ANALYSIS: Calculating Singapore's Callous CareShield Cash Grab

The Singapore government will be making it compulsory by 2020 for Singaporeans aged 30 and above to pay into an insurance scheme that covers severe disability.

And Singaporeans are outraged.

At the time of writing, more than 8,000 people have signed a petition, launched on July 13, calling for the government to equalize the premiums for CareShield Life – as the Ministry of Health (MoH)-managed scheme is known.

The Singapore government is making women pay higher premiums on the basis that "they live longer than men," the Today newspaper reported – women’s average life expectancy at birth was 85.2 years versus 80.7 years for men as of last year.

This discrepancy is apparently justified even though men earn nearly 20 percent more than women in Singapore and the gender pay gap has not improved since 2006, according to a report by consumer research firm ValuePenguin.

But that doesn’t matter – the Singapore government still wants women to pay 22.8 percent more in premiums than men.

The irony is that the government knows that “women have less savings on average, and [the premiums] could therefore be better supported by the men,” but no – the government still wants women to pay more.

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And to make it an even rawer slap on to the faces of women in the city state, the person who made this announcement was a female minister – Senior Minister of State for Health Amy Khor.

She said in a parliamentary debate that “on balance, the [ElderShield Review] Committee decided that applying gender-differentiated premiums for CareShield Life would more accurately reflect the differences in risk between men and women, and result in a more actuarially fair and sustainable scheme.”

But this policy is clearly “inherently sexist and regressive,” as petition signatory Shi Ying Loke stated in comments attached to the petition, which has so far garnered about 6,600 signatures.

Mardiana Abu Bakar added that the policy is “unfair and disrespect[ful] against women”, which led to Liyana Tan exclaiming: “Our lifespans are not by choice!”

“This is a national health care umbrella, not an individual insurance purchase,” Hanshin Lek said, adding that “women should not be penalized for living longer.”

Perhaps signatory Jane Ong summed it up when she said: “Men and women are created equal. But not in Singapore.”

As Samy Rajoo acknowledged: “We already know you [the Singapore government] bunch are a bunch of misogynistic [Male Chauvinist Pigs] but really…”

“It is a reflection of the tone-deaf indifference of the [Singapore government] to the lives of women especially the poor and working-class women,” Saleemah Ismail joined in.

At last count, 63 of the signatories called the government’s policy “discriminatory” and 16 people called it “ridiculous.”

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Premium injustice

But it is not just the gender inequality that Singapore has built into the CareShield Life Policy that has Singaporeans up in arms.

Signatory Tee Seng Tan explained: “It is criminal to make money out of universal health care especially by a government.”

Fellow petitioner Varina Lee put it plainly: “Premiums are much higher [for] females but [the] payout is so much lower than the total premiums collected. Out of [the] billions the government has collected, only about a million was paid out.”

Lee is referring to the premiums and claims made under ElderShield – the predecessor of CareShield Life.

ElderShield was launched in 2002 as a “severe disability insurance scheme which provides basic financial protection to those who need long-term care.”

The definition of “severe disabilities,” according to the Ministry of Health, is “the inability of an individual to perform at least three of the Activities of Daily Living (ADLs) independently, with or without mobility aids (e.g. walking aids, wheelchair). This means that the individual will require the physical assistance of another person for the ADL.”

The ADLs include tasks like feeding, washing, and going to the toilet.

ElderShield was not compulsory, and only people aged 40 and above were eligible.

But under CareShield Life, the scheme has been made compulsory and will start collecting money from people beginning at age 30.

Few statistics have been released under ElderShield. Even after the ElderShield Review Committee was set up to review ElderShield and relaunch it as CareShield, the government did not provide any actuarial calculations.

Payouts have only been given to 1.2 percent of the total number of policyholders. Does this mean the government has accumulated as much as 98.8 percent of the premiums paid into ElderShield?

But how much exactly has the Singapore government collected and paid out?

As of 2017, Singaporeans have paid S$3.3 billion (US$2.4 billion) in premiums and only S$133 million (US$97.2 million) was paid out in claims for ElderShield – in other words, only 4 percent of the premiums have been paid out in claims.

According to The Straits Times, most policyholders are on ElderShield 400, which gives a payout of S$400 a month for six years for claimants.

Thus far there were 1.3 million ElderShield policyholders – people aged 40 are automatically enrolled into ElderShield unless they opt out. The ElderShield Review Committee reported that 15,600 policyholders had made claims since ElderShield started in 2002, of which 6,300 are still actively making claims.

