Wednesday, January 20, 2010

Taking the right dose of health insurance

The Straits Times
By Lorna Tan,
Finance Correspondent

It is often said that we lose our health making money, and then lose our money to restore our health.

My take on that is: Not if you have adequate medical insurance.

My 68-year-old mother was recently hospitalised for surgery at the National University Hospital (NUH) and the bill came to a cool $28,000. My family, however, did not have to fork out a single cent. My mother has an Enhanced Incomeshield hospitalisation plan, as well as a 'Plus rider', which covers the deductible and co-insurance portions of the bill. (We will address these two features later.)

Prior to the surgery, my mum was, for weeks, complaining of hip and leg pain when she stood or tried to walk for more than the distance between two bus stops. She was diagnosed with degenerative spondylolisthesis, a condition that disproportionately affects individuals over age 65. In other words, she was suffering from a degeneration of some sections of her spine.

Spinal fusion surgery was recommended and, on April 29, she underwent a five-hour operation at NUH. In all, she was hospitalised for five days in a Class A1 ward.

Private Shield plans

In case you have not heard, it is possible to be hospitalised and not have to pay a single cent from your pocket or Medisave account. Welcome to the wonderful world of private Shield plans.

These are hospitalisation plans offered by insurers that can be funded from one's Medisave, subject to an annual cap of $800.

Here are the two major pluses of such a plan:

# Lifetime cover: Most private Shield plans offer lifetime cover, whereas MediShield cover ceases when one turns 85.

# As-charged feature: Almost all private Shield plans offer this feature, which removes the benefit limits on the amount that can be claimed each day for hospital stay and procedures. This means hospitalisation expenses will be paid according to what is billed.

In contrast, traditional plans come with specific sub-limits, such as specified dollar benefits for room and board. Of course, you are still subject to the plan's deductible and co-insurance (unless you have a rider), and annual limits.

What then, is an appropriate level of cover?

It's quite simple. Buy a plan that matches your health-care expectations, provided you can afford the premiums. So, if you expect to stay in a class B1 ward, then buy a hospital plan with B1 coverage.

In my mother's case, her plan is an Enhanced Incomeshield Advantage plan, which means it covers Class A wards of government/restructured hospitals such as NUH. She could have opted to be hospitalised at a private hospital, but her insurer, NTUC Income, would then pay up to 65 per cent only of the hospitalisation bill.

Bear in mind that premiums rise as you age. So, it is important to ensure that you have sufficient money to fund future premiums so as to prevent policies from lapsing.

I believe it is wiser to buy a higher-class plan now while I can afford it, with a view to downgrading to a lower plan when I am older and premiums are higher.

All Shield plans come with deductible and co-insurance features. The former refers to the first layer of charges that the policyholder has to bear. Depending on the type of plan, the deductible is typically about $2,000 to $3,000.

The co-insurance feature means that the policyholder shares part of the cost of the bill, usually 10 per cent over and above the deductible.

Some insurers provide 'riders' that cover either one or the other feature. You can use only cash to pay the premiums. In the case of Income, it no longer offers the 'Plus rider' to new policyholders. In its place is the 'Assist rider', which covers the deductible. This leaves the policyholder to foot the co-insurance portion, which is capped at a specified amount depending on the type of Shield plan.

In the case of my mother's Incomeshield, it also covers the costs incurred during her outpatient visits to the hospital three months before and after the hospitalisation.

Buying peace of mind

Many people hold off buying private Shield plans because they believe that they are adequately covered by their employers. That's a very short-sighted view. Such covers are usually not portable, and there will come a day when you will leave your employer. Also, as you grow older, you may develop medical conditions and it is very difficult to find an insurer who will cover you once you have them.

So, insure yourself adequately while you are still healthy. My whole family, including my two children, are insured with private Shield plans.

My daughter now calls my mother 'bionic grandma' because six titanium screws and three rods have been permanently implanted in her to stabilise her spine.

Bionic or not, having the right dose of health insurance certainly pays off, and it is small change when we consider the peace of mind it provides.

This article was first published in The Straits Times on July 20, 2008.

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