Understanding the 30%++ Increase in PruShield Premier Premiums.

For clients who are getting Prudential’s highest-grade shield plan, PruShield Premier, from October 1st onwards, premiums will increase significantly. This applies to those renewing after 1st October as well.

This is not new.

We don’t carry Prudential’s products, but we have clients wondering whether there is a print error when their insurer updates them on their upcoming premiums.

When all the insurers updated their shield and rider to the new cancer drug list and cancer drug services structure, they promised not to change the premiums of their shield plans until 31 August 2024.

Well, the hell gates are open now, literally.

Prudential updated the premiums of their riders earlier this year on 1st April 2024 (Announcement here). They are not the only ones raising the premiums of the riders.

I am not covered under Prudential’s shield plan and am probably going to dread seeing my Singlife’s renewal statement when it comes in a couple of month time.

I decided to do a stock take to try and understand how Prudential structured their health plan. Our shield plan, or our health plan, is the foundation of which our wealth protection is build upon. I should spend a little time taking stock of Prudential’s offering because most insurer would list the info all over the place.

Majority of the premium data comes from Prushields premium table update on 1st Apr 2024 and July 2024 update.

Framing the Different Grades of Prudential’s Shield Plans

Prudential offers three different grades of shield plans.

These shield plans help alleviate your medical bills depend on the grade of medical care you prefer. A lower grade plan has lower premiums but does not cover well for higher grade healthcare. Premier allows the policyholder to attend private medical facilities, Plus allows maximum A wards of government restructured hospital while Standard covers only up to B1 ward.

Framing the Different Riders of Prudential’s Shield Plans

The objective of health insurance in Singapore is to ensure that Singaporeans are not burdened by large hospital bills should they get sick. It is based on a cost-sharing system.

The diagram above describes this cost-sharing system. You will pay part of the cost, but Prudential’s shield plan pays a significant part of the bill.

Some of you would want reduce the out-of-pocket cost further and the insurer came up with riders to do that.

Prudential have about five riders (if we exclude those plans not available for new sign-ups).

The diagram below tries to frame these riders better:

Two of the riders are tied to Plus, and three are tied to Premier.PruExtra Plus, Premier and Preferred are the riders that would alleviate more. The lite plans are cheaper but there is a limit to how much deductibles they will pay.

Riders Now Provide Additional Cover for Cancer Treatment.

One of the reasons why the shield and rider premiums are increasing at an alarming rate is probably due to private cancer treatments going haywire. So much so that MOH stepped in to try and control things.

With the changes, cancer treatment cost is no longer as charged. The insurer’s rider plans will provide increased coverage if you wish to go for more expensive cancer drugs and services:

The rider will bump up the amount claimable.

Therefore, the riders are worth serious consideration if you have a strong preference and want to give yourself a greater fighting chance.

Prudential Practices Claims-Based Pricing for their Shield Plan Riders.

In an effort to make those who claim more pay more of the share of the cost of insurance, some insurer like Prudential introduce claims-based pricing.

You can read more about how Prudential structure their claims-based system here.

If you don’t claim, Prudential give you a discount of 20% on your premiums. If you claim, your premiums bump up from the Standard premiums.

Claims-based pricing is applicable for:

1. PruExtra Premier CoPay
2. PruExtra Preferred CoPay
3. PurExtra Plus CoPay

Where Prudential decide to implement claims-based pricing is also a tell tale sign of where the cost issue lie.

Visiting Non-Panel Doctors.

You can usually purchase a rider to cover the deductible and co-insurance.

You can view this page to find out more.

This splendid table will give you a clear idea of the benefits and the non-benefits of choosing a doctor on the panel over one that is not.

Generally, if you apply for a pre-authorization and visit a doctor on the panel, you have the peace of mind that your total out-of-pocket is capped at S$3,000. Else, do prepare a medical sinking fund if you would like to visit your preferred private doctor.

How Much it Costs in Premiums in a Lifetime on PruShield

The premiums that we may is not fixed or level. It becomes more and more expensive over time. So how do we size up the different grade of health plans offered by each insurer?

One way of measure is to look at the premiums that you will pay in a lifetime. We add up the annual premiums that we will pay from age 1 to 100 years old. This would allow us to compare different grades of plan but also across insurer.

The table below shows the lifetime premiums of the different grades of Prudential plan:

We usually look at the premiums paid to the insurer separate from the premiums for Medishield LIFE (Medisave in the table is the total premiums from age 1 to 100 paid for Medishield LIFE. There is an error in the label).

The total healthcare premiums that you would have to pay are the premiums for Medishield LIFE and Prudential.

There are a few observations:

1. The highest grade of healthcare, Premier and Premier CoPay would cost nearly $900,000!
2. Most of the premiums are backend loaded, which means they come later on in life.
3. This means that many may not have catered this in their retirement income needs.
4. The Medishield LIFE premiums largely can be paid by your Medisave.
5. If your healthcare needs/expectations are modest, then your cost may be modest.
6. If you want the most flexibility in choices, you would have to pay for that flexibility. You would also be subsidizing others who go for higher grade if you choose not to go for the higher grade but paid for it.

How Much Premiums Will Go Up for PruShield Premier on 1st Oct 2024?

Only PruShield Premier’s premiums went up if renewed or signed up after 1st Oct 2024. The table below show us before and after:

Generally, the premiums go up by 30++% or 15++% depending on your age band.

However, in absolute dollar terms, the increase can be rather significant.

The chart below shows how the PruShield Premier premiums change with age:

There are a few significant bumps in premiums that will be painful:

• 40 to 41 ($400)
• 50 to 51 ($550)
• 60 to 61 ($650)
• 70 to 71

The chart below shows the different degrees of premium change from the last update to this new one:

The majority of the bumps are 30++%.

