Monday 21 July 2014

Do you need an Integrated Shield Plan?

Insurance industry veteran Ong Lean Wan lists five key questions to consider when deciding whether you need an Integrated Shield Plan
The Sunday Times, 20 Jul 2014

Integrated Shield Plans (IPs) are provided by private insurers. They comprise coverage of the basic MediShield tier plus enhanced coverage from the insurers so policyholders can be adequately covered for class B1, class A or private hospital stays. MediShield Life will replace the current MediShield portion in each IP.

Here's a simple checklist to help you to decide whether you need an IP, and which is most suitable.

1. If you were hospitalised, what type of hospital and ward would you want to stay in?

This is one of the key considerations in choosing an IP. There are four ward classes in public hospitals - Class A, B1, B2 and C - to choose from. There are also private hospitals.

Ward classes in public hospitals differ in terms of room features, whether the patient can choose his doctor and the subsidy level. Regardless of the ward class, patients receive the same quality of care. All patients can choose any of the ward classes.

If you intend to stay in Class B2/C wards, you may not need to buy an IP. MediShield/MediShield Life will provide good coverage for large hospital bills.

MediShield/ MediShield Life will still pay out if you choose to stay in a B1/A class ward or in private hospitals, but they are pegged to the estimated expenses in B2/C class.

The payout from MediShield/MediShield Life will be small in comparison, as there are lower or no subsidies for treatment in B1/A class wards and private hospitals and the bills are higher.

So you may wish to consider paying more to buy an IP if you intend to stay in Class B1, Class A or private hospitals.

Typically, each insurer offers a range of IPs targeted at a level adequate for Class B1, Class A or private hospital coverage, with increasing premiums in that order. Choose the plan according to the ward class/ hospital that you prefer.

If you choose a lower plan than the ward class you prefer, you can expect to have to top-up with more Medisave and/or cash payment if hospitalised.

2. Should I get as-charged coverage or non-as-charged coverage? What is the difference?

Unlike as-charged plans, non-as-charged plans have caps on the payout (a deductible and co-insurance apply for both types of plans). As-charged plans are more expensive than non-as-charged plans, but may provide more peace of mind.

Consider whether you would like to pay more upfront each year for premiums in exchange for the certainty that there will be no cap on the payout should you be hospitalised. The amount above the cap can be paid by Medisave, subject to limits.

3. Do you have any pre-existing medical conditions?

A pre-existing condition is a medical condition or illness that has developed before a person is covered under an insurance plan.

Depending on how serious these conditions are, private insurers may reject the individual from insurance coverage; insure him but exclude the pre-existing conditions and related illnesses from coverage; or adopt other approaches to manage the risks from these conditions.

For those insured with exclusions, you may be paying for an IP that does not cover you for the major illnesses that you most need protection from. Ask your insurer if there will be exclusions imposed on your coverage.

4. Can you afford the current and projected lifetime premium costs of your preferred plan type?

Once you are clear about your preferred coverage for hospital and ward type as well as as-charged versus non-as-charged, check if you can afford the current and projected lifetime premium costs of this type of IP. Do note that health insurance premiums will be revised from time to time in line with claims experience, health-care inflation and benefit enhancements.

Also note that IP premiums, like MediShield premiums, are priced by age groups, according to the health risks and expected higher utilisation of that cohort. This means your premiums increase as you get older.

So it is important that you do not gauge the affordability of an IP based on the premium you are paying now. Do look at the premiums payable when you are older, and also factor in potential revisions in premiums due to reasons explained earlier.

Premiums for IPs are higher than those for MediShield, and this differential widens for older age groups. The total costs can be substantial, particularly for the high-end IPs - for example, lifetime premiums for a private IP may exceed $400,000 for a couple, based on the current premium schedule and without factoring in future premium revisions.

5. From the above questions, I think I have bought an IP that is beyond my needs and affordability level. What are my options?

You may want to consider choosing a more affordable IP targeted at a more affordable ward class, or rely on basic MediShield/ MediShield Life. You will not have to undergo underwriting again if you are moving to a plan with lower coverage.

However, if you wish to upgrade your IP or buy a new one, you will be subject to medical underwriting by the private insurer. That may result in exclusions on your pre-existing medical conditions.

The MediShield Life Review Committee has proposed that the Government work with the insurance industry to develop key features for a standardised Integrated Shield Plan focused on providing coverage at the Class B1 level. The standardised plan should:
- Provide adequate coverage at Class B1 level
- Have benefits regulated by the Government
- Be provided as an option to all new and existing IP policyholders, including those who want to downgrade from their Class A or Private Hospital plans to a more affordable option.
The standardised plan, after its introduction, will be the cheapest IP and also more affordable over the lifetime. Naturally, it should form the base case or the default plan for anyone considering buying an IP.

The writer is a director and the chief executive of fee-based financial advisory firm Life Planning Associates. He was previously the CEO of Great Eastern Life China and chief financial officer of Keppel Insurance.

Health coverage criteria differ among IP insurers
Those with pre-exisiting conditions advised to do their homework
By Salma Khalik Senior Health Correspondent, The Straits Times, 21 Jul 2014

PEOPLE looking for private health coverage who have pre-existing medical conditions are being advised to shop around.

When MediShield Life launches at the end of next year, insurers offering Integrated Shield plans (IPs) will be allowed to impose a surcharge to provide full coverage to such customers.

Currently, they can only reject them or offer partial coverage.

IPs are private medical insurance plans that can be paid for fully or partially with Medisave premiums and are offered by five insurers here.

