Get ready for pricier private hospital Shield plans and riders

IF you are Singaporean or a resident with a CPF account, you will surely have hospitalisation insurance in the form of MediShield Life, and most likely also a private Integrated Shield plan (IP). It is estimated that nearly 4 million people are in the MediShield scheme as at 2016, and two-thirds have an Integrated Shield plan.

Yet even with the sizeable numbers, navigating the IP landscape isn't as straightforward as it should be. This is due to a number of sobering trends. One is that premiums have escalated through the years, as insurers have increasingly found themselves grappling with mounting underwriting losses. Based on data by Wen Research for 2017, virtually all insurers in the scheme incurred underwriting losses. Losses of S$146 million were estimated in 2017, compared to under S$100 million in 2016.

For policyholders this presents a discomfiting dilemma, as the premium escalation is by no means even among the insurers. Some have hiked premiums more steeply particularly for older ages. As a policyholder ages, it becomes less easy to switch insurers as he or she may have developed health conditions that may be excluded by a new insurer. In addition, it is very difficult at the outset to have any visibility as to an insurer's portfolio of risk and the likelihood and extent of premium rises.

More recently, following the findings of the Health Insurance Task Force 2016 report which indicated over-consumption of health services among those with IPs and riders, as well as the possibility of over-charging among private hospitals, changes in the structure for riders are in the offing. Until recently you could buy riders to cover the deductible and co-insurance portions of a hospital bill. This allowed you to enjoy cover from the first dollar of costs.

As of April this year, insurers must launch new riders, where the co-payment benefit is 5 per cent (compared to the current 10 per cent), and there is a co-payment cap of S$3,000 per policy year. This means that new subscribers of riders from April will no longer be able to have coverage from the first dollar. This move is an effort to rein in over-consumption of healthcare and hopefully also slow down the rise in premiums. The HITF report found that the hospital bills of people with full riders are 60 per cent higher than those without riders. As at 2016 about 1.1 million people have full riders.

Those who already hold comprehensive riders can continue, but the writing on the wall is clear. They have to brace themselves for steep premium rises.

There is good news, however. One is that insurers have rolled out versions of riders where policyholders who agree to submit their cases to the insurer's panel of doctors or a pre-approval system can pay lower premiums.

Aviva has rolled out new riders that comply with the 5 per cent co-payment requirement. Income expects to launch its rider in March and the rest in April. Aviva says its new riders are 20 per cent cheaper than the current comprehensive version; AXA indicates savings of between 28 and 54 per cent.

Here are some things to note if you are thinking of switching your IP, or considering a rider.

The accompanying table of IP premiums is for private hospital plans only which are the main culprit for over-consumption, and hence see the steepest escalation in premiums. The IP premiums exclude MediShield Life. But your actual total cost should include the premium for MediShield Life, which is also reflected in the table.

Between 2016 and 2018 some insurers raised premiums substantially. For example AIA's HealthShield Gold Max A premium for the 46-50 age band rose 36 per cent from S$570 in July 2018 to S$775. The 56-60 age band's premium rose 30 per cent from S$1,043 to S$1,355.

Aviva raised premiums in 2016 for its private MyShield Plan 1 across a number of age bands, and kept premiums steady in 2017. But in 2018, premiums rose between 6 and 15 per cent for those aged 31 to 60. It will raise premiums again this year by between 8 and 20 per cent. Based on numbers requested by BT, the 56-60 age band will see the sharpest rise - 15 per cent in 2018 and 20 per cent in 2019.

Underwriting losses in the IP portfolio play a part in the premium trend but do not tell the whole story. Based on Wen Research's compilation, AIA incurred an underwriting loss of S$40 million in 2017 and S$29 million in 2016. Aviva's loss came to S$25 million and S$7 million, respectively.

Yet insurers such as Great Eastern Life managed relatively modest premium adjustments. Between 2015 and 2018, GE said it reviewed premiums only once in 2017. The premium for the private Supreme Health P Plus plan rose from S$717 to S$752 in 2017-2018 for the 51-55 age band. The premium for the 56-60 age band rose from S$837 to S$878. GE said: "In 2017 when we revised our premiums for our suite of IP plans and riders we adopted a moderate approach combined with educating the public not to over-consume.'' GE's underwriting loss deepened from $12 million in 2016 to $39 million in 2017.