How does the bump-up look if we wish to know it in absolute dollar terms?

This chart shows that. While the percentage rise is not very large in the later years, the absolute amount is at least $1,500.

How does PruShield Premier’s Premium stack with their Riders?

Many of you would have purchased a rider to go with PruShield Premier as well. Prudential did not raise the premiums on the rider this time but that is because they raised the rider premiums on 1st April 2024.

The three riders available to pair with PruShield Premier saw their riders go up by 23-25%.

The top tier rider is PruExtra Premier and the premiums look like this:

You know… the premium of a rider look almost equivalent to the premims of the main shield plan.

In the chart below, I stacked the shield plan with the rider:

By your retirement age, you would be paying $10,000 a year in health insurance premiums (provided the premiums do not rise further).

If you would like to constrain your private healthcare options you can choose the Preferred Copay instead:

This is still a very premium private healthcare option and the premiums are not cheap. Here is how the main Premier plan stacked with the Preferred:

If you are okay to pay more of the deductible, the Premier Lite (wrongly labelled as Preferred Lite below) may help limit the cost:

Prudential have raised the cost of the lower tier rider on Premier by 23% to 25% in their 1st of April update to get to the chart above.

The premiums for Premier Lite is still pretty significant because it can offset majority of the out-of-pocket hospitalization costs. The policy also helps to alleviate significant costs with cancer cost not as charged anymore.

Would PruShield Plus be Cheaper?

For readers who prefers to stick with Government Restructured Hospitals, but would like the option of being admitted to A and B1 Wards, PruShield Plus may be enough.

The chart below shows the premiums progression as we age for PruShield Plus:

The annual premiums versus Premier at various ages:

1. 40: $114 vs $472
2. 50: $184 vs $943
3. 60: $261 vs $2064
4. 70: $788 vs $4116
5. 80: $2054 vs $7567
6. 90: $2824 vs $11,175

It might be worth your consideration to think whether you wish to have that private medical option. If private medical is just optional for you and you can accept paying more if you are forced to, the premiums of the lower grade Plus is more affordable.

Here is the premium progression with age for the rider on Plus called Plus Copay:

Prudential have increased the premiums on the Plus Copay by 12% to 15% in their 1st April update. You can see it is a smaller increase compared to

Plus Copay reduces your medical cost so that you would pay only 5% co-payment. Since almost all the medical specialist in government hospitals are on panel, and cancer treatments are pretty regulated, Plus Copay can significantly alleviate your out-of-pocket costs. Therefore, the premiums are relatively as expensive as the main Plus plan.

Here is how the Plus and Plus Copay add up:

We can compare the Plus + Plus Copay at various age versus Premier + Premier Copay:

1. 40: $403 vs $1,450
2. 50: $544 vs $2,460
3. 60: $954 vs $5,150
4. 70: $2,038 vs $10,128
5. 80: $4,280 vs $16,624
6. 90: $5,640 vs $22,672

And here’s the premium progression for the Plus Lite Copay:

Prudential raised the premiums for the Plus Lite by 15% to 31% in their 1st April Update.

The Premium Progression for PruShield Standard

And here is the premium if you would just want the option to upgrade to a B1 Government Restructured ward:

Should an Increase in Shield and Rider Premiums Affect Your Protection Strategy?

I think if you don’t have an idea how your wealth protection strategy is, that should be the first thing that you try to sort out.

If not, you might make a wrong move. You can write in to my colleagues at Havend (enquiry form) and they can help review your needs through their InsureWell Assessment, which is completely free.

We can read a few things together:

1. In the April update, premiums increased generally for the Prudential riders linked to the Premier Shield plan relative to the Plus.
2. The increase in premiums in this 1st Oct 2024 update is only on Premier Shield plan with the rest unaffected.
3. Claims-based pricing is mainly on the Riders.
4. Cancer treatment no longer being as charged and greater protection covers by the riders.
5. The authorities forced the insurer to make the policyholders at least copay some of the cost instead of not paying a single cent in the past.

I think the whole industry is trying to grapple with a rising medical cost in the private medical area. In the past two months, you may have come across many articles in the papers discussing this issue. They will give you an idea that we might not see the end of changes.

Whichever way, there may be a few things that we know will stick:

1. You need to pay some of the medical costs out-of-pocket.
2. You may need to decide the grade of medical care that you can accept and choose a grade of shield and rider coverage.
3. Freedom of choice has a cost now, to which you need to decide how much this means to you.
4. Annual premiums would rise because that is how the premiums are structured.
5. Annual premiums would rise at different rates if this issue is not managed systematically.

I have always favoured a system where I pay some of the costs out of pocket, with the shield plans solving the larger bills. I would need to fine-tune the “paying some of the costs” part better and that may be a future topic.

As someone building towards my financial independence, I have talked about my experience sizing up and building up medical sinking fund to:

1. Fund my future shield plan premiums (about $80,000)
2. Supplement my critical illness plans which will end at 65 years old so I take care of it for lifetime (about $50,000).

The future may rely on a system of

1. A shield plan that matches our healthcare preferences.
2. A medical sinking fund to pay for medical needs.
3. Some critical illness protection to hedge those major health risks so that your options are wider, but not the small stuff.

Dependent on a pooled system has risks. If our financial means allow, it would be better to mix it up and start depending on ourselves.

I will probably cover my Singlife premium increase and a couple of other insurer’s just to help myself frame their health insurance plans better.

In the meantime, if you also identify strongly with this personal framework and there is a shortfall in protection needs, you know how to find (see the enquiry form slightly up)

This post reflects the views of Investment Moats and does not represent the views of Havend. Kyith is a senior solutions specialist at Havend. He does not recommend investment or insurance products. Parts of these posts may include materials from Havend.

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