Should MediShield Life premiums be based on lifestyle?

The answer is not straightforward for a number of reasons.

- Wee Hwee-Lin

Minister for Health Ong Ye Kung recently said that the Government was looking at ways to help support healthcare in Singapore as the population ages.

Among other things, he referred to using behavioural economics to nudge people to adopt healthier lifestyles, such as by "differentiating insurance premiums between those with and without appropriate lifestyles".

No doubt he was referring to MediShield Life, the basic health insurance plan for all Singaporeans and permanent residents, administered by the Central Provident Fund (CPF) Board. This helps to pay for large hospital bills and selected costly outpatient treatments, such as dialysis and chemotherapy.

So, should someone with a healthier lifestyle benefit when he enrols in a public health insurance scheme? The answer is not as straightforward as it seems.

RISK-POOLING SHOULD BE MAINTAINED

Insurance comes with many upsides. The role of insurance, such as MediShield Life, is to provide financial protection and risk mitigation against uncertain events. Insurance functions by pooling the resources of many individuals or entities to spread the risk of potential losses.

For example, one in three Singaporeans will develop cancer over the course of his lifetime. Yet we do not know who will develop cancer, but we buy critical illness policies to hedge against the risks of developing such illnesses.

There are clear benefits to national risk-pooling. Premiums collected from all Singaporeans, healthy or otherwise, will provide adequate resources to those who need medical care, sparing individuals from breaking the bank.

In the absence of such a policy, the healthcare cost to any ordinary person would be highly prohibitive. Using an example provided by the CPF Board, the total bill for a 48-year-old Singapore citizen or permanent resident who has a uterus operation and is hospitalised in a normal C ward for five days would be $17,600.