Managing your health premiums
By Lorna Tan and Shawn Lee
If you’ve only got a minute:
- Singapore's Integrated Shield Plan (IP) holders are facing significant increases, with lifetime costs potentially soaring to S$842,000 for those with riders.
- As medical expenses climb, review your healthcare preferences and explore options like downgrading, removing your riders and IP or switching insurers.
- Regularly reviewing your healthcare needs and affordability can help you manage escalating healthcare costs and insurance premiums.
This article was first published in The Business Times.
Following the end of the premium freeze by the Life Insurance Association (LIA) on 31 August 2024, nearly all insurers have raised their premiums for private medical Integrated Shield Plans (IPs) and riders. Did you know that the most expensive lifetime IP premiums with riders can reach up to S$842,000? This figure does not include premiums for MediShield Life.
Excluding riders, lifetime premiums for IPs that offer cover for private hospitals can amount to S$323,900. These rates do not account for future increases. At least an insurer has raised IP premiums (for private wards) by an average of 21% (without riders) and by 35% when riders are included. For the same insurer’s restructured hospital base plans, the increases are 14% without riders, and 23% with riders.
In Singapore, over 2.9 million people - more than 70% of the population - hold an IP with 1 of the 7 insurers. Additionally, 2 out of 3 IP holders, or over 1 million people, have riders attached to their plans.
Why have premiums increased?
The average cost of medical care in Singapore rose by 10.3% in 2023 and is expected to increase even more in 2024. Insurers have reported that their overall IP claims costs increased by up to 25% in the first half of 2024 compared to the same period in 2023.
A key factor driving up claims is the generous coverage offered by insurers. IPs can cover up to 90% of hospitalisation bills, with the remainder paid using MediSave or cash. Riders can limit a patient’s out-of-pocket expenses to 5% of the bill, capped at S$3,000 per year.
It is quite common that when you see a doctor for a condition, the first question the nurse asks is whether you are covered by IPs and riders. If so, you may be prescribed more diagnostic tests and expensive treatments.
This is the “buffet syndrome” where more non-critical or unnecessary tests and treatments could be prescribed. In 2016, patients with riders that covered the entire bill were 60% higher than those who do not have riders. Since it is already paid for, there is greater and even overconsumption of medical services which pushes up healthcare costs.
Ageing demographics, advancements in healthcare, and medical cost inflation are all factors contributing to increased healthcare costs and claims, ultimately resulting in higher premiums for everyone.
Assessing Affordability
According to the Monetary Authority of Singapore (MAS) Basic Financial Planning Guide, a good rule of thumb is to spend no more than 15% of your take-home income on insurance protection that covers risks such as medical expenses, excluding bundled products like whole life insurance, which combine investment and protection elements.
Additionally, review your overall budget to determine if you can comfortably afford your health insurance premiums while managing daily expenses and saving for retirement and other financial goals.
Strategies to manage premiums
1. Buy an affordable medical cover
My advice is to buy a medical plan that you can afford even if it is the highest level of coverage. You can opt to reduce the cover as you age if the premiums rise to an unaffordable sum. It would be difficult to do so the other way round – buy a low cover and upgrade later - as insurance upgrading is only possible if you are still insurable and have no pre-existing medical conditions.
Of course, if you are very sure that you don’t need private hospital cover and wish to optimise the premium amount, then go for a plan that best suits your needs.
2. Retain your IP and rider
If your healthcare premiums are within budget, consider keeping your existing plans, provided they meet your healthcare needs. Review your premiums annually, as they typically increase with age. You can always downgrade your coverage later if necessary.
If you have a pre-existing condition or a history of medical claims, retaining your current plans may be wise, as the premiums of your medical coverage would likely be lesser than the cost of treatment.
Switching to another insurer may lead to further exclusions on your coverage so you are better off sticking to your plans.
3. Downgrade or remove your rider
If you want to reduce your premium costs while maintaining significant coverage for a specific ward class, consider downgrading or removing your rider while keeping your IP.
Most insurers offer various rider options, so you could save up to 50% on rider premiums by selecting a lower level of coverage. With an IP only, you can still have up to 90% of your hospitalisation bill covered.
Note that with an IP only without rider, coverage is limited to drugs on the Cancer Drug List (CDL). As of February 1, 2023, the CDL includes 340 treatments, about 90% of all Health Sciences Authority (HSA)-approved treatments.
