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Comprehensive Health Insurance is Getting Expensive. Should You Switch or Downgrade?

In the past 2 years, there have been some significant changes to the health insurance front (Your private Medishield plans).

In the last 5 years, we have also seen some of the fastest growth rates in the premiums on the health insurance and the additional private riders that you could purchase to reduce the out-of-pocket cost that you would pay if you get hospitalized.

I been trying to wrap my head around these changes but never got around it but I didn’t have the bandwidth to get around researching on it.

Last year, we had a brief on the changes to the health insurance plans and the impact.

The team that did the brief did such a great job framing the decision tree we should go through step by step to consider which is the appropriate health insurance.

I thought its better I get my head around thinking about this issue. I believe that health insurance should not be looked upon as the be all end all.

We all should have a rough overall strategy to address our medical needs. This includes the medical savings and the maintenance of our overall wellness.

I think the health insurance premium cost (your shield plans and their accompany riders) are not cheap. We all have to make a choice to choose the right insurer, a grade of medical coverage we are comfortable with that is affordable enough for us in the long run.

But how do we go about making the decision?

This article sought to explain:

  1. A brief background of how we got here
  2. The out-of-pocket expenses you have to pay if you just pay for the regular private shield plans and if you purchase riders that covers the deductibles and co-insurance
  3. Comparing between existing NTUC Incomeshield riders and the replacement
  4. The difference in expenses if you decide to go with the panel and non-panel doctors
  5. Brief comparison of the out-of-pocket expense on a few health insurance providers
  6. The recent premium escalation for existing NTUC Incomeshield riders
  7. The health insurance decision making framework

Why Did Health Insurance Get So Expensive?

If you have been paying attention to the bills that passed you by, you would have noticed that the premiums of your private integrated shield plans (IP) have been going up.

This was the direct and indirect failure of our current Singapore healthcare and insurance system. It started with private insurers fighting with each other to convert as many of us to IP.

One of the upside is to provide riders that, if you pay for these riders, if you are hospitalized, you do not need to pay a single cent.

There are a few different grades of hospital and surgical plans provided by each private insurers. The plans are differentiated mainly by the grade of hospital treatment/experience you can get (private hospitals, Class A ward, Class B1 ward, Class B2 and below ward).

Since the premiums are not too unaffordable, and it was not so big of a problem, many of us would choose the highest coverage, which is coverage up to private hospitals.

At first, it was not a problem because every stakeholder did not do anything funny. Then, the profit-driven private hospitals decide to put it in their marketing campaign that you do not have to pay for a single cent for a much better treatment experience.

Since our restructured government hospital experience is not always the best, and the cost of treatment is fully paid by their insurance plans, a lot of people go to the private hospital to seek treatment. This worked so well for the private hospital so it reinforce what they should do.

A lot of us start going there for private hospital treatment, even for minor issues.

And so health insurance payout increases, premiums that remained low starts going up.

This became a big problem. You can read more about it in my old article here.

No More All-You-Can-Eat Buffet Health Insurance Riders

On March 2018, the Ministry of Health announced that from April 2019 onwards:

  1. Co-payment: New IP riders must incorporate a co-payment of 5% or more
  2. Co-payment Cap:
    1. Pre-approved or panel treatments: Co-payment cap at $3,000 a year or more
    2. Non-panel treatments: No co-payment cap

The reason given is to curb the “buffet syndrome” so that we are prudent in using and charging healthcare services. This is also to ensure healthcare costs and health insurance premiums remain affordable.

Lastly, this will promote treatments through panel of specialist so that medical costs can be monitored and controlled.

So now you would have to pay at least some out-of-pocket expenses for your hospitalization bill instead of not having to pay a single cent if you purchase the comprehensive riders after April 2019.

The change that is new that affects your decision tree in the grade of health insurance selection is that it will be cheaper if you select from a panel of medical professionals pre-approved by your medical insurer.

You would submit a pre-authorization request form before admission.

If you would like to have a wider selection of health professionals, going further than the list of pre-approved medical professionals of your insurer, your out-of-pocket expenses will be higher.

From Zero Out-of-Pocket Expenses Paid to Some Co-payment

The best way to illustrate these changes is through the diagram extracted from MoneyOwl’s slidedeck.

