Making Sense of Health Insurance - Part One
There are many different types of health insurance policies and it can be challenging to know which is right for you. In the first of a two-part article, MoneySENSE and the Life Insurance Association, Singapore (LIA) will provide an introduction to Health Insurance; explain the differences among the various types of policies; key things to consider before deciding whether to take up a particular policy; and where to go for more information.
Why do you need Health Insurance?
The cost of healthcare can put a strain on one’s finances, especially if one is diagnosed with a critical illness that requires major surgery and/or long term hospital care or if one is disabled and is unable to work.
Health Insurance can help alleviate these financial strains by:
- providing some payment to compensate for your potential loss of income when you are hospitalized or are disabled;
- reimbursing you for all or part of the medical expenses incurred when you are hospitalized; or
- providing a lump sum payment in the event you are diagnosed with specific illnesses or become disabled.
How can you fund the costs of your healthcare?
Generally, there are three sources of funds that you can tap on:
- your personal savings;
- your Medisave savings; and
- your health insurance – this will include your MediShield or “Shield” plan purchased with your CPF Medisave savings, and any other personal health insurance plan/s that you have.
As part of the employment benefits package, some employers also buy (group) health insurance coverage for their employees. Find out whether you do have such a benefit, and if so, what you are covered for. Remember that such a plan may not cover you if you change employer or retire so you may wish to consider having a personal plan as well.
In addition, if you are in the low income group, you can apply for assistance under the Medifund scheme. Medifund is an endowment fund set up by the Government to help needy Singaporeans who are unable to pay for their medical expenses. Medifund acts as a safety net for those who cannot afford the subsidised bill charges, despite Medisave and MediShield coverage. For more information, visit the Ministry of Health’s website www.moh.gov.sg
What are the different types of Health Insurance?
The table below provides an overview of the common types of personal health insurance plans in Singapore. Do note that the terms and conditions are different for each type of plan. Details for the same type of plan may also vary among different insurers. Always check the details, find out what is covered and what is not, before you decide whether or not to take up the policy.
| Type of Health Insurance Plan |
What the Plan covers |
Key points to note |
Medical expense insurance
(or hospital & surgical insurance)
|
- Pays medical expenses incurred as a result of an accident or illness.
Generally pays for:
• Inpatient medical treatment/ surgery
• Some outpatient charges for day surgery
• Consultations with specialists before and after hospital stay
• X rays
• Laboratory tests
- “Major” medical expense insurance would generally also pay for expenses for longer hospital stays due to major illness (e.g. heart bypass or organ transplant)
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- The amount that you are reimbursed will only cover the actual amount you have had to pay, less any deductibles, regardless of the number of policies you have. So, taking up extra medical expense policies does not necessarily provide extra benefits.
- Comes with deductibles and/or co-insurance features which set out the minimum amount you need to pay before you can make a claim on your policy(ies).
- There are limits to the amount you can claim under each policy. There may be limits for all claims as well as limits for each illness, disability, year or lifetime. You can combine the limits of two or more policies to get higher benefits.
- May exclude coverage for expenses incurred for treatment for certain illnesses such as pre-existing conditions or treatment that is not for medical reasons.
- May have a waiting period during which medical expenses cannot be claimed from the policy unless they relate to accidental injuries.
- Premium rates may not be guaranteed
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| MediShield and Integrated Shield Plans |
- MediShield is the national basic ‘major medical expense’ insurance scheme that helps its policyholders meet large hospitalisation costs at the Class B2/C level.
- Some insurance companies offer Integrated Shield Plans that provide higher medical coverage than MediShield. These are suitable if you plan to use Class B1, Class A wards or private hospitals. These plans are combined with basic MediShield and policyholders pay one premium for coverage under both the private plan and basic MediShield. MediShield provides the basic coverage. An Integrated Shield Plan may not always pay out more than the MediShield due to higher deductibles.
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- Eligible Singaporean Citizens and Permanent Residents are covered unless they opt-out. You can check with the CPF Board if you and your family are covered under MediShield and/or how to apply for MediShield coverage.
- MediShield premiums can be paid by Medisave. If you or your family members have Integrated Shield Plans, you can also use Medisave to pay for your premiums. However, you cannot use more than the withdrawal limit set by CPF to pay for the premiums. As you get older, there is a possibility that you will have to pay the premium with cash.
- MediShield and Integrated Shield Plans have co-insurance and deductible features.
- You can use your Medisave or your immediate family members’ Medisave to pay for the deductible and co-insurance
- Premium rates are not guaranteed and will increase as you get older. See CPF website for more details.
- May have a waiting period, which means claims are not payable if incurred within a stipulated time period after policy inception.
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| Hospital cash insurance (or Hospital income insurance) |
- Pays a fixed amount of benefit for each day you are in hospital for medical treatment or surgery, regardless of actual expenses incurred during your stay.
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- Total insurance proceeds may be more or less than your actual expenses.
- May have a deferred period. This refers to the period of time after commencement of disability/ sickness before the benefits will be paid. So benefits may only be paid after you have been in hospital for more than set number of days.
