Do your part to keep insurance premiums low

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Most of us will avoid hospitals like the plague, yet there are some people who are so fixated on avoiding illness that they go to the other extreme and insist on being hospitalised or treated even though they are a long way from death's door.

They do so because they bank on their insurance policies to bear most of the cost. But these cases contribute to the steep increase in healthcare costs and ultimately translate into higher premiums for everyone, including those who have never made any claims.

Dr Alan Ong, AIA's medical director and the Life Insurance Association's convener, says that all insurance contracts specify that the insurer will pay only for what is medically necessary, and for medical care and charges that are assessed to be reasonable and customary.

"We will err on the side of giving claimants the benefit of the doubt when assessing claims vis-a-vis this clause, but we also have a responsibility to other policyholders, who are bearing the cost of treatment through their premiums, to make sure that the claims are properly assessed," he says.

He notes some scenarios where claims would be rejected.

• A patient with back pain wants to go for magnetic resonance imaging (MRI), but wants to be admitted overnight because doing so will enable him to file a claim. This claim would be rejected, as MRIs can be done on an outpatient basis.

• A patient with eczema and no other medical history is admitted for chest pain. All costs related to the dermatological condition would be declined as it is not necessary to admit a patient for eczema.

• A patient who wants to prolong his stay at the hospital may find himself paying for charges that can be higher than those for a staycation at a good hotel. If the normal upper-limit length of stay for the patient's condition is five days, but he stays 21 days, insurers would not cover the costs associated with the extra 16 days.

• Colonoscopy procedures normally do not require hospital admission as patients are allowed to leave after the check is done. So if a person chooses to be admitted, the additional costs would not be covered unless he suffered some complications that require further treatment.

Dr Ong says that an increasing number of claims come from patients who choose private hospitals. In general:

• The average private hospital bill is about two to five times more than the average public hospital A or B1 Class bill.

• Patients treated at private hospitals or clinics have a higher likelihood of having multiple procedures done than patients seen at public hospitals.

How this affects you

If healthcare costs continue to rise, so will your insurance premiums.

As insurance costs are now structured based on age, any increase is especially painful for retired seniors because it poses a double whammy for them - they have no more income, yet have to pay more to be insured.

There are three ways to address the money gap.

• Just like new whole life policies that give customers an option to pay premiums for only a fixed number of years, insurers should devise new premium plans that allow customers to pay more in their productive years. Customers who opt for this will have progressively lower premiums as they age, and perhaps none at all when they hit 80.

• If you want to be covered for private hospital treatment in your old age, you should ensure that you have ample savings for retirement or continuous lifelong income. You can have the latter if you save enough to hit the highest tier of CPF Life - this can give you a monthly income of about $2,500 from 65, especially if you top up whenever a new limit is announced. Setting aside a few hundred dollars from this monthly payout will allow you to pay for your medical insurance for life.

• Singaporeans and permanent residents are covered under the MediShield Life scheme, so no one will be left to suffer without treatment. If you don't have enough money even for daily necessities, drop the private health plan.

“The average private hospital bill is about two to five times more than the average public hospital A or B1 Class bill.”

Yes, the basic scheme cannot cover the bills of those who want to stay in higher-class wards, but everyone is still getting treatment and care from the same team of guardian angels who have kept Singapore safe from the pandemic.

Lest people forget, just like with travel insurance, you should not hope to claim from your medical insurance.

People never complain about wasting money on travel insurance when they return home safe from their holidays. Yet, when it comes to medical plans, you hear loud moans and groans.

Like all things in life, if you want the best care money can buy, start to save and plan for it.

You should not complain about wasting money to insure against hospital bills.

Be happy that you can feel like a million bucks for every year that you avoid being sick.

Repurpose from The Straits Times by Tan Ooi Boon, Invest Editor 28 Feb 2021