Beware The Grey Areas

Source : TODAY, Tuesday, September 11, 2007

Possible exemptions from annuities plan: Analysts on the issues involved

THOSE with private plans may be exempted from the proposed compulsory annuities scheme, but there’s a catch: It could cause the pool of those insured to shrink.

And judging by the lessons of Eldershield — which is being revised as a result —this could make the annuities scheme unsustainable in the long run, warned a health economist.

On Sunday, Minister in the Prime Minister’s Office Lim Boon Heng signalled that the Government might consider exemptions for the chronically sick and those already adequately covered under comparable schemes.

This could encourage cherry picking by private insurers, cautioned Associate Professor Phua Kai Hong of the Lee Kuan Yew School of Public Policy. “This means hat the rich, or those with private insurance, can opt out and what you will be left with is the poor re-insuring themselves,” he told TODAY.

“What you want is a risk pool that is large as possible” as this spreads out the risk evenly, he added. But if the government scheme “is left with just high-risk groups, while private insurers cherry-pick and make a profit, the scheme will run into the red”.

Instead, Assoc Prof Phua suggested that everyone — save the terminally ill or the disabled —buy into a basic scheme and buy additional riders from private insurers. This way, he said, the private sector will not be able to market annuities that take advantage of the public one.

Also, instead of allowing those who can afford private insurance to opt out, Assoc Prof Phua said he was all for favouring “the disadvantaged” — such as those with conditions that impair their earning power and are already squeezed by medical bills.

Most agree that exempting those with terminal or disabling illnesses from the compulsory annuities scheme is reasonable. Already, Central Provident Fund (CPF) policy allows them to withdraw their funds regardless of age.

The annuities scheme seeks to cover members should they outlive their CPF savings when they hit the age of 85.

But there still remain some medical grey areas. “Where is the standard? We need well-defined specifications for a doctor to determine the prognosis, such as for terminal cancer,” said Prof Phua.

As for chronic illness cases being exempted, Dr Lily Neo, an MP for Jalan Besar GRC, said there would have to be present “complications that shorten the life span”— such as diabetes that has resulted in renal failure, or hypertension that has led to stroke.

And then there are the exceptional medical cases who outlive their illnesses. MP for Sembawang GRC, Dr Lim Wee Kiak, said: “No doctor can tell you, 100 per cent, what survival rates are.” He added that medical assessments would have to be tweaked according to changing treatment modalities.

Meanwhile, some of the severely disabled want the choice of opting into the annuities scheme — and tapping the monthly payouts at an earlier age, especially when they are no longer able to work.

The lifespan of such patients is reduced and most do not expect to live until they are 85.

The Disabled People’s Association hopes the Government will put in place a sliding rule system based on the various disabilities and lifespans and allow them to draw down payouts sooner. BizLink Centre, a job agency for the disabled, said it would include these and other suggestions in its report to the Manpower Ministry, reported Channel NewsAsia.