This meant that, of the 1.3 million policyholders, only 1.2 percent of them would have received payouts or have been assessed as having severe disabilities.

Under ElderShield 400, the total premiums a person would have paid from age 40 to age 65 would be S$13,416.25 for men and S$17,364.12 for women, or an average of S$15,390.19.

Questionable sums

In the ElderShield Review Committee Report, the committee claimed that the total premiums collected on behalf of a 30-year-old low-income male policyholder who becomes severely disabled for 10 years at age 67 would be S$4,600.

It is uncertain how the committee came out with this figure since at 64 years of age, the annual premium for that year alone for women is already S$3,131.62. For men, it is already S$2,380.17.

In terms of claims, a claimant who is paid S$400 a month for six years – the claim limit that they are allowed – would receive S$28,800 in total. This would be about 1.87 times or nearly twice the average premiums that an individual would pay.

In other words, the total premiums that every two persons pay would be almost enough to pay for the claims of one person. Or at this rate, the amount the 1.3 million ElderShield policyholders are paying would be enough to cover about 600,000 people.

However, currently, payouts have only been given to 1.2 percent of the total number of policyholders. Does this mean the government has accumulated as much as 98.8 percent of the premiums paid into ElderShield?

Also, since the premiums being collected could be enough to pay for about 600,000 policyholders at the current claim rate, does this means that only 2.6 percent of the maximum possible number of policyholders have so far made claims?

Of course, the number of claimants might still increase, since ElderShield only started in 2002, so there could still be some policyholders who are relatively young and who would have yet made claims but might need to do so in future.

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The median age of ElderShield policyholders in 2017 was 52 years old, and the median age at which claims were made was 67 years old. In 2017, it had been 15 years since ElderShield was introduced in 2002, which meant that policyholders who were 40 years old in 2002 would be 55 in 2017 -- this would put them at about the median age of policyholders.

If we therefore assume that ElderShield is at the halfway point of its first cycle, it could be estimated that there might be twice as many people who might make claims by the end of this cycle – or 2.4 percent of the policyholders. This is a guesstimate due to a lack of available data.

But by the time more claims would be made, the premiums would have also grown to include further compounded interest, which might mean that payouts as a proportion of the total pot might be around the same or could even be lower.

Premium assumptions

In the revamped ElderShield – CareShield Life – the Today newspaper reported that Senior Minister of State for Trade and Industry Chee Hong Tat said: "It is also not feasible for policyholders who do not make claims to pay discounted premiums."

But Chee later contradicted himself by saying: "The probability that some may not claim from the scheme because they will not become severely disabled is already incorporated in computing the premiums."

As we can see from the above assumptions and estimations, the premiums paid for ElderShield as of now could allow nearly half of policyholders to make claims. But does this make sense? Are nearly half of Singaporeans likely to become severely disabled, and if not, is it necessary for the Singapore government to collect so much in premiums?

Is this the so-called “probability that some may not make claims” that Chee is referring to – a whopping 50 percent?

Indeed, the ElderShield Review Committee Report states in its opening remarks that “Singapore’s need for long-term care will rise with an ageing population. One in two healthy Singaporeans aged 65 could become severely disabled in their lifetime.”

Is that suggestion based on the prevalence of severe disability in Singapore?

Chee Hong Tat added: “This balance amount is not profit, it is to meet future liabilities."

He also said that it is "logical and necessary" for CareShield Life/ElderShield to have a positive balance because "if a pre-funded scheme does not have a positive balance when its policyholders are younger, [...] there will not be enough financial resources to meet future liabilities, and when policyholders grow older and more of them start to claim, the scheme will have difficulties making the payouts."

But based on the above calculations, those are profits! If those are not profits, what are they? Santa Claus’s Christmas present to the Singapore government for being nice?

How “logical and necessary” is this? What "future liabilities" is Chee talking about? Is the Singapore government planning ahead for the next million, billion years, or for infinity and beyond?

The excess balance is profit, period.

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Handsome profits

If we could extrapolate the data onto CareShield Life, we might be able to get a sense of how much the government is likely to profit under the new scheme.

The Singapore government claims that under the revised CareShield Life, premiums will be higher but payouts will rise even more steeply.