Riders that cover both the deductible and co-payment portions of costs sound desirable but the big question is affordability. The pre-mium escalation in the rider segment by far exceeds the trend in the base plans. In some older age bands, the premium for a comprehensive rider alone exceeds the total cost of the base plan (MediShield Life plus IP).

Since the rider covers just a portion of the total hospital bill, the cost seems disproportionately high. So if you hold a comprehensive rider you really need to think hard about your needs and whether the premium is affordable at older ages when you may cease to earn an income. Riders must be paid for in cash.

For example, the premiums for AIA's Max Essential A rider for private hospital plan rose by 58 per cent across a number of age groups. The 51-55 age band, for instance, paid $S1,741 from July 2018, compared to S$1,101 previously. The cost of GE's Platinum rider for its private plan also rose between 30 and 35 per cent for the 41-60 age groups.

Income raised the premiums for its Enhanced IncomeShield (Preferred) Plus rider by as much as 54 per cent for some age groups. In 2019 the premiums rise further by up to 66 per cent for the 51-55 age band.

Aviva raised its MyHealthPlus C Plan 1 rider by between 26 and 36 per cent for the 31-60 age group in 2018. This year the premiums will rise by - brace yourself - 74 to 80 per cent.

There are some enhancements: this year there is an overseas treatment benefit for six covered illnesses, inclusive of travel and accommodation costs, for instance.

But you need to take a hard look at the premiums. At older ages, the rider premium could exceed your main plan. Aviva's MyShield Plan 1 will cost S$1,483 for the 56-60 age group, for instance. Add in MediShield Life's premium of S$630 and the total premium is S$2,113. The cost of the comprehensive rider is $2,241.

It's the same story for Income's Enhanced IncomeShield (Preferred) where the total premium including MediShield Life is S$1,792 for the 56-60 age group. The comprehensive rider premium is S$2,186. For AIA, the private plan costs S$1,985 for the same age group including MediShield Life. The Max Essential A rider costs S$2,398.

Insurers have launched more affordable riders that cover the co-insurance and the deductible - subject to certain conditions. AIA for instance has a Max Essential Saver A rider for its private plan. This rider will cover the co-insurance portion. But the deductible is covered only if customers seek treatment through AIA's "quality healthcare partners'' comprising over 180 private medical specialists, or in government/restructured hospitals. The premium for the 56-60 age band is S$729 compared to the cost of the full rider at S$2,398.

Great Eastern has a Total Health Platinum Select rider, where customers access private hospitals through GE's panel of doctors, using a complimentary call-in service called Health Connect, which helps facilitate pre-authorisation. The premium for the 56-60 age band for Platinum (comprehensive) is S$1,482, against S$570 for Platinum Select.

Prudential has a system of "claims based pricing'' for its rider, PRUextra Premier, where premiums are determined by whether claims have been made. It did not raise rider premiums last year.

Agnes Choy, Prudential head of group business and medical products, says: "We believe a claims-based approach is fair because customers who claim less and stay healthy are rewarded with lower premiums.'' More than 80 per cent of customers get a 20 per cent discount on renewal premiums for their rider.

Aviva is apparently the first to launch the new version of riders as required by MOH. The new rider called MyHealthPlus has two options. The one that comes close to a comprehensive rider is Option C-II where there is a deductible benefit.

AXA will launch its AXA Enhanced Care in April. The structure is in line with what is mandated by MOH. AXA has thrown in up to 365 days of post hospitalisation cover. Premiums are expected to be 28 to 54 per cent cheaper than existing riders.

AIA will launch the AIA Max VitalHealth rider to replace existing riders in April. Income expects to launch two new riders - Deluxe Care and Classic Care in March. The Deluxe Care rider is subject to 5 per cent co-payment on all benefits; the Classic Care rider has a 10 per cent co-payment. The cap on co-payment of S$3,000 per year applies if the treatments are made under the IncomeShield private specialist panel. Premiums of Deluxe Care rider are expected to be five to 18 per cent lower than the Plus rider.