Pitfalls in as-charged insurance policies

02 Nov 2007, The Straits Times

Question

Name of the Person: Koh Wee Guan

'As charged' medical plan takes load off dad's mind

I was glad to read the report, 'Automatic MediShield cover for kids' (The Sunday Times, Oct 28). It is a good move.

Recently, I opted for Income's 'as charged' Preferred plan for my 11-month-old daughter, the premiums for which will be paid from my Medisave account.

For an estimated $1,878.30 in cash, I was able to secure 100 per cent coverage of hospitalisation fees for my daughter for the next 25 years, through the purchase of a rider to cover the deductible and co-insurance.

The estimated cash outlay is the net present value (compounding returns at 4 per cent per annum) of the sum that I would need to set aside now to pay for 25 years' worth of the rider's premiums.

I felt very relieved after doing my sums, knowing that should anything happen to my daughter, I would be able to afford to send her to whichever hospital or specialist, without having to worry about the size of the bill.

While I understand that the premiums are not guaranteed to stay unchanged, and I may not get 4 per cent returns every year, having an insurance plan like this beats having nothing at all.

I may or may not be able to provide her with luxuries in future years but I am happy that I can at least provide her with the best medical care because of the decision I made recently.

Reply

Name of the Person: Ms Karen Tan

Director, Corporate Communications

Ministry of Health 

Pitfalls in as-charged insurance policies

Mr Koh Wee Guan has bought medical insurance coverage for his daughter and was particularly pleased that "'As charged' medical plan takes load off dad's mind" (ST Forum, 30 October).

We commend Mr Koh's pro-active approach towards his daughter's medical coverage.  We encourage all parents to subscribe to at least the basic MediShield for coverage in Class B2 and C, and to supplement with private insurance plans if they are likely to use private hospitals or higher classes in public hospitals.

As noted by Mr Koh, some insurers also provide additional "riders" with payouts "as-charged" by the hospitals, thus eliminating any co-payment by patients.  While this seems like a good feature for policyholders, such a scheme has unfortunately led to over-servicing and over-pricing by hospitals in other countries.  The initial low premiums of such "riders" prove unsustainable and in order to cover the rising claims and costs, insurers end up having to raise premiums regularly and/or to drop the "as-charged" approach.  Indeed, most national health insurance policies now regulate how much providers can charge through some sort of fee schedules. A free-for-all "as charged" regime proves too costly for the insurers (and hence the policyholders) to bear.

MOH has not objected to the introduction of "as-charged" plans, despite this concern, as we do not wish to stifle industry innovation.  But we do not allow Medisave to be used for such riders.