In the past, patients with Integrated Shield Plan riders had their hospital bills completely paid for. However, this will soon be a thing of a past. Under the new rules announced on the 8th of March 2018, riders for Integrated Shield Plans will no longer cover the entire bill. Under the rider co-payment rule, you have to pay at least 5% of the hospital bill, at a maximum of $3,000/year.
Wait, but why?
In the past, we wrote on why this phenomenon happened, and observed that cost for services increase drastically when insurance is involved. According to Ministry of Health, the average bill of someone with a rider is around 60% higher than someone without. Patients with riders tend to seek treatment in private hospitals as well, which results in the difference in average.
In addition, the asymmetry of information for medical bills allowed hospitals to charge high prices for procedures. The first response to the increasing bills was introducing the medical fee benchmark to be implemented in second half of 2018, and this forms the second major response by MOH.
What does that have to do with you, you might ask? Premiums for Integrated Shield Plans increased over the years, with higher increases affecting older policyholders and those with private hospital plans. This is bad because if the increase in premiums continue, these people won’t be able to afford the premiums later in their lives. At the risk of being reductionist, the sequence of events goes like this:
- High expenditure due to riders
- Healthcare decides to charge more – insurance companies are paying, anyways
- Insurance company faces loss
- Insurance company charges higher premiums
Inappropriate levels of health service usage lead to an overall larger healthcare expenditure. Future consumers suffer directly due to escalated premiums. All Singaporeans also suffer indirectly since healthcare expenditure affects taxes.
Financial advisers of fundMyLife share their opinion
Out of curiosity, we asked the financial advisers of fundMyLife on their opinion regarding the rider co-payment. Disclaimer: their opinions were either paraphrased for reading convenience or quoted verbatim.
Winifred believes that full coverage is the best. She sees why the Ministry of Health wanted to implement this due to rising claims and “free buffet” effect, and that there are too many people in hospitals trying to take advantage of insurance policies. However, she would rather they increase the premiums just like last year instead of co-payment.
Another point Winifred made was that it is better to, if you can afford it, buy the best of hospital plans. She shared that most people think that they won’t need it and buy cheaper riders in a bid to upgrade it in the future. However, unpredictable changes like this will happen and presumably throw people’s plans awry.
I think people are missing the point here. The fact is that there is going to be a gradual shift from government supporting us with subsidies and schemes to a more self-reliant ecosystem whereby we pay for what we want.
There is no point crying over spilled milk and who we should blame for this episode. We shouldn’t expect a U-turn from either the insurance companies or the government for this matter.
My suggestions are objective and pragmatic:
Over few years as we progress towards an aging population, we need to scrutinize our own portfolio to see if we have enough savings. Be real with yourself you haven’t saved enough or build up enough passive income. Because with whatever changes that might happen during the coming years (I don’t think this is the end), only one thing is constant. We are going to need more money for medical and for our daily cost of living. Hence, it’s better we start our planning today.
Private medical bills are increasing about 10-15% per annum for the past few years, so it’s little surprise that this has caused insurers plenty of concern.
But from a patient’s perspective, if the patient knows there’s insurance coverage and when the doctor recommends diagnostic tests etc, we’re not really going to say no. The main priority in our minds is just to make sure everything is okay. The cost part is taken care of by the insurance.
However, with the co-payment change, will we think twice about costs of tests? I doubt so. Health is still a priority.
A a consumer, it’s frustrating to not get full coverage or if you haven’t utilized your shield and your premiums are escalating. But it’s understandable that over the longer term, co-payment is the way forward. In fact, I think we’ll all be moving towards co-payment in the long run.
Melvin shared that it was easier to downgrade a rider than to upgrade it as upgrading requires medical underwriting whereas the other way does not. He recommends that you buy a better plan first to have more options available to you. On doctors who benefit from charging higher fees dues to insurance, he opined that it is challenging to figure out whether it is true or otherwise, and that good ones do want to treat the patients in the best manner possible.
Melvin said that it is easy to talk about co-payment for riders when it involves outsiders. For insurance companies, it makes sense. However, he pondered whether one holds the same opinion if his/her loved ones are the ones in hospital. He also questioned if a consumer would prefer co-payment or pay as-charged.
He also thought that there should be more innovative solutions out there such as Prudential’s PruShield, where customers enjoy premium discounts when there are no claims made whereas there is premium adjustment after claims. However, while solutions such as this is in the right direction for pricing structure, first-time buyers may reconsider getting riders in consideration of the likelihood of needing to pay higher premiums after claims.
What do others think about the rider co-payment?
We also browsed the Insurance Discussion SG Facebook Group, where a lively discussion took place. Both sides offered compelling argument for and against the new ruling. Of the few posts that we surveyed, there were thought-provoking comments. For example, a commenter mentioned why a doctor would order extra tests on a patient.
Both comments brought valid points to the table. That said, who should we blame in this who affair? There truly isn’t a sole party to blame – affordable and fair healthcare requires the cooperation of various stakeholders. Consumers, insurance companies, and healthcare providers are all in it to make healthcare accessible for everyone.
How will this change things for consumers?
As of the moment of publishing, there are currently no plans to require existing policyholders to co-pay their hospital bills. However, this could change since insurance companies will come up with more competitive and innovative plans to encourage existing policyholders to switch.
Is it the end of healthcare that we know it for future policyholders? Not necessarily so. Medisave can cover some of this co-payment, and the ministry estimates that 1 out of 2 rider policyholder will pay SGD$100 or less for hospital bills across all ward types. However, financial planning in the future will probably have to include planning for rider co-payment, since riders no longer offer full cover.
Worried about this new rider co-payment rule? Fret not – head on to our site to ask our curated pool of trusted financial advisers on what your next move should be, if you have not purchased one.
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