If you do not have any riders, you would need to pay a deductible plus a 10% co-insurance of the total hospital bills incurred.

With the old full rider system, the deductible plus the 10% co-insurance is fully paid by the rider. If you have a rider that only pays for the co-insurance, then you would still need to pay for the deductible.

Under the new system, your deductible is still handled in a similar manner. However, you will need to co-pay the co-insurance.

The amount of co-insurance you pay is subjected to:

  1. Whether the 5% of hospital bills is below or above $3,000
  2. Whether you choose pre-approved / panel treatments or you would like a wider choice of treatment options.

It may be easier if we go through an example. Since NTUC IncomeShield happens to be one of the more popular plans out there, let us use that as an illustration.

NTUC IncomeShield used to have 2 riders before the announcement:

  1. Plus Rider. This covers the deductible and 10% co-insurance for all 3 different grades of their shield plans. You basically pay zero dollars for the grade of your shield plan chosen.
  2. Assist Rider. This rider caps the 10% co-insurance to either $3,000, $2,500, $2,000 depend on the grade of your shield plan chosen.

Since Apr 2019, NTUC have introduced 2 riders:

  1. Deluxe Care Rider. You would need to at least pay 5% in co-insurance, capped at $3,000 per policy year for panel or pre-approved doctors. There are no cap if you choose the non-panel doctors
  2. Classic Care Rider. You would need to at least pay 10% in co-insurance, capped at $3,000 per policy year for panel or pre-approved doctors. There are no cap if you choose the non-panel doctors AND an additional $2,000 a year charge

If you are still on Plus Rider and Assist Rider before 7 March 2018, you are not affected by the changes.

So they say. We will get to this in a minute.

For those after, your options are the Deluxe Care Rider, Classic Care Rider, or don’t have a rider at all.

How much you would pay before and after the changes for two different hospital bills.

The table above compares the amount that you will pay if are on the Plus Rider versus the Deluxe Care Rider and also the Assist Rider versus the Classis Care Rider.

MoneyOwl‘s solutions team compared these two grade of riders with 2 different hospital bills, a small $10,000 bill and a larger $80,000 bill.

You would realize 2 things:

  1. Now you would at least pay something.
  2. How much you would pay depends on whether you choose pre-approved doctors/panel doctors or you do not declare and wishes to have more options.

The major impact that is new to us is how much do we value the freedom to seek the medical help we desired. With this new structure, this becomes a consideration.

Freedom to Choose Non-Panel Doctors is an Additional Medical Cost

MoneyOwl also did a comparison across some of the shield plans they carry:

The information might not be super up to date but honestly I do not think things have changed that much.

What you will notice is that for the same $80,000 hospitalization bill, the out-of-pocket expense for panel doctors are largely the same.

If you wish to have the option to pick and choose from non-panel doctors, then you will need to compare between plans.

Generally, I think that if you go to the top of the top, that is the Deluxe Care @ NTUC, MyHealthPlus C-II @ Aviva, Enhanced Care @ AXA and Key Rider @ RHI, there is not much difference.

The difference tends to be for those riders that do not cover fully the deductible plus co-insurance such as MyHealth Plus A-II and Classic Care.

Existing Health Insurance Rider Premiums Likely to Get More Expensive

If you are currently on the Plus Rider or Assist Rider, you have the option to stay on them. Staying on these riders allows you to pay zero out-of-pocket expenses for the Plus Rider and lesser for the Assist Rider.

Here is the catch.

The premium escalation can be a little crazy.

The most recent premium increase for Incomeshield Plus Rider
The most recent premium increase for Incomeshield Plus Rider

The table above shows the premium increase for NTUC Incomeshield Plus Rider. If you are on the preferred plan, your premiums went up from 15% to a whopping 65% in some age band.

For example, if you are at the age 65, last year your premium was $2832 a year. This year it became $4673!

I look upon this as either the existing premiums was not priced well, there is some inflation happening in the past year, or that it looks like an attempt to force you to port over to the Deluxe Care Rider.

We are not sure about next year, but it is likely that

  1. As you go up in age band, your premiums will rise from where it is now
  2. The whole category of rider will rise in premiums as well

So in some years there will be a massive rise.

