Existing Integrated Shield Plans With Full Insurance Riders Are Being Replaced

A massive piece of news enveloped the private health insurance industry just before the Chinese New Year. It was reported by the Straits Times that several private insurers are moving existing integrated shield plans (‘IP’) that comes with full riders towards IP with co-payment features upon their respective policy renewals. This pivot by the private insurers is welcomed by the Health Insurance Task Force as it has recommended them to include co-insurance, deductible features in their products to ensure consumers have skin in the game to rein in rising healthcare costs.

Summary of Events

Judging from how fast premiums have been rising 30% to 40% in the past 2 years (even for a child!), I was not surprised that the replacement of full riders on existing shield plans have occurred. What surprised me more was just how soon this change came about, considering the timeline of events:

• 7 March 2018 – Ministry of Health (‘MOH’) announced that people will no longer be able to purchase private healthcare insurance that comes with riders that pay their entire hospital bills. It will be mandatory for private insurers to sell IP that come with co-payment component from 1 April 2019. This regulatory requirement WILL NOT affect the 1.1 million people who already have full riders for their IP.
• 1 April 2019 – New IP riders sold by private insurers will include minimum co-payment requirements (5% of hospital bills)
• 3 February 2021 – NTUC Income began notifying its customers that even existing shield plans with riders that cover entire hospital bills will have a co-payment feature (at least 5% of the hospital bill) upon renewals from 1 April 2021 onwards. Co-payments will be capped at $3,000 per annum, subject to various conditions being met. In the same report, other private insurers such as Aviva and Prudential Singapore stated that they will be doing the same as well. It will not be surprising that the remaining private insurers will adopt a similar stance shortly.

Before the 1.1 million policyholders start crying foul play, let us first acknowledge that contracts between policyholders and private insurers are commercial in nature and are subject to changes from time to time. For instance, we often receive addendums to our policy contracts indicating that certain definitions may have changed.

What Are The Key Changes?

Depending on which private insurer your private ISP is signed with, you would find that your previous full riders may now include a mixture of the following components.

1. Co-payment of at least 5% of hospital bill

Given that private insurers have almost a year of data to analyse since 1 April 2019, they must have noticed that co-payment riders have achieved the desired outcomes. Therefore, the transition from full riders to riders with co-payment requirements have been enforced on existing policyholders even though they are not required under regulatory requirements.

As the name suggest, with the introduction of a co-payment element, policyholders now no longer pay zero out-of-pocket expenses for their hospital bills. A comparison is made in Diagram 1 to illustrate the difference in additional expenses a policyholder can expect to pay for a hospital bill size of $50,000.

The difference in the final bill payable is $3,000. That would be the out-of-pocket costs that a policyholder who was previously on a full rider would now have to fork out on a hypothetical $50,000 hospital bill size. It must also be noted that this cap of $3,000 only apply because the consulting doctor is assumed to be from the Panel of Preferred Doctors. If not, the final bill payable would actually be $7,000. ($5,000 + additional $2,000 fee applicable for consulting a doctor from a non-panel)

2. Panel of Preferred Healthcare Providers

As illustrated earlier, having a cap on co-payment is critical as it allows policyholders to plan with great certainty on their maximum exposure/downside risks on a medical bill per year. Furthermore, the final bill can still be paid by MediSave, subject to withdrawal limits set by CPF. This further cap the actual cash outlay and explains why Heartland Boy has been depositing Olympia’s CNY angbaos into her MediSave account.

However, the cap on co-payment is premised on the assumption that one visits a doctor on the private insurers’ panels. Potential issues have already surfaced as published on the forums:

• Patients with long underlying medical issues may have to switch to new doctors who are on the panel to curb their healthcare expenses. However, these new doctors may not be as familiar with the patients’ medical history compared to their previous long-time doctors (who are not on the panels).
• To get into the panels, doctors have to comply with fee schedules and contract fees set by the private insurers that take reference from MOH’s fee benchmarks
• Even healthcare professionals and partners who are able to comply and wish to opt in may not be able to do so as the panel could already be “full”

If you are a caregiver, I am sure you will empathise with the unease experienced by your loved one due to a new doctor in an unfamiliar environment. This sudden change should not be underestimated and it would be hard to put a monetary value to it.

3. Premiums instantly reduced across the board

If the private insurers are taking away the benefits of full riders, they are somewhat giving it back by charging lower premiums. As consumers of healthcare products, we all hope that premiums increasing by a staggering 30-40% per renewal would be a thing of the past. In the previous blogpost, I already highlighted that policyholders aged between 66-70 who are on Enhanced IncomeShield (Preferred) with Plus Rider already experienced a 35% increase in their annual premiums as shown in Diagram 2.

If this doesn’t have you quaking in your boots already, imagine how much it will be when you eventually reach that age group if premiums continue to increase exponentially like the previous few years!

Why Should We Be Concerned?

I have always viewed an integrated shield plan as the most basic and important insurance policy to purchase as it enhances the coverage offered by the compulsory MediShield Life. That is why it was the first insurance policy that I purchased for my child. Its importance was reinforced by my painful experience of paying for her hospitalisation bill when she was still not old enough to own a private healthcare plan.

After the announcement on 7 March 2018, I discussed with my insurance agent and purchased an Assist Rider for my NTUC Enhanced IncomeShield Advantage plan. Since I only purchased a rider after the 7 March 2018 announcement, I was not affected by the latest announcement by NTUC Income as I was already mentally prepared to pay out of pocket costs with a cap. Unfortunately, the Assist Rider will soon transition to the Classic Care Rider after 30 June 2021. I would definitely need to consult my insurance agent as we review my next step then. For the rest who are on full riders, do check and keep a lookout for announcements from your insurers to understand the changes.