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DOC Money answers questions about which is the best health
insurance to buy.
1. Do I really need health insurance?
It is not compulsory. You can pay hospital bills with your
Medisave or cash. But a big bill might break your piggy bank. You
could even go bankrupt.
When buying health insurance, you have three ways to go:
i) Medishield: It is an opt-out plan run by the
CPF Board.
ii) Group health plans: If you work for a big
company, you probably have it already.
iii) Private shield health insurance: We have
about 20 plans, offered by the five big life insurance companies:
NTUC Income, AIA, GE Life, Prudential and Aviva.
My advice: Buy one. Health insurance is
practically a necessity.
2. Should I go for double coverage?
For group health plans, the employer pays part or all of the
premiums, which makes this type of insurance a great deal.
Many people ask, 'If I have a group plan, should I go for double
coverage?'
It means taking a private shield plan or Medishield in addition
to your group insurance.
Financial advisors tell a story about how you will lose your
group coverage when you leave your company. If it happens when you
are 65 and in poor health, you could find yourself uninsurable.
They say, 'You had better buy back-up health insurance now.'
It isn't exactly unbiased advice since they receive a healthy
commission if you buy.
Of course, double coverage doesn't mean double claims. You can
claim from only one insurer at a time. Otherwise you could profit
from being hospitalised.
The big question is: Which policy to charge? It turns out that
people with double coverage often send the bill to their group
insurance.
Why?
i) First, the group coverage may pay more.
ii) Second, they may want to establish a record
of no claims from their private shield insurer and
iii) the group plan's deductible and
co-insurance may be low or even zero if it is paid by the
company.
Insurers love it when you pay premiums and don't send them any
claims. It makes for big profits.
My advice: If you want back-up health
insurance, go for Medishield. Paying 20, 30 or 40 years for a
private insurance is expensive, especially if you never use it.
A slightly more risky but cheaper route is to go with just one
plan: Your company's health insurance.
3. I have no group insurance. What to do?
The low-cost option is Medishield.
If you prefer to be sick in luxury, you can choose among 20 or
so private shield plans from five life insurers.
Which is best? Each has its own set of bells and whistles such
as
i) lifetime and annual limits,
ii) riders to pay your deductible and
co-insurance,
iii) global coverage and
iv) as-charged plans, with no limit on the size
of the bill.
Both the costs and benefits vary, which makes comparisons next
to impossible.
Private shield plans are costly, especially for the elderly. At
age 75, you pay only $225 per year for Medishield. For the five
private shield plans, however, the average premiums are $2,000 per
year - nearly 10 times more.
Besides the premiums, a private plan commits you to permanently
higher deductibles and co-insurance.
My advice: No preference. None of the private
shield plans has a clear-cut advantage over the others.
4. How does Medishield compare to private
plans?
Ah. Now we have something to compare. You can do it by looking
at the benefits and costs of each.
Benefits are claims the insurance company pays to policyholders.
Costs are the premiums that policyholders must pay.
Divide one by the other and ta da ... you have a benefit to cost
ratio.
Then look for the biggest number. It tells which health
insurance gives you the most value for money.
Ranking health insurance
Based on 2006 insurance returns, here is how health insurance
ranks:
First place: Group plans. They pay out $65 for
every $100 in premiums taken in.
Why so good?
Part of the reason is group premiums are adjusted yearly. It
shifts risks to policyholders, which allows insurers to charge
less.
More importantly, these are mega-buck contracts evaluated by
savvy HR managers who push for the best deal.
It produces a dog-fight among insurers which results in
competitive prices.
Second place: Medishield. It takes a close
second place with a ratio of claims to premiums (benefits to costs)
of 50 per cent. It is a good deal.
Third place: Private plans. A confusing array
of private shield plans makes price comparisons difficult.
This makes it easier for insurers to charge high premiums.
At the same time, double coverage keeps claims low. Both work
against you to push payouts down to only $25 out of each $100 in
premiums.