For example, if you are 65 going to 66, not only will your premiums go up from $2832 to $3670, but it will be inflated upwards to $6056 due to the revision in premiums for the entire Plus rider.

Your premiums went up 100%.

Annual Premium Comparison Between NTUC Incomeshield Preferred’s Highest Grade Rider

The table above compares the premiums you would pay if you remained covered under Plus rider and if you port over to Deluxe Care rider.

You will achieve a lot of savings in the earlier age bands (before 80 years old).

If you remain on Plus rider, you pay more in premiums versus otherwise, but no out-of-pocket expenses. If you pay for Deluxe Care rider, you pay less in premiums but out of pocket expenses.

Which one increases faster? I have no idea.

The Health Insurance Decision Making Framework

Basically, we have some decision to make.

However, the decision you need to make is never straight-forward. I often tell you that the decision is easier to make if you know what you want.

In this case, it is not what you want, but what kind of medical situation you will be hit with from this point till you passed away, the frequency of occurrence. If you know that, you can choose your plans better.

Unfortunately, we do not have a clue how to determine certain areas that we do not have control over such as inflation rate, certain health ailments, further changes in policy.

So here is my way of thinking about this whole problem.

Note that there are certain areas in the decision tree that I choose not to discuss such as:

  1. You have pre-existing medical condition. In this case your decision might be more straight forward. You might not be able to switch and if you do you need to ensure the new insurer covers you.

I think in the brief by MoneyOwl’s team, they also provide some very high level rule of thumb how to think about this (it is much concise than the more detail bullshit you will read about later):

Source: MoneyOwl

What We Know from Today’s Discussion

Here is a little summary of what I have explained in the previoius section:

  1. You will need to pay out-of-pocket expenses
  2. Out of pocket cost is greater if you choose a non-panel doctor
  3. If you need to have a private hospital option, the premium cost is greater

Constraints that You Need to Work Within

There are many variables to this decision making. Let me group them in a few major categories.

Your Wellness:

  1. Not sure when you will passed away
  2. Have no idea going forward, how is your constitution, what is the frequency of medical needs, as well as the magnitude of medical needs
  3. How would you manage your wellness on a periodic basis

The Quality of Care You can Accept:

  1. Panel Doctors or More Freedom of Medical Treatment Choices
  2. Up to Private Hospitals, Class A Restructured Hospitals or below?

Growth:

  1. Inflation Escalation of Different Insurers
  2. Each insurer’s premiums at each age band is different
  3. Medical inflation of different ailments

Your Cash Flow Management:

  1. Can you accumulate a sinking fund for your medical needs?

Some of these constraints you have a certain degree of control over and can exert your influence. For others, you have no control, you are a slave to life or the system.

What You Have and Do Not Have Control Over

We re-group the constrains in the previous section into what you can control, cannot control, and have partial control over.

What you do not have control:

  1. Inflation of medical cost
  2. Inflation of premiums
  3. Your duration alive
  4. Standard of healthcare in hospitals
  5. Panel Doctors versus Non-Panel Doctors

What you have some control:

  1. Your Overall Wellness

What you have control:

  1. Manage your wellness on a periodic basis
  2. Accumulation of Sinking Funds
  3. Funding of insurance premiums

Those who I have no control over, I think I would have to take a conservative estimation:

  1. Inflation cost is going to be 7% a year at least
  2. Inflation of premiums needs to moderate down lower
  3. 90 to 100 years old
  4. Accept Class A Restructured Hospitals
  5. Panel Doctors

The way to think about those areas that you have no control is that you got to expect them to change for the better or the worse. That is just the way these things are.

You can argue until cow comes home about how unbalance or wrong the system is but if your family members need help you got to pay for it.

If you want everything to be the best (factoring high inflation, live a long life, private hospitals, freedom of choice of doctors), prepared for a very high premium or a huge medical sinking fund.

For those you have some control, try your best to do something about it. But do not have high expectations that if you do it well, you can completely mitigate the risk.

There are certain areas that you have to depend on fate.

