If the Fund already has significant reserves, why do we need to increase premiums for MediShield Life? (Even if there is a need to take care of future payouts for recurring claims, e.g., for dialysis, the dialysis patient will be paying premiums in future. Can’t these future premiums be used to fund the future payouts then?)
The MediShield Life Fund has to be self-sustaining based on sound actuarial principles. Premiums collected have to cover potential current and future payouts, including amounts set aside to support future commitments as well as provide a buffer against unforeseen contingencies such as unexpected spikes in hospitalisations due to disease outbreaks.
A key feature in the MediShield Life scheme is to distribute premiums more evenly throughout the policyholders’ lifetimes, to help with premium affordability in old-age. As policyholders age, claims are likely to increase and so will premiums. Part of the premiums paid by policyholders when they are young are set aside to provide for future premium rebates, which will help to moderate premium increases in their older ages. This constitutes the bulk of future commitments set aside in the reserves.
Other commitments include future payouts for diseases currently under treatment that will require multi-year care, such as renal failure and cancer.
MediShield Life is a not-for-profit scheme. All premiums collected are placed in the MediShield Life Fund and are used solely for the benefit of policyholders and in the administration of the scheme.
This information provided here is sourced from the MOH website.
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