The recent news of fewer individuals opting for private hospital insurance plans, coupled with a growing number of older adults abandoning such coverage altogether, underscores a significant shift in healthcare preferences and financial decisions.
It presents sobering observations that prompt us to reconsider our approach to hospitalisation insurance.
First, many seem to be overbuying their hospital plan.
7 in 10 people own an Integrated Shield Plan (IP) that entitles them to enjoy higher wards in B1 or A in both public and private hospitals. However, 57% of the hospitalisations during the period 2020 to 2022 were in B2/C wards (refer to chart below).
Source: CPF
- 89% of B1-IP holders stayed in B2/C wards (under-utilised), 6% were above their entitlement
- 82% of A1-IP holders stayed at B1 or below (under-utilised), 9% were above their entitlement
- 52% of Private-IP holders stayed in public hospitals (under-utilised).
This indicates that more than half of IP-holders did not utilise their IP benefits.
This raises the question: If subsidised treatment (i.e. at B2/C wards) is the preferred choice, why bother paying so much for an IP?
Second, the cost of IP varies widely across all seven IP insurers.
The most expensive IP would cost $324,000 for the main plan and up to $842,000 with the rider, over a lifetime of 100 years. In contrast, the cheapest IP for private hospitals costs $234,000 for the main plan and $331,000 with the rider. And these are costs in addition to the MediShield Life premium!
Indeed, IP insurers tend to differentiate their plans by offering wider benefits, but these are reflected in the price. While the price disparity may not be significant at younger ages, it can become a financial challenge in retirement. Moreover, switching to a cheaper IP insurer later in life isn’t always feasible due to potential health restrictions. Given the frequency of IP premium adjustments every few years, premiums are bound to continue rising.
Third, it is no surprise that older people are reviewing and downgrading their IPs.
About a decade ago, premiums for IPs, even for private hospitals, were much affordable, allowing for greater flexibility with a higher tier plan. For example, having a private hospital IP provided options to consult private doctors if the waiting time in public hospitals were longer than expected. Or the flexibility to seek help from private doctors as a last resort, if treatment in public hospitals were not favourable.
However, after successive premium hikes, people are now taking a hard look whether this is necessary and affordable.
How should you review your IP?
Reviewing your Integrated Shield Plan (IP) involves considering several factors, there are some general guidelines to help you make more informed decisions:
1. Healthcare Expectations: Evaluate what healthcare services are essential and what are optional based on your needs and preferences
2. Long-term Premium Commitments: Assess the affordability of the premiums over the long term and how to manage these ongoing financial obligations
3. Probable Utilisation: Consider your likely use of the IP, especially if you have pre-existing medical conditions that may require frequent claims.
4. IP Riders: Riders offered by some IP insurers can cost as much as the main plan. Determine if additional riders are necessary. Some IP riders can significantly increase costs but may provide coverage for treatments not included in the main plan, such as certain cancer treatments.
5. Tier of Coverage: Explore higher-tier plans while they are still affordable, especially for children, and re-evaluate as premiums increase over time.
If you are reassessing your IP plan and would like professional assistance with reviewing your medical insurance, we invite you to reach out for a complimentary InsureWell assessment.
This is an original article written by Eddy Cheong, CEO of Havend.