Health insurance riders will eventually be for the rich

By February 8, 2018Current

TL;DR – Enjoy 100% medical coverage while you can. 

Recently, there has been some chatter about the over-consumption of medical services and how it has jacked up the premiums over the past two years.

A TODAY Online report in 2016 revealed that Integrated Shield Plan (IP) claim frequency increased by 9 per cent a year – this was double the rate of increase in national hospitalisation rates!

This means that more people with riders were visiting private hospitals.

In fact, private hospital bill sizes increased by 18 per cent from 2012 to 2014, compared to 1.2 per cent increase in public hospital bills.

People who are completely covered by private health insurance enjoy the luxury of choices.

For people below 30, it costs them less than $850 a year to afford a full coverage rider attached to an IP. This can be affordable provided they don’t have other big commitments.

For example, a 28-yr-old male executive with a few years of working experience will be able to afford a premium IP plan under NTUC Income. He can choose any doctor, stay in a private hospital and have his own room. The IP only costs him $429/year, of which $300 can be paid through Medisave.

If he decides to buy a rider so he doesn’t have to pay a single cent for the whole hospital bill, he only needs to pay $383/year using cash.

That’s a total of $812 a year ($512 in cash and $300 via Medisave) for hundred percent medical coverage. Do note that this figure does not include MediShield Life premiums. 

The most premium IP plan gives him the option of staying in a private or public hospital. If he chooses public, he would even receive cash for being hospitalised!

Now all of these sound wonderful but the growing popularity of as-charged IPs with full coverage riders are contributing to the spike in premiums.

Full coverage riders: Are they really worth it?

I met with an insurance agent (who only wants to be known as Melvin) and asked him if he would still recommend customers to purchase full coverage riders.

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He told me that he would only do so if customers can afford it and if they see the need to so.

“Ultimately it boils down to three things – whether they place it as priority, whether they can afford it and their personal preference. We would advise them that premiums are not guaranteed. It’s subject to claim experiences and their age band.”

Rates will usually increase as they move to the next age band, and insurers may adjust rates according to claim experiences.

Melvin also told me that it’s easier to downgrade my rider plan than to upgrade it. This is something which I have also heard from other insurance agents.

“While you can afford it, you can consider buying a better plan so you have more options. In future, if you want to downgrade your plan, you can still do so without any repercussions. But if it’s the other way round, you will be subject to medical underwriting.”

When you are old and your body isn’t functioning as well as before, you may think of having more insurance coverage but insurance companies may not want to insure you.

I asked Melvin if companies should still offer full coverage riders in the long run. He answered yes.

“There’ll always be a market for it. If you want premium services, you must be able to pay a price for it.”

I was surprised to learn that insurance companies are actually making losses for IP because of the huge amount of claims.

All six IP insurers clocked underwriting losses in 2016.

Over-prescription of medical services

I wanted to know what Melvin thinks about doctors who “take advantage” of insurance to charge higher medical fees.

He tells me that it’s hard to investigate every case and good doctors want to provide the best treatment.

“Doctors are not the ones doing insurance claims so they might not know the patients’ full medical history. So there is a risk if doctors prescribe treatments based on whether patients have insurance. What if the claims department finds out you have pre-existing conditions and it affects the result of the claims?”

Some healthcare experts believe that removing the cash co-payment component reduces the check on prudence.

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Basically, they think when people have to pay a portion of their own medical fees, they will be more prudent when shopping for medical treatments.

Melvin thinks that it’s easy to push for the idea of “no zero co-payment” when it affects a third party, but it’s difficult to say the same when it affects your next-of-kin.

“What if your most treasured loved ones need to be hospitalised and seek long-term care? Would you want to have the option of seeking the best treatment? Co-payment or would you prefer as-charged?”

That kind of hit close to home because the image of my mother popped into my head.

She had serious problems in one eye and sought possibly the best private medical doctor in Singapore for treatment. Even though the fees were steep, insurance did help to reduce the overall medical costs.

Singapore’s healthcare financing philosophy, which aims for universal coverage with multiple layers of protection (via)

How to keep premiums low?

I asked Melvin if he had any innovative solutions to keep premiums for IP low.

He told me that for instance, Prudential’s PruShield: customers who do not have any claims can enjoy a pruwell reward of 20% off the standard level of premiums. Whereas, customers who make claims will have their premiums adjusted upwards.

“That could be seen as moving towards the right direction to adopt a fairer pricing structure but first time customers may consider the likelihood of them being charged higher premiums in event of claims, before considering this plan.”

And it could also be viewed unfair to customers who claim more than others.

“You can put in effort to stay healthy but if you suay and require medical treatment, is it your fault for falling sick?

Towards the end of our conversation, Melvin tells me that the solution to fix the rising increase in insurance premiums is to segregate the insurance with premium prices.

“That will help to filter out over-consumption and people will start to downgrade their plans if they can’t afford premium services. I’m not saying basic insurance is lousy, it’s professional enough. But people still want more choices – like convenience, less waiting time, concierge services etc.”

Be prepared to pay a price for premium services

At this rate we’re going, premiums for rider plans will definitely keep increasing. It might reach a point where it becomes unaffordable when we hit old age.

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The comparison table* below shows that it will cost about $2,500 a year for people above 65 to be covered by insurance at a private hospital.

*These costs are not inclusive of riders (via)

At age 83, the yearly premium is approximately $5,500! Bear in mind that the average life expectancy in Singapore is 83 years old.

Melvin advised me to plan ahead if I want to maintain the premium plan in the future.

“Prudence starts now.”

To an insurance agent, more is always better in the world of healthcare and health insurance but he also believes in the importance of financial planning.

“If you know rider plans will really be “premium” in future, you need to be prepared for it.”



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Joey Wee

Author Joey Wee

I am nice, most of the time!

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