Health coverage: Are you overinsured?

SINGAPORE - Something seems to be wrong with the way the five insurance companies offering Integrated Shield Plans (IP) decide on their premiums and coverage.

Either they do not know what their clients want or what the cost of medical treatment is, or have actuaries who are either ultra-conservative or prone to risk-taking.

Why do I say this? Because the premiums the five insurers - NTUC Income, Great Eastern, AIA, Prudential and Aviva - charge for covering the same ward class can differ by more than 100 per cent.

To add to the confusion, the insurer charging the highest premium is not necessarily the one offering the highest claim - and vice versa.

And when it comes to the amount of claims allowed for some treatments, one insurer allows three times the claim of another. Does one insurer know something the other doesn't?

Health Minister Gan Kim Yong's constant refrain is that he wants MediShield, the national basic medical insurance scheme, "to give Singaporeans peace of mind".

Like more than half of insured Singaporeans, I am on an Integrated Plan, which is offered by private insurers and gives higher payouts than the basic MediShield.

Going through the fine print of the IPs offered by the five insurers - which the Ministry of Health (MOH) publishes on its website - the one feeling I do not get is peace of mind.

There is such a huge variation in premiums and claims limits that I worry that I'm either being ripped off or am under-insured - which means that I might not be able to meet huge hospital bills in future.

There are three categories of Integrated Plans. At the top end is insurance for people who want treatment at private hospitals.

The other two plans are pegged to the level of care that is equivalent to staying in the A and B1 classes at public hospitals.

It is understandable that insurance pegged at private hospitals could vary greatly, as there are expensive private hospitals and less expensive private hospitals.

So, for a fairer comparison, I decided to look at the IPs pegged at public hospital rates; in particular, the B1 class, where Singaporeans enjoy a 20 per cent government subsidy, and hence, the variation in costs among different public hospitals is not that wide.

The five insurers provide a total of seven Integrated Shield Plans in this category.

When the basic MediShield package was enhanced in March this year, giving higher annual payouts and lifetime claims limits among other things, all the IPs were affected, as they all incorporate MediShield.

It would seem reasonable to expect the seven plans to charge roughly the same premium rates, as they are all meant to cover the same ward class, with some slight variation in coverage.

What was surprising was the huge difference in premium increases imposed by the five insurers for people in the same age band.

For people aged 20 years, the increase ranged from 35 per cent to 136 per cent.

For 80-year-olds, the increase in premiums ranged from 1 per cent to 29 per cent.

Depending on which IP an 80-year-old is on, the annual premium could be as low as $1,621 or more than double that at $3,599.

Whether they pay the high or low premium, coverage is pegged at B1 class in a public hospital. Both the priciest and the cheapest plans for an 80-year-old have the same $150,000 cap on annual claims but no lifetime claims limit.

But another IP, with a premium of $2,398 for 80-year-olds, caps annual claims at a much higher $250,000, and also has no cap on lifetime claims.

Furthermore, the coverage can vary greatly among the IPs covering people of the same age group in the same ward class.

For example, for "surgical implants and approved medical consumables", some insurers pay "as charged" - which means the policy holder pays only the 10 per cent co-payment no matter how high the bill - one pays up to $3,000 per surgery and another $9,000.

For chemotherapy, the amount a policyholder can claim ranges from $1,240 to $3,000 a month to an as-charged basis (again, co-payment applies to all schemes).

Even payouts for daily ward and treatment charges can vary by more than 100 per cent. Three plans pay "as charged", three pay $450 to $550, and one pays up to $1,000.

This begs the question: Are some of the high claim limits just for show, meaning that they look good on paper, but no patient is likely to reach that limit? And hence, there is no need to buy a policy that has such a high limit?

Or is the opposite true - that some insurers are offering inadequate coverage to their policyholders?

Health coverage: Are you overinsured? 

Many Singaporeans complain about paying high premiums for health insurance plans, especially after last year's rather steep rise in premiums, with some premiums more than doubling.