For those areas that you have control, this is where you can strive to do better:

  1. Do enough to keep yourself healthy and in good condition.
  2. On an annual basis, set aside some of your surplus from work into a medical sinking fund
  3. Fund your insurance premiums

What You can Do Today to Help You Make a Better Decision

At this point, there is definitely some things that I am clear about, but also areas that are not clear to me.

Some of this would involved questions such as

  1. Are restructured hospital really that unacceptable in the experience?
  2. How likely would there be an emergency and I would need to expedite this by going to a private hospital
  3. The experience with panel doctors
  4. Just how much signficant savings will switching plans give me on a long term basis

All this means that there are some things to think about or research upon:

  1. You need to try your best to know the quality of healthcare you can accept
    1. Panel doctors or non-panel doctors
    2. Grade of treatment
  2. You need to look into the past (yourself or your family history) to determine the magnitude and frequency of healthcare needs
  3. You need to figure out whether you would like to pay higher premiums upfront so that you do not need to pay so much if you need to claim
  4. Do what You have Control Over

#1 deals with things you have no control over and you need to figure out a certain level of what you can accept. #2 tries to give you an edge whether betting on a good coverage is more beneficial due to your own personal health situation.

#3 and #4 are areas you have control over.

If you have better clarity on what may work out best for you, then you can better frame what kind of health insurance coverage you need.

You will also know the downside of your medical strategy. This is important because, almost all the strategy will have some downsides.

What will work for me might not work for you.

For example, you might prefer to:

  1. Cover for a Private hospital shield plan with a full coverage rider
  2. Have a small medical sinking fund
  3. Fund your insurance premiums because you have a good, stable job

Someone with less resources would prefer to:

  1. Do more to keep themselves active, healthy and in a good condition
  2. Have medical coverage up to Class A Restructured Government Hospital
  3. Cover the co-payment when it is still relatively affordable, but co-pay 5% , up to $3,000 per policy year
  4. Build up a medical sinking fund for the out-of-pocket expenses
  5. Do not pay too high of an insurance premium

There is no correct answer.

I would prefer to do something like the latter.

If you want to transfer ALL the medical risks to the insurance company, accept that you need to pay for it.

Let me know based on what you cannot control, have certain control and have control, what you would prefer to do.

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Ian

Sunday 3rd of May 2020

This is a timely article. I read it when it was first published, and revisited it again today. I have been reviewing my insurance coverage during the CB period. I have been hesitant on my hospital plan - I am currently on private hospital plan without rider. 1. I have not got a rider because in the past I was thinking to leverage on my employer's hospital insurance. I realise that as age increases the risk is getting higher, so I plan to get a rider. 2. The premium on private hospital plan is really expensive. It is not that I can't afford, but the premium itself (without rider) can easily cover a restructured hospital class A plan with a new rider. 3. #2 is the point that I am still pondering over. I am more inclined to downgrade to restructured hospital class A plan, to optimize premium cost, and also i feel the public hospitals here aren't that horrible. I have the strong view that for long term treatment, it is best to go with public hospitals due to lower costs. But I am not yet decided... Will talk to my agent again to figure out this.

Sharon

Sunday 19th of April 2020

I'm on the Preferred Plan with Plus Rider ($0 out-of-pocket) and I don't intend to downgrade, despite NTUC Income sending me multiple letters before.

Although I don't mind a panel of doctors or staying in Restructured Government Hospital, I currently have a medical risk (which occurred after I have the policy for many years). All my policies taken up after this, all insurers have excluded it for claims in the future.

I will pay the hospitalisation premium, as long as I can afford it. As part of the employee welfare benefits at my workplace, my employer also pays some of it. At the moment, the cost is still bearable. Probably later in life, if financially tight, I find it's still not too late to downgrade then.

Kyith

Sunday 19th of April 2020

Hi Sharon, thanks for sharing. If we have pre-existing, then the risk of switching is heightened. I think it will be good to have one ear to listen to what others shared about their experiences with Restructured Government hospitals to have an idea of whether the quality of care is bearable.

What is within our control is that we can slowly build up a medical sinking fund (aside from our CPF Medisave)

Alan Lok

Sunday 19th of April 2020

To start off, all of us must first realize that insurance cover tail end risks. And most, if not all insurance companies are profitable.

