Are we setting aside too much reserves for MediShield Life?

The MediShield Life Fund is said to be designed in a way that it is self-sustaining and based on actuarial principles, with each age group paying premiums, under the compulsory MediSheld Life which all citizens in Singapore have to subscribe to, to broadly support its own current and future claims.

"This means that the Fund has to set aside enough monies as reserves to honour payouts for projected future benefits, and to hold a buffer against adverse scenarios." – MOH

According to the Ministry of Health‘s website – “As at end 2016, the total assets of the Fund stood at $ 5.9 billion. Over the past 5 years, on average, about two-thirds of the Fund comprised reserves to fund the expected scheme liabilities.”

Does this mean that the claims paid as a proportion of the assets of the fund were about $1.967 billion (one-third), with about $3.93 billion (two-thirds) as reserves?

From the table below – the actual claims paid was $2.734 billion with $3.417 billion required reserves.

The claims paid to premiums collected ratio was 43.2% ($2.734 billion divided by $6.332 billion).

Is this the lowest claims to premiums ratio of all the national health insurance schemes in the world?

If we include the interest earned by the fund – what is the loss ratio?

As to MOH stating, “The following table shows the Fund’s incurred loss ratio over the period 2012 to 2016. The incurred loss ratio over the period is 99%. This is derived from the Fund receiving $4,871 million in premiums while paying out or setting aside $4,815 million to support policyholders’ claims and scheme liabilities”

Since it is a mandatory scheme which even Singaporeans and PRs living abroad have to pay premiums, and the premiums increase with age as well as the premiums and premium subsidies can be decided almost at the will of the Government – is there really a need to have so much reserves “to support policyholders’ claims and scheme liabilities”?

Is this the national health insurance scheme with the ‘most reserves’ in the world?