Extrapolating from current available data:
(i) the current number of 1.3 million ElderShield policyholders comprised two-thirds of Singaporeans aged 40 to 84,
(ii) the Elder Shield Review Committee claimed that the premiums paid will increase by 135.4 percent (based on their calculations that the premiums for each individual will increase from S$4,800 under ElderShield to S$11,300 under CareShield Life, and
(iii) the committee also estimated that the total payouts for each individual would increase from S$28,800 under ElderShield to S$144,000 under CareShield Life, or a rise of 400 percent:

The committee estimated payouts over a nine-year period, which is strange given that data cited by Minister Khor in “Gender, educational and ethnic differences in active life expectancy among older Singaporeans (Chan et al., 2016)” suggested that “women aged 60 are expected to spend 7.8 years requiring assistance with any of the ADLs compared to 2.6 years for men aged 60.”

Very strangely, the government has not released information on how much the CareShield Life premiums are likely to change over the payment period. On page 80 and 81 of the ElderShield Review Committee Report, an estimate of the premiums is provided suggesting they are expected to increase every year across the age groups – which means that the S$11,300 in total premiums that the committee estimates is only a base estimate.

Also, if the premiums are expected to keep growing, but the payouts would start at a fixed rate of S$600, this would mean that – yes, that’s right – the government will be profiting handsomely from the differential.

According to the “Population Trends 2017” report, there were 1,961,841 Singaporeans aged 40 to 84 last year, of which 66 percent or about 1,294,815 people would be covered by ElderShield. There were also 627,231 people aged 30 to 39, in addition to those aged above 84. This means there would be about 1,294,257 people who were not on ElderShield who would now be under CareShield Life – or twice as many people as are on ElderShield now.

Assuming that the claim rate would still be the same at 1.2 percent, this would mean that about 31,200 people – or twice the current number of claimants – could be making claims under CareShield Life.

As such, if CareShield Life was implemented over the same period as ElderShield from 2002 to 2017, twice the number of policyholders would mean double the collection of premiums to about S$6.6 billion (S$3.3 billion in premiums multiplied by two). We can then factor in the expected increase of premiums of 135.4 percent under CareShield Life, which would mean that premiums could reach S$15.5364 billion.

The doubling of claims as well due to the doubling of the number of policyholders would suggest claims of about S$266 million (S$133 million in claims multiplied by two). When multiplied by the expected increase of claims of 400 percent, this would equate to claims of S$1.064 billion under CareShield Life.

This would mean that, of the S$15.5 billion premiums, only 6.8 percent would be paid out in claims.

If so, this would mean that the government would be able to accumulate a balance of 92.3 percent. And since this does not account for the compound interest and the likelihood that claims would be lower due to the generous estimations of the premiums that could be paid out, as well as the expected continual increase in premiums, the balance would still likely be substantially higher than 93.2 percent of the CareShield Life premiums.

Therefore, the excuse that Chee Hong Tat gave that the balance amount in CareShield Life is “not profit,” but is meant to “meet future liabilities,” does not make sense.

If the balance is meant to “meet future liabilities” and is not for “profit,” then the government should work on a lower balance.

A fairer calculation

Gerald Giam of the Worker's Party pointed out that the Monetary Authority of Singapore requires a minimum Capital Adequacy Ratio (CAR) threshold of 100 percent to 120 percent for insurers. In the context of ElderShield, if only S$133 million was paid out, ElderShield should only need to collect S$292.6 million – or 120 percent more, and not the S$3.3 billion that it has collected, which is more than 11 times what is necessary – or roughly the level of profit the government is raking in from ElderShield.

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On the above estimations for CareShield Life, if only S$1.064 billion in payouts are required, then only S$2.3408 billion in premiums would be needed. The estimated S$15.5364 billion would therefore be nearly seven times what is necessary. Again, noting that premiums including the compound interest would be higher and that the claims have been overestimated, CareShield Life would be profiting by even more.

How, then, should the premiums for CareShield Life be calculated?

The evidence-based manner to come out with an insurance scheme such as this would be to calculate the money needed to pay for the projected prevalence of the population which could encounter severe disability, then include an expenditure buffer for the CAR, and then divide this money by the overall population to come out with the premiums.

In other words, to calculate the future liabilities, say (i) we go on a 50-year planning cycle, (ii) we look at the severe disability prevalence, (iii) we project the trend in which the prevalence might change over 50 years, (iv) we look at how much expenditure and claims might be needed based on the prevalence, (v) we include a buffer (CAR) for our financial projections, and accordingly, (vi) we divide the projected claims needed by the population, to calculate the premiums accounting for the compound interest, and also the continuous increase that the government wants to build into the premiums.

