The MediShield Life Fund needs to set aside enough monies to honour pay-outs for future commitments s. These include:
a. Future premium rebates: MediShield Life is designed such that premiums continue to be affordable in old age. Part of the premiums that policyholders pay when young is set aside as reserves in the MediShield Life Fund and returned as premium rebates when they are old and no longer working. The contributions from each age cohort will be used to support their own rebates in old age. This helps to distribute premiums more evenly throughout policyholders’ lifetimes.
b. Claims incurred but not yet submitted or paid: This is for expected incoming claims, where the treatment has already taken place (and hence hospitalisation expenses have already been incurred) but claims have yet to be submitted or paid. This includes estimated provisions for claims that are still being processed and those that have not been submitted.
c. Claims not yet incurred but expected to be paid in the future: This is for claims where treatments have not taken place but are expected to occur in the future (i.e. the next few years) based on actuarial projections after allowing for future premium collections. This also includes an allowance for the fact that premiums typically remain constant for several years at a time, whereas average claims go up each year with the increasing cost of medical treatments. The reserves also help the scheme meet all its obligations to members during these years.
d. Continuing claims: The Fund sets aside provisions to cover the projected total future costs for those who have started on multi-year treatments. For example, patients undergoing dialysis claim up to $1,000 per month, or up to $12,000 per year. Such treatment continues for many years and the claims for these patients are provided for from Fund reserves.