Co-Payment For Private Shield Plan Riders – Good Or Bad?

If you have not read the news (a very hot topic on the social media platforms now), the Ministry of Health (MOH) has plans to revamp all the present Full Payment Rider into one that comes with a co-payment (around 5% of claimable amount) but with a cap (up to $3,000 or more each year). So is this a good move or bad move?

My Personal Opinion: This is a good move and good in the long run.

But before I share my views on why this is good move… let’s review the why the change and features of these two riders…

Why The Change? Over-Consumption, Over-Servicing and Over-Charging!

If you have read the news, the reasons for this change are due to Over-Consumption, Over-Servicing and Over-Charging which I do agree.

For Example:

On Over-Consumption… in my current line of work, I get to work with Hospitals on the Patient Admission Process (IT portion) and there were many cases whereby the staffs shared that patients chose to go for the highest ward because of their entitlement (i.e. they have a plan and rider that covers 100% of the bill) even though they don’t really need it. You can refer to this link to see an example of the different ward charges (Standard Ward Class A is at $466.52 per day versus Standard Ward Class B1 at $251.45 per day).

On Over-Service and Over-Charging… which I believe (not 100% sure) is more applicable to the Private Hospitals side where most of the resident doctors there work and operate on their own basis (i.e. the Private Hospital is merely a platform for them to utilize the equipment and space). Control may not be as strict as Restructured Hospitals in terms of a standard list of procedures, medicines and prices… so when a doctor recommends a package of this, this and that for an admission and the patient agrees (because bill is 100% covered and as a layman we are not too sure if the recommendations are necessary). This can result in Over-Service and Over-Charging.

So I believe a change of rider type has to be introduced to take care of these issues and to pass back a little responsibility to the patients (they have to start asking on the charges and if treatments are necessary). Additionally, I also understand that MOH is working to release a standard list of treatments and charges for public references.

Now We Come To The Features Of The Riders

Deductible & Co-Insurance

If one (he) did not buy a rider (payable by cash only) to go along with the As-Charged Private Shield Plan (payable by Medisave and up to a cap), happened to be hospitalized and had a Inpatient bill of $10,000 (assuming $10,000 is the actual claimable amount), he would have to take care of the deductible (e.g. $3,500 for a Ward A) and co-insurance (usually at 10%) first before the rest is taken care of by the Insurer.

So this patient would have to pay $3,500 + 10% of ($10,000 – $3,500) = $4,150 out of his own pocket (and Medisave Account) whereas the remaining bill of $5,850 will be taken care by the Insurer.

Full Payment Rider – Basic Feature

But if he decides to buy a Full Payment Rider, the Deductible and Co-Insurance portion are basically taken care (which means $10,000 bill is 100% covered by the Insurer) of and he will be covered right from the $1 dollar onward (meaning even if the bill is below the deductible of the ward, e.g. $3,500, insurer will still cover 100%). If this guy happens to be hospitalized again within the same policy year, the new bill will still be 100% covered by the Insurer.

Co-Payment Rider – Basic Feature

If he goes with a Co-Payment Rider (assuming it’s the proposed rider by MOH) versus the Full Payment Rider, he would have to pay 5% of the $10,000 bill (= $500, Remaining Cap = $3,000 – $500 = $2,500). Depending on the nature of the treatments and such, most of the bill payment can be settled by the Medisave Account else it will be cash payment. If this guy still happen to be hospitalized again (e.g. 2nd bill is $20,000, his co-payment will be $1,000 but if it is a bill of $70,000, his co-payment will be just $2,500 instead of $3,500). Any hospitalization after that will be covered 100% by the Insurer. This will be reset when it comes to the next Policy Year.

So Why Is A Co-Payment Rider Good In The Long Run? My Personal Views…

Now that you know the basic difference between a Full Payment and Co-Payment Rider, I will like to share my personal views why a Co-Payment Rider is good in the long run… You may or may not choose to agree to my views.

– Co-Payment Rider Is Not Something New (And You May Not Be Worse Off When It Is Released)

A Co-Payment Rider is not something new in the Singapore Insurance Market. One other Insurer has a few variations of this Rider (existing one covers Co-Insurance only and they used to have another one that covers just the Deductible). Another Insurer offers this Rider (which I am covered) and on top of that there is a Hospital Cash Benefit when you decide to get admitted to a lower Ward Class. This Hospital Cash Benefit can be used to offset the Co-Payment Portion (not directly and you get to decide if you want to do so) which means I may not have to pay anything at the end of the day.

Insurers may differentiate themselves by adding different new features on top of the basic ones and at the end of the day, you may still enjoy the same features as a Full Payment Rider but enjoying a lower annual premium rate.

– Cheaper Premium & Lower Premium Increment As Compared To A Full Payment Rider

If you look at the existing annual premiums between a Co-Payment and a Full Payment Rider, the former is usually 40% – 50% cheaper in the long run. When it comes to Premium Increment (rate is never guaranteed and may increase due to claim experiences), the increment is generally lower as compared to a Full Payment Rider as well. The premium for my rider had just increased for this year and it is still not that ‘scary’ as compared to my counterparts who are having the Full Payment riders and have gone through a few increment cycles.

– It Can Be A Financial Burden Relief For Some

I knew of a few clients back in my old days of a Financial Planner whereby they had to take on the annual cash payments of the Full Payment Riders for themselves, their parents, spouse and children. The amount was huge and was quite a financial burden but they were still holding on because of the fear that one day something bad may happen to any of the family members and they had something on standby. Therefore the introduction of this Co-Payment Rider can be a financial relief for some especially when the premiums are lower. The differences in the premiums mean that they may save it for other areas or for any standby situations.

– Passing A Little Responsibility Back To The Patient

The Co-Payment Rider may introduce a different mindset for the patient when it comes to Admission. If he decides to go for a Higher Ward (when not required), he has to be willing to bear the differences in cost. Likewise for treatments, the patient (or Next-Of-Kin) may need to probe the doctor and start asking if the recommended treatments are necessary since the patient has to bear a small part of the bill now.

So Should I Switch To A Co-Payment Rider If I Am On A Full Payment Rider?

My current understanding is that if you are already on a Full Payment Rider, you may still hold onto it but you are given the option to switch over to enjoy the lower annual premium.

My view is that whether to switch over will depend on your Financial Ability to handle the premium increments and higher premium rate in the older age band. On top of that, you may have to ask yourself if there’s really an admission, will you be able to handle at least 5% of the bill (and the Payment Cap) in the short and long term.

What Should You Do Now?

If you are thinking of getting a Rider now, you should just get it (the Co-Payment Rider) and don’t wait because with a sudden change in Health would mean not being able to get a Rider at all.

You may not be worse off with this Rider since you will still be enjoying a lower premium rate and I believe Insurers may still introduce new features to the Co-Payment Rider in the future. For now, you can always use the Premium Difference to get other insurance plans if you are still worried or save up/invest in an account which you will not touch at all.

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