So first, it is not like the government does not know the severe disability prevalence.

Amy Khor revealed that the prevalence of Singaporeans aged 65 and above who are severely disabled is 7 percent. For those aged between 30 and 40, it is a much lower 0.1 percent.

Thus is it not also curious why, of the ElderShield policyholders, only 1.2 percent have been able to make claims, when there could be up to 7 percent who could? As it is, the median age at which claims were made was already 67 years old last year.

This also raises another question – if the government already knows that the severe disability prevalence is only 7 percent even for the oldest age group, then why are ElderShield policyholders currently paying enough to fund as much as nearly half of all the policyholders? Shouldn’t the policyholders only need to pay enough to pay for about 7 percent of them, or just slightly more if adding for a buffer?

In such an instance, the premiums that ElderShield policyholders should have paid is about S$1.7 million (S$133 million x 7 / 1.2 x 220 percent), and not the S$3.3 billion that ElderShield policyholders have paid. Or in other words, ElderShield policyholders have paid two times what is necessary.

Or in other words, instead of the S$400 payouts given out now, the government could pay out two times as much, or S$800 a month for each claimant, under the premiums currently paid.

ElderShield policyholders should therefore only be required to pay half of what they are paying now, or should be able to receive twice as much in claims.

Payout reluctance

But note that this estimation is based on a transparent management and the assumption that the government would give ElderShield payouts based on the full 7 percent severe disability prevalence, which is unlikely since the payouts have only been given to 1.2 percent of the policyholders thus far – thus the profit rate would still be high.

Even with this estimation of how the optimal financing of ElderShield should be calculated, the above computations are based on a 7 percent prevalence of severe disability and the assumption that the Singapore government would actually honor its obligation to pay out claims.

In the optimal scenario, all the estimated 7 percent of Singaporeans who might become severely disabled would receive their payouts. As it is, only 1.2 percent of the policyholders actually received payouts under ElderShield and at the median age of 67 years old at which claims are being made, it is unlikely that the ElderShield payouts would suddenly reach 7 percent.

Moreover, in the last few weeks, there have been several cases of elderly Singaporeans who should have qualified for ElderShield being denied coverage. A Mr. Teo was denied his payout even though he is certified blind. A Mr. K, whose story was shared by the Worker’s Party chairperson Sylvia Lim in parliament, was an amputee who had advanced kidney failure. His claims were revoked, and he subsequently died within a month of finally having his ElderShield claim restored.

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Strangely, when the MoH decided to respond to the story of Mr. K, they said on their Facebook that, “the total amount of payouts he received [from ElderShield] from Sep 2014 to Sep 2016 was S$7,500,” and then they added that the payouts he received was “higher than the total of amount of premiums he paid (S$3,100)”.

But Singaporeans picked up on the faulty logic. When sharing MoH’s post, Weiqiang Lai said, “Lol [is the MoH] trying to smoke [Singaporeans]? [For] which insurance [is] the payout not more than the premium?”

Indeed, what is the logic in the MoH shaming Mr. K? ElderShield 300 promises a payout of S$300 every month for claimants, and Mr. K’s total payout of S$7,500 over 25 months equates to exactly S$300.

In shaming the deceased Mr. K by saying that he was receiving more payouts than the premiums he paid, what are they saying – that Singaporeans should not receive more payouts than the premiums they paid? Moreover, is the ElderShield not meant to be risk-pooled and therefore the premiums pooled to pay for claimants with severe disabilities who require assistance?

The MoH response feels almost spiteful, and perhaps in keeping with idea that the government would rather sit on a ballooning ElderShield/CareShield Life premium pot than give Singaporeans their due.

In short, Singaporeans are overpaying for ElderShield, and soon CareShield Life, and the government is profiting.

As calculated previously, of the other healthcare schemes, the government has accumulated a balance of more than 98 percent of the Medisave balance and 65 percent of MediShield, both schemes that aimed at helping members of the Central Provident Fund meet potential future medical expenses.

Coupled with the more than 98 percent that the government has accumulated from ElderShield and possibly more than 93 percent from ElderShield, the Singapore government is making Singaporeans pay a hell of a lot of money into these schemes that are supposedly to help citizens, but from which the government is consistently reaping handsome profits.

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Editor: David Green