Last week, it was announced that private integrated shield plans (IP) offered by insurers in Singapore will no longer be able to offer full rider coverage. This comes off the back of high inflation in Singapore over the past few years, which has threatened to make healthcare costs in Singapore unsustainable, if not tackled effectively today.
The Problem at Hand: Full Rider Coverage Leads to Overconsumption
For those of you who are not familiar, private integrated shield plans are add-ons to the existing MediShield Life that we already have. While coverage to MediShield Life is pegged to treatment costs in Class B2 and C wards in public hospital, an integrated shield plan allows policyholders to cover their medical fees at higher-class wards in public hospitals or private hospitals.
However, even when covered under an IP, policyholders still need to typically co-pay 10% of the hospital bill. To cover that, most insurers offer a full rider option that covers the entire bill, ensuring that policyholders do not even have to co-pay part of the hospital bill.
Moving forward, this will no longer be the case.
The Ministry of Health has announced that new IP riders will have to incorporate a co-payment of 5% or more.
Since the announcement, there has been a fair number of articles, questions, opinions, confusion and even misconceptions on the implications of the changes.
To help you understand how these changes may affect all of us, we will highlight 5 important facts that we all need to know.
# 1 If You Have an Existing IP With Full Rider, Nothing Has Changed for You
We have observed some confusion about whether the changes announced will affect Singaporeans with existing IPs with full riders. The simple answer is no. This is the first (and most important) thing you need to know.
In spite of the changes announced, insurers in Singapore must continue to honour commercial contracts that they already have with existing policyholders. The new changes only affect new riders, and not existing ones.
If you have been approached by an overly enthusiastic insurance agent hoping to capitalise on the announcement to generate sales lead for themself, do take note of this. The changes do not affect your existing policies in any way. Also, nothing in the announcement requires you to act immediately.
# 2 Co-Payment Riders with Cap are Not a New Product.
In his speech, Mr Chee Hong Tat, Senior Minister of State for Health, mentioned that “most insurers are planning to launch their new riders (with co-payment) with an annual cap of $3,000, though they are allowed to set higher thresholds.”
To some, this may come across as MOH getting insurers to create and launch a new type of rider.
Truth is, it’s nothing new.
For example, NTUC Income already has the Assist Rider. This rider provides a cap that policyholders have to co-pay in each policy year. This is similar to what is being proposed in the changes announced, where insurers will offer riders that require policyholders to co-pay part of the hospital bill, up to a certain cap.
Co-payment is good because it helps prevent the moral hazard problem where policyholders overconsume expensive healthcare services, knowing that they are fully covered. By having to pay a small co-payment fee, it ensures that policyholders are partially responsible for the hospital bills that they incur.
At the same time, the cap on the maximum amount of co-payment a policyholder has to pay each year also provide a form of assurance that unexpectedly large hospital bills will still be largely covered by the insurance policy.
For example, with a co-payment of 10%, up to a cap of $3,000 per year, a policyholder who incurs a bill of $100,000 will pay only $3,000 (cap), instead of $10,000 (10% of the bill).
# 3 If You Buy a New IP Plan Today with Full Rider, You Will Have to Switch to Co-Payment Rider
To give insurers time to design the new co-payment rider, IP plans that offer full riders will be available for now.
However, policyholders who buy an IP plan with full rider will eventually have to switch (by 1 April 2021) to the new rider with co-payment.
Again, we stress this only applies to new IP plans with full rider that were bought after the announcement has been made. If you already have an existing IP plan with full rider, this does not apply to you.
# 4 If You Are Already on a Rider with Co-Payment, You Do Not Have to Worry
For existing policyholders who have an IP plan with rider that includes a co-payment, there is nothing you need to worry about.
In his parliament speech, Mr Chee Hong Tat mentioned that “the requirements for new riders will not affect MediShield Life and Integrated Shield Plans which already have co-payment features”.
Simple as that.
# 5 If You Intend to Switch, Be Careful
If for any reason you intend to switch policy or insurer because of the change (even after we stress there is no reason to do so), do note that any pre-existing conditions may not be covered by your new insurer when you switch.
If you upgrade your policy within the same insurer, you may not be covered for your pre-existing illness.
This is particularly important for us to stress because we do not want Singaporeans to accidentally lose their coverage due to the sudden heightened interest surrounding integrated shield plans, where over-enthusiastic agents may capitalise on the news to convince policyholders to switch plans in order to enjoy a “better” product in light of the upcoming changes.
Summary: Our Main Points
To summarise this article, we like to recap the following.
> If you already have an integrated shield plan with full rider, you will continue to enjoy this coverage. You will not be forced to switch to any new plans. Do note however that you should expect your premiums to continue increasing in the future, since the policyholders who are most likely to claim on their hospital plans will also be the ones least likely to switch.
> If you have an integrated shield plan that includes a co-payment rider, you will not be affected.
> If for any reasons you are switching your plan, be extra careful to ensure that you do not lose any coverage due to pre-existing conditions.
> Lastly, there is no need for you (or anyone you know) to act immediately to buy or switch plans. Any IP riders that you have bought will continue to function in the same way.
If you have a question or would like to discuss your opinions on the latest changes, you can join the open Insurance Discussion SG Facebook Group, where you can engage likeminded individuals who are passionate about insurance matters in Singapore.
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