In light of that, the average consumer of insurance product will lose out in terms of $ gain --> meaning, for the average consumer, if you pay $100,000 SGD worth of premium for your entire life, be mentally prepared that you will most likely get back less than $100,000 SGD worth of insurance claim before you pass away.

If that weren't the case, insurance companies would have gone out of biz.

And guess what, that is a VERY NICE situation to be in. Because that mean you have led a relatively healthy life style till the very last moment.

So for me, buying hospital insurance for me is a loss $ preposition; but i still do it because it does gave me a piece of mind for knowing that if (touch wood) i fall sick, my investment portfolio will not be impacted at all.

But that is also the reason why i am only going for hospitalization plan and not any other type of insurance products.

I have not finished reading this entire article, but i have the intention to do so this evening after my baby sitting Sunday.

This article, I must say, can't be more timely.

Both my parents are into their 75s, and i am coughing out more than SGD 7k per year for an AVIVA cover all hospital plans at B1 ward level ....

At the rate i am going and assuming both my parents live until 100, the amount of premiums that i will be paying will mushroom to a very very sizeable amount; such that it will be cheaper for me to raise my two young kids relative to forking these medical insurance premiums.

And guess what, the premiums in Singapore is already cheaper than that in Mainland China or Hong Kong where i am currently residing....

So something have to give way.....

I am contemplating downgrading my parents and MY own insurance coverage as well; to pay much less premium and in return risk the co-insurance option.

Insurance purchase is a mixture of $ cost/benefit thingy + emotion decision - much as we try to be rational, it is tough.

If everybody is rational (which i actually do not support or agree), insurance companies will have gone out of biz.

One final comment from me: there is one thing i know is 100% right, exercise daily (30 minutes of 80% lung capacity cardio + appropriate stretching and core muscle training), sleep early (before 1100), drink more water (>5 litres daily) and don't smoke --> that way, your life will have much higher chance of quality improvement. very simple and basic....

I am aiming for that as well, just not there yet i confess.

Kyith

Sunday 19th of April 2020

Hi Alan, thank you for leaving me such a comprehensive post. Firstly, I hope your parents are well and am happy to hear you have 2 young kids!

I agree it is tough decision. This is especially so if it involves your loved ones. Your parents may have existing ailments that would make going to another insurer tough (and i know about myshield's crazy premiums). The decision point might be whether you want to let go and just have Medishield Life for the parents. I think the medical insurance for your children should be ok. To be honest I seriously wonder how many retirees can than a 3.5k a year premium (those in the older days instead of folks like ourselves who save up for our own retirement).

If i read what you say correctly, you are not paying for the riders. And that might be the right decision. This means you need to build up some form of medical sinking fund.

Thanks for the health advice and we should meet up the next time you are in Singapore.

Sinkie

Sunday 19th of April 2020

If you don't buy the rider now, and only buy later, then the rider will not cover any pre-existing conditions that you'll develop between now & when you finally add the rider (when you're 60+ & out of work & no longer covered by employer). Insurers are not stupid. LOL.

You can nego with your company to pull you out of the corporate cover & top up with cash that you can use to pay a super-deluxe comprehensive rider.

At the end of the day, it's a pretty simple decision based on whether you can afford or not. And by affordability I mean H&S premiums being not more than say 5% of your annual income or retirement expenses.

You can control your own personal health a hell lot more than all the other hundreds of moving parts.

You can also hedge by buying life insurance company stocks, particularly in Asian context (hint: China & S'pore). (Life insurance in developed western countries are usually not as profitable as general insurance/property & casualty insurance. That's why WB doesn't do it.)

Wil

Sunday 19th of April 2020

Hi Kyith, this is nice comparison. Some people suggest if we are covered by corporate medical insurance plan, we can consider maintaining personal medical insurance premium and stop the rider. What do you think ? Do you know where can i find info of medical insurance comparison for corporate or SME.

Kyith

Sunday 19th of April 2020

I think you will need to find it on your company website. There are people who rely on their company insurance. I always tell people, know what are the risks of your action and if you can lived with it you could go ahead. the upside of relying first on company insurance and then your insurance is the bill is smaller, you might not need the rider. but you do need to pay out of pocket expenses if the bill is small though

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