Having “Co-Payment” in Your Integrated Shield Plans (“IP”) – What Can You Do About It?
Integrated Shield Plans or “IPs” are private insurance plans that allows you to upgrade your MediShield Life coverage. There are additional premiums to be paid in purchasing an IP and generally speaking, the main reason people buy IPs is due to their desire to have the option of higher entitlements and benefits in the choice of their medical care should they need to be hospitalised.
In Feb, it was reported that insurers are moving away from covering hospital bills fully and this move affects everyone, including existing policyholders who previously were covered fully without any need for co-payment. For many people, unexpected medical expenses is one of their top money problems and buying an insurance that covers hospital bills fully is a way to provide the peace of mind to remove the problem.
This is why the introduction of co-payment has caused much unease. To the average policyholder who was on full coverage, the peace of mind is broken as they are no longer able to see the issue as a black and white “I pay the premiums and the insurer pays the bills” idea. Instead, it is now a grey “I pay the premiums and some of the bills while the insurer will pay the rest” concept that is difficult to understand and perhaps, even more difficult to accept.
Yet, hospitalisation insurance is such an important component of one’s financial plan that many hesitate to make any decision for fear of getting it irrevocably wrong. Being passive is no longer an option as changes such as the introduction of features such as “co-payment” to your IPs (even if you did not welcome the changes) meant that your coverage is changing even if you have not done anything.
As I try to understand the changes made on the IPs as a whole and the changes made by the individual providers of IP (i.e. different insurers) in particular, I’ve concluded that there are 5 main features in your IP program that you need to understand properly before you begin to review how your IP will fit in as part of your risk management plan for the future.
The 5 “Please Know This About IP” Features (Including Co-Payment)
To understand how your IP works, you will need to understand these features that are found in IPs. Some of these features can be found in all IPs while others can be found only in some. I will use the example of the IP being an umbrella to protect against the hospitalisation bills of heavy rain and illustrate how these features affects the use of your IP umbrella.
This is the initial amount that you have to pay first before the insurance coverage kicks in. A typical deductible amount can be as high as $3,500 which means that even if you have an IP, the insurance will not cover any bills below the deductible amount. This can be partially or fully covered by adding on a “rider” to your IP.
Think of this as a feature where you are not able to open your umbrella for an initial period (e.g. first minute) when you are caught in the rain.
This is the portion of the claimable amount that you have to pay, usually expressed as a percentage (e.g. 5%). Using an example of 5% co-payment, if the claimable amount is $10,000, you will have to pay $500 while the insurer will pay the rest. This can be partially covered by adding on a “rider” to your IP.
Think of this as having a small hole (e.g. 5%) in your umbrella.
3. Panel Doctor
A doctor under an IP provider’s preferred network or panel. Seeking treatment at a panel doctor will allow you to enjoy higher benefits and more coverage as compared to being treated at a doctor that is not within your IP provider’s panel.
Think of it as your umbrella having a special ability where it will increase in size when used at certain places (e.g. near your own home or office) while it reverts back to a normal size when it’s used at other places.
4. Claim-Based Premium Pricing
Your premiums will be adjusted in accordance to your claim experience. If you do not make any claims, your premiums will be discounted. If you make a claim, your premiums will increase.
Think of it as your umbrella becoming smaller after each use and increasing in size if it’s not used for a while.
5. Letter of Guarantee/Certificate of Pre-authorisation
The insurer will cover the hospital bill without the need for you to “pay first and reimburse later” if a letter of guarantee or certificate of pre-authorisation is obtained.
Think of it as having a special raincoat that provides protection against the rain in addition to your umbrella.
Changes Are Confusing – What can I do?
When I explained the various “things to know” about IPs using the concept of heavy rain and umbrella, people tend to understand better and almost inevitably, I will get the “What’s the point of this type of umbrella?” remark. (As you are reading this, is that your first thought as well?)
My answer is always the same – we don’t design the umbrella; we use the umbrella. Unless you want to give up your umbrella (i.e. terminate your IP coverage), your concern is to learn how to optimise it’s use and ultimately, protect yourself against getting wet in a downpour.
That being said, when it comes to your personal financial planning, here are the 3 main things you can do which are entirely within your control:
A. Each IP provider has a “style” – Master the style of your IP Provider
Your IP provider is likely to have a combination of some or all of the 5 features I described earlier and some may even have other features that I have not described. Knowing the “style” of your IP provider is essential for you to optimise your coverage.
For example, you will need to know how to access the panel doctors, what is the process to follow, how do you get help, how do you get a certificate of pre-authorisation or letter of guarantee…etc. You will also need to know what is the process when you are using a non-panel doctor such as what is covered and not covered, how will the IP provider support non-panel doctor claims…etc.
Of course, when you have a financial planner or insurance advisor helping you, you can just reach out and get the “concierge support” from working with an advisor but nonetheless, whether you have someone helping you or not, the goal is the same – learn the style of your IP provider so that you can use it to protect yourself as much as possible financially.
But, what if you don’t like the style of your current IP provider? This brings me to the next consideration…
B. If you don’t like the style of your IP Provider, you can consider a change (with caveats)
Before I comment on this second consideration, let me be clear – I do not encourage switching your IP provider or terminating your IP. By default, you should stay where you are, learn the style of your IP provider and learn all you need to learn to maximise your coverage should you need to make a claim. Go with the flow and roll with the changes.
One more important point, you are likely to want to switch to another IP provider because there are some features at the new IP that you want to switch to. It is important to remember that the new IP provider that you switch to may change their “style” and remove the feature that you like or add a feature that you dislike in the future. In essence, there are no guarantees that you won’t end up at the same place having made the move.
However, if you wish to explore the option of making a switch, here are the caveats to consider:
- Make full declaration of your health when applying to the new IP provider
- Only switch when you are able to get the same or better coverage terms
- Read and understand the clauses and definitions related to “Pre-existing Conditions” and standard exclusions to see if there are any that might apply to you
One final point, I believe this is one of those moments where it’s better to act with the professional advice and recommendation of a financial planner rather than DIY-ing and this brings me to my next point.
C. Rework Your Risk Management Plan
IPs are part of your insurance risk management plan to protect against the “Loss of Health” risk. There are other insurance products such as personal accident insurance, disability insurance, critical illness insurance and other benefits such as hospital cash benefits that can work together in tandem to provide comprehensive protection.
In fact, one of the benefits that came from the introduction of “co-payment” to the IPs is that the premiums will be reduced and the premiums saved can be reinvested to plug other gaps or supplement your hospitalisation insurance in other ways.
One idea that you can consider is to reposition your IP which used to be able to offer “swiss-knife” coverage for all hospitalisation bills to one that is intended to cover for catastrophic bills only. This change in focus will mean that the need for riders can be reviewed, more premiums can be saved but you will have to consider the need to budget for higher deductibles and co-insurance.
There is no “best” way as we do not know our future needs but we can work from a plan and make sensible adjustments along the way.
It’s Hard For Everyone – Make It Easier On Yourself
Hospitalisation bills and IPs are a much more complex issue than heavy rain and umbrellas. As the end-user, we have to leave the responsibility of making the system right to the people with the unenviable responsibility to decide on the trade-offs.
When you travel on an airplane, you are expecting a certain experience or “style” of the airline. Some serve peanuts and some don’t. Your job as a passenger is not to debate and discuss why peanuts are served, not served or why it was served in the past but not now. Your job as a passenger is to leave the pilots to do their jobs, follow instructions such as wearing your seat belts when the alarm lights are on and most importantly, enjoy the flight.