Weighing the cost of health cover in one’s senior years

[SINGAPORE] Most Singaporeans worry about high medical expenses in their senior years, as many surveys have found. Insurance is a major tool to lighten out-of-pocket healthcare expenses. But what if we can’t afford the premiums as we get older, when the cover is most needed?

The Central Provident Fund Board’s latest tool – the Health Insurance Planner – sets out in stark detail how much your premiums will eventually cost and the possible funding shortfall.

The planner projects your long-term MediSave balance and the premiums from MediShield Life, Integrated Shield Plan (IP) and rider, and CareShield Life and supplements if you have those. The planner enables comparisons of your IP coverage and premiums with others in the market.

To be sure, health insurance premiums rise with age. But the planner has crystallised this escalation in a way that is rather startling. I don’t have an IP rider, so that saves a huge chunk of costs. And, I have already downgraded my IP from private hospital to Class A ward in a restructured hospital. Still, from now to age 90, premiums of my private plans are expected to balloon by 21 times. What if I live to 100?

Will I need to eventually drop my IP cover completely? If so, I may become part of a growing pool of seniors who eventually rely on MediShield Life alone. It was reported last year that between 2020 and 2023, 2.2 per cent of people over the age of 60 gave up their IPs.

Longevity and the rising cost of medical technologies are challenges for both policyholders and insurers. Yet a survey of insurers by advisory firm WTW found that the top cost driver is behavioural – that is, 79 per cent of respondents in Asia reported that medical practitioners recommend too many services, including the overprescription of medications and diagnostics, which result in unnecessary and excessive costs.

But policyholders’ behaviour also plays a part. An overly generous plan design is widely blamed for the “buffet syndrome” or overconsumption of healthcare. In the past years, insurers have taken steps to modify their plans, such as requiring 5 per cent co-payment and the use of their panel of doctors which may lower the cost of riders. But with stubbornly high medical inflation, the steps may not go far enough to dampen premium rises. It remains to be seen whether more drastic changes are on the cards.

Quite apart from plan design, it’s important that policyholders understand the concept of risk pooling – that one’s personal actions can have ripple effects on the entire risk pool. Alex Lee, president of the Singapore Actuarial Society, said: “If everyone starts consuming beyond what they can usually afford, the pool can only remain sustainable by making everyone pay more, or those who come later get a lower payout, or both. At some point, the premium rate may rise to a level unaffordable to some; and they will be forced to drop out, further constraining the resources available to the pool… The expectations and behaviour of others in the same plan as you affect how much (in) premiums you pay.”

For now, it is also important to review your current cover and try to anticipate the affordability of future premiums and your funding shortfall. Steps you can take include topping up your MediSave, putting aside more cash as savings, and downgrading your IP. Most of all, exercise restraint in how you consume healthcare. This may seem too insignificant to make a difference, but it surely goes some way to help the sustainability of your plan’s premiums and benefits.