However, the Life Insurance Association of Singapore (LIA) has told The Straits Times that a condition excluded by one insurance company might not be considered so important by another.

"The underwriting philosophy and practices vary across the five IP insurers, each with its own internal underwriting guidelines," the LIA said.

There are about 65,000 people on the basic MediShield or an Integrated Shield plan (IP) who are excluded from full coverage because of a pre-existing condition. Many of these have said they would like to be fully covered and are willing to pay extra for it.

With MediShield Life, they need to pay premiums that are 30 per cent higher, for 10 years. For IPs, it is entirely up to the insurer. The LIA said it could not provide a standard list of conditions that all five companies do or do not cover. Allowing each to decide for itself "ensures that insurance companies remain financially sound to provide payouts for policyholders".

Insurance companies look at the following when deciding whether to offer full or partial coverage, or not to cover the person:
- The risk of future complications or recurrence;
- The likelihood of surgery in the foreseeable future;
- The additional risks of such surgery; and
- Ongoing medical treatment or monitoring the person would usually require.
IP insurer Aviva said it would generally not cover people who have diabetes with complications, HIV/Aids, or who have recently been diagnosed with cancer and are having treatment for it. It would cover, with exclusions, an asthmatic who suffers frequent attacks. But someone with deficiency of the G6PD enzyme, which could lead to the sudden destruction of red blood cells, is given normal full coverage.

The LIA said that charging people with medical conditions higher premiums, or refusing to cover them for certain conditions is being fair to healthy people covered by the insurance. Doing otherwise would mean healthy policyholders were "burdened by the financial risks of those with pre-existing conditions."

Dr Chia Shi Lu, head of the Government Parliamentary Committee for Health, said IPs are run commercially, so "criteria will differ amongst providers depending on their marketing strategy and business considerations".

He suggested that people with pre-existing conditions "should shop around" for the best deal.

Limit Medisave use to basic plan
By Salma Khalik, The Straits Times, 22 Jul 2014

ABOUT two in three people here have an Integrated Shield Plan (IP). But when it comes to being hospitalised, more than 60 per cent opt for a lower class ward than what their plans entitle them to.

What this probably means is that the majority pay for benefits that they will never use. Meanwhile, as the years pass, their Medisave accounts are prematurely depleted by the higher premiums they have to pay for these IPs.

With the launch of MediShield Life at the end of next year, the Ministry of Health (MOH) should review the use of Medisave for paying health insurance premiums. It should not allow Medisave to be used too freely for paying premiums, or people may start buying more insurance than they need or can afford when premiums rise with age.

This can be done simply by allowing the use of Medisave for only the payment of the basic MediShield Life insurance plan.

If people want to buy higher-priced IPs, they should pay the difference in cash.

The fact of the matter is that many people are not taking full advantage of the benefits of their higher IPs because these come with high cash co-payments.

The higher the ward class, the larger the amount they have to pay before insurance kicks in. This deductible ranges from $1,500 for C class to $3,500 for A class or private hospital wards.

They also need to co-pay 10 per cent of the rest of the bill - and bills in a private hospital are definitely much bigger than those of a subsidised ward.

The exception are those who bought a rider - which can be paid with cash and not with Medisave - to cover this co-payment. For the rest, the IP insurance does not cover their full bill.

Faced with the actual amount that they will have to pay, most choose a lower class of ward than they have been insured for, to reduce this cash co-payment.

Another indication that many people have bought higher insurance cover than they can afford is the 8 per cent drop-out rate at the point when premiums exceed the amount that can be withdrawn from Medisave.

It is only when they have to top up premium payments with cash that people realise how much they are really paying for their insurance. Until then, the money had been automatically deducted from their Medisave accounts. It's simply a case of "out of sight, out of mind".

This rude awakening usually happens to people in their 50s and 60s (depending on the type of IPs they have), when their premiums exceed the $800-a-year cap that can be taken from Medisave to pay for premiums up to the age of 75.

They then need to decide whether they want to retain that high coverage, or downgrade to something with lower premiums.

Keeping their IPs means paying hundreds, or even thousands, of dollars a year in cash above what can be paid from Medisave.

Not all can afford to do that. Those who cannot should not be frittering away their Medisave money on expensive insurance plans.

Choosing an IP should be an option only for those who can afford it. It should not be a default choice simply because you can pay the premium fully with Medisave when you are young.

Once MediShield Life starts, MOH should stop allowing the use of Medisave for insurance plans that cost more than the basic MediShield Life tier.

If premiums for IPs need to be topped up with cash, it is likely that people will be more careful and circumspect in their choice.

If Medisave can be used only for the basic scheme, there will also be no need to keep revising the premium withdrawal cap - which is currently set at $800 to $1,400, depending on age.

Future caps can be set based on premiums of the government-run basic scheme. IPs that cost more can be topped up in cash. People who find topping up the difference a strain should realise that they have likely bought an IP that is beyond their means.

For those who can afford it, payment will be no more onerous than having the premiums paid automatically through Giro.

Such a move will help to ensure that Medisave accounts are not depleted prematurely.

Medisave was originally meant to pay for up to 11 hospital stays in a person's life. Its use has since been expanded to include a slew of outpatient treatments as well as medical insurance premium payments.

With people living an average of three years longer with every passing decade, there needs to be adequate funds in their Medisave accounts to pay the compulsory premiums for a good 30 years beyond retirement.

They will also need the money to pay their share of hospital bills, as well as to help control chronic medical conditions.

Restricting the use of Medisave to just the basic scheme will help to keep much of these savings intact for more important uses.

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