Keeping Yourself Healthy Gets To Play A Small Role In Keeping Your Health Insurance Premiums Low

Do you know that one of the small ways that you can help to possibly keep your health insurance premiums low (or unchanged) is by doing your part and keeping yourself healthy?

And the more the people are aware of this and doing their part of keeping themselves healthy… the better it is in the long run!

But before you think that I am talking nonsense and you are saying that this method beats the purpose of buying (or maintaining) a health insurance plan… let me share with you why I made that above statement and see if you can agree with me!

First… Let’s Understand Why Health Insurance Premium Increases

If you do not know how insurance works, here’s the general concept (note that I may have left out certain factors):

1. Insurance Company sets aside a pool of money meant for insurance claim payouts only (let’s call this a Risk Pool).

2. Healthy people buy insurance(s) from the Insurance Company and they pay premiums. Unhealthy people may also buy insurance(s) but most of the time they will pay higher premiums (or have restricted benefits while paying the same) while those who pose higher risk (equals higher chance of claiming) will not be able to buy.

3. The amount of premium that a person pays usually depends on the age group that he is in and the overall claim experiences that the insurance company has within the age group. You will notice that premiums for the younger age group tends to be lower whereas premiums can go very higher for the older age group.

A simple explanation is that if a younger person and an older person are to fall sick with the same kind of illnesses, the older person may tend to take a longer time to recover (e.g. more visits to the doctor, professional treatment is required and/or stronger and expensive medication types) which will lead to more and higher claim payouts.

So to factor in such circumstances, older age group tends to pay higher premiums (and this is calculated based on the insurance company’s claim statistics and experiences).

4. Premiums collected will be used to maintain the business (inclusive of making profits) as well as to maintain the Risk Pool. That is why people say that insurance is of which people come together to buy policies, pay premiums and share the risk.

5. When people start to make claim (because of issues like hospitalization due to major issues like long term illnesses or small issue like observations for suspected dengue), payouts are being drawn out from the Risk Pool.

6. If the drawn out rate is higher and faster than the premiums they can receive along with the company’s profits (inclusive of other accounting, reinsurance fees and management factors) and is affecting the overall company’s cash flow…

Premium will tend to increase across a certain age group or across the board!

Side Note:

Premiums for Private Health Insurance Plans include the premium for CPF Medishield. So if the Health Ministry decides to increase the premium for CPF Medishield (for example, the upcoming Medishield Life Plans), the premiums for Private Health Insurance Plans will follow suit.

That’s Why Keeping Yourself Healthy Will Play A Small Part In Helping To Keep Your Health Insurance Premiums Low Or Unchanged

So if you have read through the points that I have listed above, you may agree with me that by not making any health claims (which requires you to do your part in staying healthy) although unavoidable because of the current majority… you will help to prevent the drawn out rate from going high and provide less reasons for insurance companies to increase the premiums (e.g. to maximize profits).

For this to work to your advantage also requires fellow policyholders to keep themselves healthy. It may be tough but if you and I can do our part in making this move first and slowly influence the people around us… we will eventually enjoy from it!

Meanwhile Insurance Companies (and the Planners) need to get out there and have more people covered by their health insurance plans (not for profit reasons but more for keeping the drawn out rate in balance).

So Do I Still Need A Health Insurance Plan If I Can Keep Myself Healthy?

The hard truth is that nobody buys a (e.g. term / health ) insurance plan with great hopes of making a claim other than those Savings and Whole Life plans which you get to enjoy benefit returns (upon maturity).

Insurance Plan, or in this case, a Health Insurance Plan, is always a form of assurance to yourself and your family that if any unforeseen circumstances (e.g. a long term sickness or unexpected accident) happen… you have the financial means to depend on and not make you worse off!

For example, you may have paid $1000 in health insurance premiums over the last few years but a sudden and really unexpected illness that involves hospitalization and surgery (e.g. choking on a fish bone) cost you around $5,000. Without a health insurance plan, you may have to pay the full $5,000 from your personal savings (which may have been intended for holiday use) or partially from your CPF Medisave Account. But because you are covered with it, your Insurance Plan gets to take care of everything and you still get to enjoy your intended holiday!

The other good thing is that if you have started claiming for a long term illness, your insurance plan will still take care of the hospital bills as long as you are alive but suffering.

Therefore if you are not too sure if you can always stay healthy in the future (especially if you know of some family history), you are definitely better off by getting yourself covered.

But if you are sure of your health in the long run or have the external means to take care of any hospital bills (e.g. a very comprehensive company medical benefits plan)… you can definitely choose not to take up or to continue with any health insurance plan!

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comment 2 comments
  • Amal

    Hi , thanks for writing about this great article about medical insurance , I have a question as i am considering buying a medical insurance for my elderly parents and i came across this article :

    https://qompanion.my/articles/is-medical-insurance-costly-for-my-elderly-parents

    My parents to dont have any of the critical illnesses so they are eligibal for the normal medical insurance policy , however they only stay in Malaysia for 6 months do you find it worth it buying a medical insurance for them ?

    thanks

    • Dexter Chan

      Hi Amal, thanks for your comment. In order to know if it is worth it, will depend on many things, e.g. if you can afford the premiums in the long run, eligibility of your parents, the benefits and limitations of the plan and more. If you know about the plan, you can do some immediate, short and long term scenario planning and see if the plan works well. For example, if your parents are covered but *touch wood* something happened when they are out in Malaysia, will the plan still cover them outside of Malaysia? If not, will they (because of the medical conditions) be able to come into Malaysia? If yes, how much can the plan take care of you and your parents? Do some thinking, planning, talk to Financial Planners and look around for suitable plans. If there is a plan that ticks most of your criteria, then go for it. Hope this helps!

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