Do you need an Integrated Shield Plan?
Integrated Shield Plans (IPs) are provided by private insurers. They comprise coverage of the basic MediShield tier plus enhanced coverage from the insurers so policyholders can be adequately covered for class B1, class A or private hospital stays. MediShield Life will replace the current MediShield portion in each IP.
Here's a simple checklist to help you to decide whether you need an IP, and which is most suitable.
1. If you were hospitalised, what type of hospital and ward would you want to stay in?
This is one of the key considerations in choosing an IP. There are four ward classes in public hospitals - Class A, B1, B2 and C - to choose from. There are also private hospitals.
Ward classes in public hospitals differ in terms of room features, whether the patient can choose his doctor and the subsidy level.
Regardless of the ward class, patients receive the same quality of care. All patients can choose any of the ward classes.
If you intend to stay in Class B2/C wards, you may not need to buy an IP. MediShield/MediShield Life will provide good coverage for large hospital bills.
MediShield/ MediShield Life will still pay out if you choose to stay in a B1/A class ward or in private hospitals, but they are pegged to the estimated expenses in B2/C class.
The payout from MediShield/MediShield Life will be small in comparison, as there are lower or no subsidies for treatment in B1/A class wards and private hospitals and the bills are higher.
So you may wish to consider paying more to buy an IP if you intend to stay in Class B1, Class A or private hospitals.
Typically, each insurer offers a range of IPs targeted at a level adequate for Class B1, Class A or private hospital coverage, with increasing premiums in that order. Choose the plan according to the ward class/ hospital that you prefer.
If you choose a lower plan than the ward class you prefer, you can expect to have to top-up with more Medisave and/or cash payment if hospitalised.
2. Should I get as-charged coverage or non-as-charged coverage? What is the difference?
Unlike as-charged plans, non-as-charged plans have caps on the payout (a deductible and co-insurance apply for both types of plans). As-charged plans are more expensive than non-as-charged plans, but may provide more peace of mind.
Consider whether you would like to pay more upfront each year for premiums in exchange for the certainty that there will be no cap on the payout should you be hospitalised. The amount above the cap can be paid by Medisave, subject to limits.
3. Do you have any pre-existing medical conditions?
A pre-existing condition is a medical condition or illness that has developed before a person is covered under an insurance plan.
Depending on how serious these conditions are, private insurers may reject the individual from insurance coverage; insure him but exclude the pre-existing conditions and related illnesses from coverage; or adopt other approaches to manage the risks from these conditions.
For those insured with exclusions, you may be paying for an IP that does not cover you for the major illnesses that you most need protection from. Ask your insurer if there will be exclusions imposed on your coverage.
4. Can you afford the current and projected lifetime premium costs of your preferred plan type?
Once you are clear about your preferred coverage for hospital and ward type as well as as-charged versus non-as-charged, check if you can afford the current and projected lifetime premium costs of this type of IP. Do note that health insurance premiums will be revised from time to time in line with claims experience, health-care inflation and benefit enhancements.
Also note that IP premiums, like MediShield premiums, are priced by age groups, according to the health risks and expected higher utilisation of that cohort. This means your premiums increase as you get older.
So it is important that you do not gauge the affordability of an IP based on the premium you are paying now. Do look at the premiums payable when you are older, and also factor in potential revisions in premiums due to reasons explained earlier.
Premiums for IPs are higher than those for MediShield, and this differential widens for older age groups. The total costs can be substantial, particularly for the high-end IPs - for example, lifetime premiums for a private IP may exceed $400,000 for a couple, based on the current premium schedule and without factoring in future premium revisions.
5. From the above questions, I think I have bought an IP that is beyond my needs and affordability level. What are my options?
You may want to consider choosing a more affordable IP targeted at a more affordable ward class, or rely on basic MediShield/ MediShield Life. You will not have to undergo underwriting again if you are moving to a plan with lower coverage.
However, if you wish to upgrade your IP or buy a new one, you will be subject to medical underwriting by the private insurer. That may result in exclusions on your pre-existing medical conditions.
The MediShield Life Review Committee has proposed that the Government work with the insurance industry to develop key features for a standardised Integrated Shield Plan focused on providing coverage at the Class B1 level. The standardised plan should:
- Provide adequate coverage at Class B1 level
- Have benefits regulated by the Government
- Be provided as an option to all new and existing IP policyholders, including those who want to downgrade from their Class A or Private Hospital plans to a more affordable option.
The standardised plan, after its introduction, will be the cheapest IP and also more affordable over the lifetime. Naturally, it should form the base case or the default plan for anyone considering buying an IP.
The writer is a director and the chief executive of fee-based financial advisory firm Life Planning Associates. He was previously the CEO of Great Eastern Life China and chief financial officer of Keppel Insurance.
This article was first published on July 20, 2014.
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