Health insurance riders have caused quite the stir, with a new panel suggesting they be done away with permanently. But without going into the complications of the wider industry, let’s consider the impact of riders on the individual. For many policy holders, riders are popular for their real (or perceived) savings:
What is an insurance rider?
Insurance riders are extras, added on to an existing policy. In Singapore, about half of all the policyholders with an Integrated Shield Plan* (IP) have insurance riders.
An insurance rider adds to the premiums (costs) of the insurance policy. However, it ensures that you will not have to pay a deductible or co-insurance amount (see below for more details).
(*An IP is a private insurance policy, which stacks with MediShield Life. Premiums can be paid using Medisave. This is used by Singaporeans who want greater coverage or payouts than Medishield Life alone can provide. About two-thirds of Singaporeans currently have an IP).
Benefits of the insurance rider
The benefit of the insurance rider is that you won’t have to pay the deductible, and the co-payment.
The deductible is the initial sum you need to pay for treatment in a policy year, before you can make claims under Medishield Life. This is S$1,500 if you stay in a C class ward, and S$2,000 in wards classed B2 and above.
However, note that for some forms of outpatient treatment, there is no deductible. Chemotherapy and kidney dialysis are two examples of this. You will have to check with the medical officer in the hospital regarding your specific case.
The co-payment is the amount of the medical bill you are liable to pay, after insurance coverage. This ranges between 10 to 20 per cent. In general, the larger your bill, the lower the co-payment.
For bills of S$1,501 to S$3,000, the co-payment is 20 per cent.
For bills of between S$3,001 to S$5,000, the co-payment is 15 per cent.
For bills above S$5,000, co-payment is 10 per cent.
For example, say you get into an accident, and require hospitalisation and treatment. You stay in a C class ward. Your total medical bill is S$7,500.
You would pay:
- The first S$1,500 as a deductible
- For the first S$1,501 to S$3,000 of the bill, you would pay 20 per cent, or S$300
- For the next S$3,000 to S$5,000 of the bill, you would pay 15 per cent, or S$300
- For the last S$2,500 of the bill, you would pay 10 per cent, or S$250
In total, you would pay S$2,350 out of a total medical bill of S$7,500.
If you had an insurance rider however, it would also cover the cost of the deductible and the co-payment. As such, a person with an insurance rider would pay S$0 for the above bill.
The key benefit of not worrying about bill size
This is the part where it gets sticky for the healthcare industry as a whole. But looking at it from a personal level, riders provide a lot of options and reassurance.
For example, say you are having severe headaches, that developed along with your current medical issues. It may just be another symptom, or it may indicate something serious. Your doctor wants to send you for some tests and scans.
The collective tests and scans come up to S$1,500. Remember that, because there is a co-payment, you will still end up paying a higher bill, even if your policy covers part of the cost. As such, financial considerations might cause you to take a risk, and skip doing the added tests and scans.
If you had insurance riders however, you wouldn’t need to worry. There is no co-payment.
This is why the healthcare industry doesn’t like riders. Policyholders who don’t have to pay anything become more likely to “overconsume” medical resources, and doctors become incentivise to prescribe an excessive barrage of tests in order to be “extra safe”.
There is a virtually 100 per cent chance you will use the rider at some point
With other forms of insurance, such as insuring your business or car, many people are reluctant to buy extras features.
However, money spent on riders is less likely to be a waste. This is because almost everyone gets sick or injured at some point. So even though riders raise premiums, many Singaporeans feel it is not a waste to buy them, especially if they have pre-existing conditions or are trying to save on maternity costs.
The riders may not be around for long
Because insurance riders cause people to consume more healthcare resources, they will – over time and on a broad scale – cause insurance premiums to rise for everyone. It’s quite likely that they will be done away with soon.
Setting aside industry-wide concerns however, it’s obvious why so many Singaporeans are willing to purchase riders. If you’re interested, you should talk to a financial advisor about it, while you still can.
This article was contributed by SingSaver.com.sg, Singapore’s number one personal finance comparison site for credit cards and personal loans.