Gender-neutral premiums, transparency, and rebate mechanisms - MP Edwin Tong's response to WP MP Leon Perera's questions on the CareShield Life Bill

On Monday (2 Sept), the CareShield Life Bill was passed in Parliament after its second reading, making it compulsory for Singaporeans born in 1980 or after to pay CareShield life insurance fees starting 2020. For those born in the year 1979 or earlier, the premium is optional. Future cohorts will join when they turn 30. CareShield Life is an insurance scheme that covers Singaporeans if they are affected by ‘severe disability’ and is meant to gradually replace ElderShield which remains optional for Singaporeans. CareShield Life premiums start at $206 a year for men and $253 a year for women at the age of 30. Singaporeans will end up making 38 payments until the age of 67. Should they be afflicted with “severe disability”, the policyholder will receive a payout of at least $600 a month, for as long as care is needed. When debating the bill in Parliament, Workers' Party Non-Constituency Member of Parliament, Leon Perera raised several questions about the bill including the actuarial data behind the premium calculations, and the gender-difference in premium amounts.

Gender-neutral premiums

Firstly on gender, Mr Perera noted that setting the same premiums for men and women would send “the signal about gender equality in major public policy formation” and that the advantage of that far outweighs the disadvantages. In response to that, Senior Minister of State Edwin Tong said, “Actuarially, it is recognised that women live longer, are more likely to experience a severe disability, and live longer in severe disability.” This means, he adds, that women stand to receive more benefits from CareShielf Life across the spectrum, which justifies the higher premiums. Averaging out the premiums across gender “only works for a fully universal scheme where there is no option”, said Mr Tong. He explained that while a gender-neutral premium may appear inclusive at first blush, the long-term outlook in terms of expected payouts and the period of those payouts would likely lead to women opting into CareShielf Life and men choosing to stay away. “We would have gender-skewed coverage, and this may have the unintended effect of further worsening national solidarity over the scheme, in the long term,” he said.

Transparency

Mr Perera had also asked if the government would release the actuarial models used when deciding on premiums. He said, “this kind of transparency would ensure greater public buy-in by providing assurance to premiums are not set at too high a level that would tend to over-reserve funds that may need to be disbursed by way of future premium rebates or which might be retained for the benefit of future cohorts,” adding that it would pre-empt any speculation the public might have on the premium prices. To this, Mr Tong noted that the Ministry of Health hired professional actuarial consultants to construct those models. He explained that given the complexities of actuarial science, “instead of just publishing a large number of actuarial tables, it is far more important and a lot more meaningful to release relevant information in a manner that can be easily understood and reviewed by a layperson.” Moving on, Mr Perera also raised the question of whether there will be a transparent policy guideline given to the CareShield Life Council to determine, among others, the extent to which any excess funds are to be disbursed via premium rebates as opposed to reserving funds for future cohorts. Mr Tong assured the House that the CareShield Life scheme would be transparent and that the accounts of the CareShield Life and ElderShield Insurance Fund will be made public. He added that relevant information on the premiums collected and payouts made for those funds would be published on an annual basis. Elaborating further, Mr Tong said that the information shared will be similar to that for MediShield Life and that the CareShield Council will also consider what information will be useful with regards to industry norms.

Rebate mechanisms

Next, Mr Perera also asked about the mechanism for premium rebates, citing Clause 15 of the bill which allows for the offsetting of premium subsidies for premium refunds, for administrative ease. Mr Tong replied with an example. He explained, “If an auto-enrolled policyholder decides to opt-out before the deadline of end 2023, the premiums he had paid will be fully refunded and the mechanism used is set in clause 15.b. Any premium subsidies and incentives he received previously will then be offset from this refund. We don’t reclaim the subsidies while at the same time choosing to exit from this scheme.“ He added that if the council considers premium rebates as its regulat adjustments, then, in that case, the rebate computation will not take into account the subsidy that thas been given. “Instead, the rebate will be retained in the Fund for the benefit of all policyholders,” he said. “We believe that is the fairest solution.”

Supplements from the private sector

Another question raised by Mr Perera is whether the government anticipates the emergence of a CareShield Life market of private insurers offering premium supplements and what are the steps, if any, taken to facilitate this. In his response, Mr Tong said that Singaporeans can currently purchase supplements from private insurers which provide coverage starting from 2 ADL (activities of daily living – threshold determining whether a policyholder qualifies for claims), higher payouts, or both. He explained that as with ElderShielf Supplements, Singaporeans can use up to S$600 of their MediSave annually, per insured person, to pay for CareShield Life supplement premiums. On whether the government would administer these supplements, Mr Tong said that the MOH’s approach is that the government will provide basic coverage while allowing the “private sector to innovate in the provision of supplementary coverage”. “We believe that there are benefits to be reaped, for instance, in the diversity and type of products offered, by allowing private insurers to compete in this space, beyond the basic tier,” he explained.