Managing your health premiums

HealthCare costs are heading north, with Singapore residents facing the double whammy of rising premiums from the private medical Integrated Shield Plans (IPs) and riders, and MediShield Life.

Following the end of the freeze on IP premiums at end-August, nearly all IP insurers have raised their premiums for IPs and riders. Did you know that the most expensive lifetime IP premiums with riders can hit close to S$842,000? This figure does not include premiums for MediShield Life which will also increase by an average of 22 per cent after enhancements to the national health insurance scheme were announced last month (October).

Excluding riders, lifetime premiums for IPs that offer cover for private hospitals can amount to S$323,900. Recently, five insurers raised premiums by double digits for their base IPs, focusing mainly on private hospital plans, while Income Insurance raised premiums across all ward types. 

Income’s IP premiums (for private wards) rose by an average of 21 per cent (without riders) and by 35 per cent when riders are included. For Income’s restructured hospital base plans, the increases are14 per cent without riders, and 23 per cent with riders.

In Singapore, nearly three million people – more than 70 per cent of the population – hold an IP with one of the seven insurers. Additionally, two out of three IP holders, or over one million people, have riders attached to their plans.

Why have premiums increased?

The average cost of medical care in Singapore rose by 10.3 per cent in 2023 and is expected to increase even more this year. Insurers have reported that their overall IP claims costs rose by up to 25 per cent 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 per cent of hospitalisation bills, with the remainder paid using MediSave or cash. Riders can limit a patient’s out-of-pocket expenses to 5 per cent 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, the medical bills of patients with riders that covered the entire bill were 60 per cent higher than those who did 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 per cent 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 health premiums

1. Buy an affordable medical cover:

Our advice is to buy a medical plan that you can afford even if it is the highest level of coverage. This is because you may not be fully aware of your health preferences and needs at present. Besides, you can always 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 lower-cost 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 less 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 per cent on rider premiums by selecting a lower level of coverage. With only an IP, you can still have up to 90 per cent 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 at Feb 1, 2023, the CDL includes 340 treatments – about 90 per cent 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?
• Do you wish to avoid a long waiting list for healthcare?
• Is an IP that offers private ward hospitalisation 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 with 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 are in the pink 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.

6. Have a holistic financial plan:

A comprehensive financial plan that helps to identify and close money gaps will boost your financial resilience and enable you to make informed and affordable healthcare choices.

Digital tools like the Plan tab in DBS’ digibank offer customised insights and analysis of protection needs, and use information like the number of dependants to recommend insurance types and work out the required sum assured.

Managing health premiums

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 will need to undergo full medical underwriting if you wish to upgrade to a higher plan 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.

Source: The Business Times; Managing your health premiums, by Lorna Tan and Shawn Lee. 16 November 2024. © Singapore Press Holdings Limited.

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