But what most of them don't realise is that they are probably forking out such high premiums because they have over-insured themselves and are paying for a level of insurance they are unlikely to need.

Today, more than two million Singaporeans and permanent residents are paying for higher medical insurance coverage than offered by the basic MediShield.

They are on Integrated Shield Plans or IPs, which ride on the basic MediShield, but offer higher payouts based on private hospital rates or the equivalent of being treated as private patients in a public hospital.

This is good since the basic insurance is pegged at subsidised B2 and C class rates and will not offer enough coverage for those opting for a higher ward class, such as B1 or A class in a public hospital.

What is surprising, however, is that more than half of those on IPs, or 34 per cent of all Singaporeans and permanent residents covered by MediShield, have opted for the most expensive plans - those pegged at treatment in private hospitals.

This does not reflect the actual usage of hospital care today, with less than 20 per cent of local residents opting for private hospitals and the rest going to a public hospital.

Do one in three Singaporeans require private hospital medical insurance when fewer than one in five are treated at private hospitals? Why do so many buy insurance plans they are unlikely to use?

They do so partly because it is easier to downgrade a health insurance plan than to upgrade.

Four of the five insurers - NTUC Income, Great Eastern, AIA and Aviva - have plans in all three IP categories.

Prudential no longer offer IPs for public hospital B1 wards.

Also many buy into the plans when they are young and when the premiums are highly affordable.

Up to the age of 49, Medisave can fully cover the premiums charged for these private plans, so policyholders do not feel the pinch of out-of-pocket payments. But from age 50 onwards, policy holders will have to top up their premium payments in cash, as the premiums all exceed the $800-a-year cap for premiums paid with Medisave.

Each year, up till the official retirement age of 62, they will need to top up their premium payments with cash amounting to several hundred dollars.

But again, as many are still working, the amounts appear affordable.

But beyond the age of 62, premiums rise steeply, averaging $4,000 a year for those aged 75. The highest premium currently charged, at the age of 100, is $8,483 a year.

Today, on average, men can expect to live to the age of 80 and women 84.5 years.

A man aged 65 in 2012 can expect to live to the age of 83.5 years and a woman to 86.9 years.

And life expectancy is still going up.

Already, there are more than 10,000 people aged 90 years and older and close to 1,000 who have passed the century mark.

Based on current premiums, people on private hospital plans will need to pay between $120,000 and $180,000 in premiums for those 30 years after retirement, depending on which insurer they are with.

Unless they buy riders, which pay for the portion of their hospital bill which they will still need to pay in spite of insurance, they will also need to pay thousands, perhaps even tens of thousands of dollars, for their hospital treatment.

Riders which start at about $30 a year for children, go up to about $2,000 a year for seniors.

The actual amount people will need to put aside is likely to be far higher, as health inflation has always been higher than general inflation, and premiums will rise as cost of medical treatments goes up.

So those who opt for insurance pegged at treatment in private hospitals must ask this basic question: Can they afford the thousands of dollars in premium payments in their post-retirement years?

Different people have different priorities, as well as different levels of savings.

After doing my maths recently, I've decided to downgrade my medical insurance plan.

One reader wrote to me to say that she opted for the top plan, and pays extra for a rider, so she will not need to pay any outof- pocket expenses should she need to be hospitalised.

She said: "Even though the premium and rider are costly, I am determined to continue with my plan for as long as I can. In the worst-case scenario, I am willing to cut down on my transport and food to service my plan, including the rider."

She has considered her options and made her choice. But not many people have given as much thought to their IPs.

I prefer to downgrade and spend more on living healthily and getting regular health screening to stay healthy and out of hospital.

And should I fall seriously ill in my old age, I will turn to public hospitals, which have excellent doctors and whose bills I can probably afford on my downgraded health insurance plan.

Get a copy of The Straits Times or go to straitstimes.com for more stories.