for treatments like dialysis and chemotherapy.

To facilitate the appointed insurer to perform its functions, section 59 has been amended to allow the CPF Board to share relevant information relating to the MediShield Plus policyholders, such as their past claims history and medical information, with the appointed insurer. Strict rules will be set on use of the information to safeguard the interests and privacy of policyholders. The appointed insurer will not be allowed to use the information for any purpose, other than for those connected with the administration of the scheme. The information also cannot be provided to their insurance agents or other parties for any other purposes.

To safeguard MediShield Plus policyholders' interest in the event of a possible failure by the appointed insurer to carry out its duties, clause 15 also inserts a new section 56A(3) to empower the CPF Board to require the transfer of liabilities under the MediShield Plus Scheme from

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the appointed insurer to another appointed insurer, if the need arises.

Mr Speaker, Sir, apart from MediShield Plus, Singaporeans can also choose to take up other Medisave-approved private insurance plans for additional coverage for stays in Class A or B1 wards and private hospitals. As of 1st July 2005, MediShield has been repositioned as the basic insurance tier upon which the private insurers may provide additional benefits and coverage. These plans are integrated with MediShield as one single product, administered by the private insurers in a way that is seamless to policyholders.

As policyholders under the new integrated plans will also be MediShield policyholders, CPF Board will take on the liabilities relating to the MediShield component for these policyholders without any further medical underwriting. These include long-term commitments for policyholders who are already claiming from their private insurer. Clause 15 inserts a new section 56A(9) to provide for the transfer of any monies from the private insurers to the MediShield Fund to meet these long-term commitments.

Withdrawal from the Medisave Account for approved purposes

Sir, let me now turn to the remaining amendment, which is on Medisave account withdrawals.

CPF members can withdraw their Medisave Account savings for approved purposes, which include medical treatments or services, and premium payments under approved medical insurance schemes. Such withdrawals are allowed even if members have not set aside the Medisave Minimum Sum in their Medisave Account. However, this is not clearly reflected in our legislation. Hence, clause 2 amends section 13 of the CPF Act to make it explicit that such approved withdrawals can be made, without

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members having to set aside the Medisave Minimum Sum in their Medisave Account.

Conclusion

In conclusion, Mr Speaker, Sir, the amendments proposed in the Bill will enable the privatisation of the Dependants' Protection Insurance Scheme and the MediShield Plus Scheme. These amendments will also facilitate other aspects of the MediShield Reform as announced by the Minister for Health.

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

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The House immediately resolved itself into a Committee on the Bill. - [Dr Ng Eng Hen].

Bill considered in Committee; reported without amendment; read a Third time and passed.