Before downgrading, carefully compare the coverage differences among riders, paying attention to co-payment amounts, deductible limits, cancer coverage and claims-based pricing features.
4. Downgrade or remove your IP
Evaluate your healthcare preferences by asking yourself:
- What ward would you prefer in the event of hospitalisation or surgery?
- Do you want to choose your own doctor?
- Is an IP that offers private ward hospitailisation necessary for you?
Reports indicate that over half of those with private IPs utilise subsidised healthcare in public hospitals. If you don’t require private IP coverage, you could save significantly on premiums.
Before making changes to your IP, consider downgrading or removing your rider first, as an IP still provides substantial coverage for your preferred healthcare ward.
If you remove your IP, you will still be covered by MediShield Life, which offers coverage for B2 and C-ward care at restructured hospitals. However, you won't have a choice of doctor in these subsidised wards, and there are differences in coverage limits.
5. Change Insurer
Premiums can vary significantly between insurers for plans that cover the same ward class.
Two people purchasing private hospital IPs may experience a lifetime premium difference of over S$85,000, with the most affordable costing S$234,400 compared to S$323,900 for the most expensive. Be mindful that coverage differences may exist, such as pre-and post-hospitalisation coverage periods.
Consider switching insurers only if you have been in the of health without any medical history. A useful tip is wait until your new plan is approved before terminating your existing coverage to ensure you are satisfied with the terms offered by the new insurer.
Your coverage will be automatically ported to the new insurer, and any unused premiums with your existing insurer will be refunded when you switch so there is no action required from you to terminate your plan.
Summary
As healthcare costs and insurance premiums continue to rise, managing your medical insurance has never been more crucial. Start by reviewing your healthcare needs and preferences and your insurance plans, ensuring they align with your financial goals.
Consider your options carefully—whether it's retaining, downgrading, or even switching your IP and riders. Each choice carries implications for your coverage and expenses. Remember, if you downgrade your coverage, you would need to undergo full medical underwriting if you wish to upgrade again in the future.
Regularly review your healthcare plans to adapt to changing needs and avoid unnecessary costs. By taking control of your medical insurance, you can navigate the complexities of health coverage while safeguarding your financial well-being.
DBS has partnered with major insurers in Singapore to make health insurance easily accessible online for purchase. You can now independently learn, compare, and buy a plan most suited to your own needs. Find out more on DBS Health Marketplace.
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Speak to the Wealth Planning Manager today for a financial health check and how you can better plan your finances.
Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.
Sources:
https://www.moh.gov.sg/news-highlights/details/speech-by-mr-ong-ye-kung--minister-for-health--at-the-securities-investors-association-(singapore)-s-25th-anniversary-members--night--12-july-2024--7.00pm--at-one-farrer-hotel
https://www.straitstimes.com/singapore/integrated-shield-plan-lifetime-premiums-vary-widely-across-insurers-moh-comparison-shows
https://www.straitstimes.com/singapore/ip-insurers-risk-a-race-to-the-bottom-as-they-compete-to-win-market-share-says-ong-ye-kung
https://www.straitstimes.com/singapore/askst-do-you-really-need-an-integrated-shield-plan-which-one-should-you-choose
https://www.straitstimes.com/singapore/fewer-people-on-private-hospital-ips-more-older-people-giving-up-their-plans-altogether
https://www.straitstimes.com/opinion/we-need-to-act-before-an-ip-crisis-knocks-on-our-door
https://www.straitstimes.com/business/st-explains-what-singapore-ip-insurers-numbers-say-about-how-premiums-will-rise
https://www.straitstimes.com/business/medishield-life-or-integrated-shield-plan-how-about-riders-what-are-your-health-insurance-options
https://www.businesstimes.com.sg/wealth/portability-integrated-shield-plans-likely-raise-premiums
https://www.businesstimes.com.sg/wealth/integrated-shield-plans-taking-stock-need-vs-affordability
https://www.businesstimes.com.sg/wealth/portability-integrated-shield-plans-could-exacerbate-rising-premiums
https://www.businesstimes.com.sg/wealth/five-seven-insurers-jack-private-hospital-premiums-under-integrated-shield-plans-some-double-digits
https://www.businesstimes.com.sg/wealth/income-insurances-ip-claims-inflation-outpaces-medical-cost
https://www.businesstimes.com.sg/wealth/making-sense-integrated-shield-plans-premium-hikes
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