Earlier this year, the government announced that patients who buy new Integrated Shield Plan (“ISP”) Riders must make 5% co-payment, with an annual cap of $3,000. This is a change from the previous position whereby purchased riders could potentially waive the entire hospitalization bill. This intervention from the government left many private insurers scrambling as they have until 1 April 2019 to roll out new riders that include the co-payment and cap.
Heartland Boy was caught with his pants down too as he only had an ISP with no riders. For too long, he had always felt comfortable enough to rely on the Health & Surgical insurance coverage provided by his company. However, some life changing events and this particular announcement from the government set him thinking. Therefore, he decided to purchase an Assist Rider for his existing NTUC Enhanced IncomeShield Advantage plan.
What Is An Integrated Shield Plan?
Integrated shield plan are private insurance plans that covers the costs incurred for hospitalization and surgical procedures. An integrated shield plan consists of 2 components:
- Medishield Life run by the Central Provident Fund Board
- Additional private insurance coverage component run by private insurers
Medishield Life is compulsory for all Singaporeans and Singapore Permanent Residents. Coverage is provided regardless of age or pre-existing conditions. As its scope is so broad, it is only sufficient to cover large hospital bills in Class B2 or C wards in public hospitals.
That is where some individuals decide to upgrade to additional insurance coverage offered by private insurers. These plans provide additional coverage to cover the cost of private hospitals or Class B1/A wards in public hospitals. NTUC Enhanced IncomeShield is one such example. Do note that ISP is entirely optional although Heartland Boy would highly recommend that financially responsible adults should always seek to obtain one. This is especially since premiums for ISP can also be paid from Medisave.
What Are Insurance Riders?
An insurance rider adds or amends the coverage of terms in an insurance policy. In the case of Integrated Shield Plan, it is common for riders to waive expenses such as deductibles and co-insurance. Here are the definitions of deductibles and co-insurance:
- Deductibles refer to the portion of an insurance claim that has to be paid by the insured. For instance, it is common to pay $3,000 as deductible for a Class A ward in a private hospital.
- Co-insurance refers to the insured paying a percentage of the hospital bill after deductibles. Once again, the market norm is 10% of the hospital bill as co-insurance.
The emergence of riders to waive deductibles and co-insurance led to a phenomenon of patients “over-consuming” medical demand. Basic economic theory can explain why consumers tend to over-consume a product when it is free. (Note that it is free in this case as the premiums would have been incurred anyway) As a result, private insurers made underwriting losses and have to raise premiums on these ISP. The Singapore government stepped in as she deemed that this was clearly unsustainable in the long-run.
How Does The NTUC Enhanced IncomeShield Assist Rider Work?
While waiting for private insurers to roll out new riders with the 5% co-payment and $3,000 annual cap, Heartland Boy decided to plug a hole in his existing Hospitalisation & Surgery policy first. He purchased NTUC’s Assist Rider which helps to waive deductibles and limit co-insurance payment to $2,500 per annum for his NTUC Enhanced IncomeShield Advantage plan. For this additional Rider, Heartland Boy pays an annual cash premium of $118. Note that riders cannot be paid using MediSave.
To illustrate the benefits that the Assist Rider bring, let’s compare the size of Heartland Boy’s hypothetical hospital bill size with a NTUC Assist Rider example.
Therefore, with the Assist Rider, Heartland Boy can be assured that the maximum outlay that he pays for his hospital bill will be a manageable $2,500. While it is not a full waiver, $2,500 per annum is a manageable amount for Heartland Boy’s household. The rest of the medical bill will be reimbursed when the claim hospital and surgical claim form is duly completed. In contrast, had Heartland Boy not bought the NTUC Assist Rider, his out-of-pocket expenses would have been a total of $8,150, or $5,650 more. Heartland Boy thinks that it is worthwhile to be paying $118 cash premiums for the NTUC Enhanced IncomeShield Assist Rider to cap his out-of-pocket hospitalization expenditure. Having to co-pay a maximum amount of $2,500 also helps to instill a disciplined approached towards the consumption of a public good.
Conclusion of Integrated Shield Plan Riders
It is true that Heartland Boy considers himself late to the game. However, he still feels that the NTUC Assist Rider satisfies a key requirement for his medical insurance coverage. For those who bought full riders waivers, don’t be too happy yet as Heartland Boy expects the premiums to skyrocket gradually. Ultimately, private insurers are for-profit companies and there is nothing stopping them for increasing the premiums with a stroke of a pen.