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FromTheInvestEditor

Review IP to weigh benefits and savings

With premium hikes expected for private Shield plans and reduction in govt subsidies, a review of costs and healthcare needs is timely

With all the recent news of escalating health insurance claims and rising premiums, I am bracing myself for higher costs in the near future.

Come July next year, when my hospitalisation policy - Enhanced IncomeShield Preferred plan from NTUC Income - is up for renewal, I expect to be slapped with a premium hike.

It will be a double whammy because not only will my private Integrated Shield plan (IP) premium go up, the government subsidy on the MediShield Life (ML) component will also be reduced.

Firstly, let me explain the ML portion.

The ML replaces MediShield, a hospitalisation and surgical insurance plan that covers patients in class B2/C wards in public hospitals.


ST ILLUSTRATION: MANNY FRANCISCO

When ML was introduced in November last year, it came with better benefits and at a higher cost than MediShield, ranging from a small 11 per cent rise for older people to a trebling of premiums for young adults.

To help Singaporeans pay premiums, the Government provided support via premium subsidies for lower- to middle-income households, transitional subsidies for all Singapore citizens, Pioneer Generation premium subsidies and additional premium support for the needy.

Of the four types of subsidies, I'm entitled to only the transitional subsidies, which come regardless of household income, the annual value of homes and number of properties owned.

In the first year, transitional subsidies covered 90 per cent of the net increase in premiums, after taking into account other premium subsidies. These subsidies will reduce and cover 70 per cent, 40 per cent and 20 per cent of the net premium increase in the second, third and fourth years respectively.

With the transitional subsidies reduced to 70 per cent from next month for the next 12 months, I'm looking at a reduced government subsidy amount of $199.50, down from the current subsidy of $256.50 in my case, which will be payable by Medisave. This subsidy will be further reduced in the third and fourth year.

Second, let's take a look at my IP and my options.

IPs were in the spotlight recently when the Life Insurance Association announced a study on the worsening health claims experience. In the light of the study, an 11-member Health Insurance Task Force (HITF) recommended several measures to rein in the costs.

In June last year, the IP insurers agreed to hold premiums steady for a year from when the ML was introduced in November. The moratorium will come to an end this month. With insurers inundated by more health insurance claims, premiums are expected to head north in the coming years.

The Sunday Times understands that the average premium jump will be in the range of 9 to 15 per cent. The hikes are expected to have more impact on those covering private hospitals, where the level of claims has escalated the most.

As my Enhanced IncomeShield Preferred plan covers hospitalisation in private hospitals, I belong to the category of policy holders who will be affected. I also have an insurance Plus rider, which covers both the deductible and co-insurance components. In fact, Income recently raised the premiums of its Plus rider for Preferred plan policy holders this month.

With all this in mind, it is timely to review my healthcare needs and costs. Should I continue with my plan or downgrade to a lower ward plan and/or rider? What savings would I enjoy? What benefits would I have to do without?

According to my insurance bill which covers the period of insurance from Aug 1 to the end of July next year, my premium before government subsidies is $630 for the ML component and $627 for the additional private insurance coverage.

My Plus rider costs $608 but it will be raised to $730 at the next renewal in July, so my total premium will be $1,987 a year at least, not including the premium increase on the Preferred plan, which has not been announced yet.

I have three options which would help to save me money on the annual premiums.

OPTION 1: DOWNGRADE RIDER

Income offers an Assist rider, which covers the deductible. This leaves the policyholder to foot the co-insurance portion, which is capped at a specified amount, depending on the type of Shield plan. For the Preferred plan, the cap is $3,000, while it is $2,500 for an Advantage plan.

For the IncomeShield Preferred plan, the Assist rider premium is significantly lower than that of the Plus rider, at $321. This means I will enjoy savings of $409 if I downgrade to the Assist rider.

More importantly, as the Assist rider provides a cap on my potential overall cash outlay, I'm comfortable that any exposure to big bills would be limited to $3,000.

OPTION 2: DOWNGRADE PLAN

I can opt to downgrade my Preferred plan to an Enhanced IncomeShield Advantage plan, which covers public hospitals A ward. Based on my age, the annual premium for an Advantage plan is $1,009, which is a yearly saving of $248.

I am comfortable with being warded at public or restructured hospitals as I believe the medical providers and facilities there are as good as private hospitals. With an Advantage plan, I still retain the flexibility of choosing a doctor of my preference.

OPTION 3: DOWNGRADE PLAN AND RIDER

For the IncomeShield Advantage plan, I can opt for either the Plus rider at a premium of $427 or an Assist rider at $256.

To reiterate, for the Advantage plan Assist rider, the cap on the co-insurance component is $2,500. Again, I find this reasonable as it caps my exposure to big bills.

So if I go for Option 3, which is to downgrade to an Advantage plan and an Assist rider, my total savings work out to $722 a year. I believe that this would be a nice compromise between maintaining the important benefits and achieving substantial annual savings on my IP.

Last but not least, do note that IP premiums will rise with age, so it is prudent to review them periodically.

Having said that, healthcare cost is a concern for most people and is expected to be one of the biggest expenses during retirement.

As individuals like myself review our costs by buying the appropriate level of cover and adopting a responsible attitude when making claims, I urge the Government, medical practitioners and the insurers to also play their part in doing their best to rein in the runaway costs.

A version of this article appeared in the print edition of The Sunday Times on October 23, 2016, with the headline 'Review IP to weigh benefits and savings'. Print Edition | Subscribe