- Benefits may also be paid only for a limited number of days each year or the life of the policy. In the latter case, the policy will end once the lifetime limit has been reached.
|
| Critical illness (or dread disease or major illness) insurance |
- Pays a lump sum either when you are first diagnosed with a critical illness or after having the first type of surgery that is covered by the policy.
- The lump sum does not depend on you going into hospital or on your actual medical expenses
|
- Check your policy for the list of critical illnesses that are covered under your policy. See www.lia.org.sg or www.gia.org.sg for the standardised definitions of 37 critical illnesses.
- Benefits are only paid if the critical illness or surgery exactly meets the definition that is stated in the policy.
- Usually has a waiting period from the date the policy starts for certain illnesses or types of surgery. If any critical illness or surgery for which the policy specifies is diagnosed or carried out during the waiting period, no benefits will be paid.
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| Disability income insurance |
- Pays a fixed amount each month to replace the income you would lose if you are not able to work as a result of an accident or illness.
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- Usually pays no more than 80% of your average monthly salary. The aim is to ease the financial burden and is not intended to completely replace the income you earned before the accident or illness.
- May have a deferred period during which benefits will not be paid (see above for explanation).
- Benefits will only be paid if you are continuously disabled for longer than the deferred period.
- The monthly income benefit will usually be paid for up to five or ten years, or until you are 60 or 65.
|
| Long term care insurance |
- Pays a fixed amount of benefit each month towards expenses for long-term nursing treatment.
|
- Benefits are paid when you cannot perform some ‘activities of daily living’. E.g. bathing, dressing, feeding, going to the toilet and moving around. The definition of ‘activities of daily living’ varies from one policy to another.
- The benefits will stop once the number of activities you cannot perform falls below the minimum stipulated in your policy.
- Some policies pay benefits for up to a limited number of years. Some policies pay benefits for life, as long as you meet the conditions for making a claim.
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| ElderShield |
- ElderShield is a national basic long term care insurance scheme.
- Provides basic financial protection to those who need long term care. It provides a monthly cash payout for a limited period to help pay expenses for the care of severely disabled persons.
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- All Singaporeans and Permanent Residents who are CPF members are automatically covered under ElderShield when they reach age 40. , unless they opt out.
ElderShield premiums can be paid by Medisave.
- A CPF member can also use his Medisave to pay ElderShield premiums for parents, spouse, grandparents and children.
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What are Exclusions and why are they important?
All heath insurance products contain some ‘exclusions’ setting out the circumstances under which benefits will not be paid.
The most common exclusion in health insurance is the ‘pre-existing condition’ exclusion. This means that any illness or disability that you have, or have had, when you sign up for the product will not be covered.
If you already have a medical condition when you apply for health insurance you must give details of this condition in your application. The insurer will then decide whether or not to provide full cover for that medical condition. If you do not provide the information when you apply for health insurance, the insurer can reject your claim.
There may also be a ‘waiting period’ or ‘deferred period’ during which benefits will not be paid. A waiting period is the period from the start of policy during which benefits will not be paid. A ‘deferred period’ is the period after commencement of disability or sickness before the benefits will be paid. So benefits may only be paid after you have been disabled or sick for more than a set number of days.
As exclusions vary from policy to policy, you should read the policy document carefully to find out exactly what you are or are not covered for. Check with your financial adviser1 or insurance intermediary if you are not sure. To avoid any misunderstanding, do obtain the clarifications in writing.
Questions to ask before taking up a health insurance policy:
Coverage
o What will my health insurance policy cover?
o Am I already covered for the same thing under another health insurance policy?
o Are there any policy exclusions?
o How is my health insurance policy affected by other schemes that pay for healthcare?
o Is coverage for lifetime or only up to a certain age?
o Is coverage worldwide or for only certain specified countries or regions?
Premiums
o How much will I be paying for my health insurance and will I be able to afford the premiums over the long term?
o How often will the premium be charged and will it be a fixed or variable sum?
o Will my policy automatically be renewed and what is the penalty if I do not pay any premium on time?
o When or in what circumstances will my health insurance policy end?
Claims
o How do I make a claim?
o Are there claim limits for each illness, for each year or for lifetime of the policy?
o Is there a waiting period for the policy?
o Are there any limits to the benefits that can be paid out from my policy?
o How will my future premiums/coverage be affected after I have made a claim?
For more information, you can refer to the following websites:
Central Provident Fund Board: http://www.cpf.gov.sg
Life Insurance Association, Singapore: http://www.lia.org.sg
MoneySENSE Consumer Guide to Health Insurance: http://www.lia.org.sg/ftpsite/guide/YGTHI2008_English.pdf
In the second of the two-part article, we will share on commonly encountered problems with Health Insurance and provide some tips on how to avoid them.
This article is produced by MoneySENSE and the Life Insurance Association, Singapore (LIA) under the MoneySENSE national financial educational programme.
1. Please refer to the MAS Financial Institution Directory to check if the entity that you are dealing with is regulated by MAS. You may also wish to refer to the MAS Register of Representatives to check whether the representative you are dealing with is listed on the register. Only representatives whose names appear on the MAS Register of Representatives will be allowed to conduct regulated activities under the Financial Advisers Act [FAA].
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