Better to get medical insurance while young and healthy

Some people say they fear sickness and disability more than death, as the former will drain their wealth.

But you can easily avoid this problem by buying health insurance, and by buying it early when you are healthy.

Do not think that you need insurance only when you are old, as the risk of illness goes up as you age.

Once illnesses develop, insurers may slap on an extra charge, or choose not to cover your pre-existing conditions. A pre-existing medical condition is a condition, disability or illness that you have before you apply for health cover.

Apart from basic medical expense insurance or hospitalisation plans, which pay for hospital and surgical expenses, there are hospital cash insurance plans which pay a fixed amount of cash should you be warded. You can also choose a critical illness plan or a disability income insurance. Then, there is long-term care insurance, which gives you a regular cash payout if you are too ill to look after yourself.

The common mistake many people make is to hold off on taking out a basic hospital plan as they are already covered under their company's insurance plan.

Most companies do not offer portable group health insurance plans. So the coverage ceases once the employee leaves the company. Those who have an existing illness may then realise too late that they are no longer insurable, or that the insurer will not cover their illness.

Singapore's health-care financing system offers three tiers of protection - through heavy subsidies in acute public hospital wards; Medisave; and MediShield and the private Integrated Shield plans.

Medisave

This is a national medical savings scheme whereby individuals put aside part of their income into their accounts with the Central Provident Fund. It can be used for the co-payment of their personal or immediate family members' health- care bills. All employees, as well as self-employed persons earning more than $6,000 a year, have to contribute to Medisave.

Medisave can be used to pay for the premiums of Integrated Shield plans, subject to a limit of $800 per policy per year. The limit for those aged 81 and above is $1,150 per policy per year.

Medisave can also be used to pay for treatments that are not covered by insurance, such as outpatient treatment of chronic diseases.

It is important to maintain your Medisave account and to use it prudently. Note that the cash will run out fairly quickly when you stop working. This is why it is important to have health insurance, as it can cover major medical expenses.

MediShield

This is a low-cost catastrophic medical insurance scheme that helps meet medical expenses incurred for class C or B2 wards in government restructured hospitals.

All Medisave account holders who are Singaporeans or permanent residents will be automatically covered unless they opt out of it.

Because it is a catastrophic policy, which covers extended hospital stays, you may find that you have to fork out a large sum for short stays after all the limits are applied.

Also, the subsidies for class B2 and C wards are subject to means-testing, where lower-income patients will get more subsidy than higher-income patients.

Therefore, higher-income patients or those who want to use higher ward classes or private hospitals should go for Integrated Shield plans on top of their MediShield.

Integrated Shield plans

These are Medisave-approved private health insurance plans currently offered by NTUC Income, Great Eastern Life, Aviva, Prudential Assurance and American International Assurance.

They do not usually cover pre-existing health conditions. But the good news is you can use your Medisave to pay the premiums.

Also, the premiums are kept affordable because the plans are designed with deductible and co-insurance components which promote individual responsibility for one's health-care needs.

Deductible refers to the first layer of costs that you have to pay before the insurance kicks in. Co-insurance is the share of the insured portion of the bill that you must pay. It is typically set at 10 per cent.

You can get a rider to cover these components or extend coverage to medical expenses incurred abroad but the premium has to be paid in cash.

Many Integrated Shield plans offer lifetime cover, or up to age 100, which is something you are unlikely to find among private insurers outside the Integrated Shield plans.

Key things you should know about Integrated Shield plans

· Claim limits: Plans may vary in terms of the maximum claim that you can make per policy year. Some plans may also stipulate a lifetime claim limit; other plans may not set a cap on lifetime claims.

· Pro-ration factor: If you stay in a higher-class ward than what your plan entitles you to, a pro-ration factor will be applied. It reduces the sum that can be claimed.

· Last entry age: For most plans, the latest age you can apply for coverage is 75. The maximum coverage age is the length of coverage.

Some plans offer lifetime coverage, while others may extend cover until age 80 or 85. Note that the riders attached to a plan with lifetime coverage might offer coverage up to a certain age (for example, 100).

· Premiums: All plans can be renewed as long as the premium is paid. But the rates, which rise with age, are not guaranteed. They can rise on renewal depending on the claims experience of the portfolio.

· Pre-existing conditions: These are not usually covered. You have to disclose all pre-existing conditions at the time of application as insurers may declare the policy void if you misrepresent or fail to disclose them.

Some plans may cover a pre-existing condition following a waiting period of, say, five years, provided the insured does not experience any symptoms or receive treatment or medication for the conditions during this time.

· Coverage: The inpatient benefits commonly include daily room and board, and treatment costs. Outpatient benefits can include kidney dialysis and cancer treatment. All these may be subject to a claimable limit or covered on an 'as charged' basis, which means that you can claim for what has been billed for all eligible expenses.

· Final expenses benefit: With this, the deductible and co-insurance portions of the bill - up to a limit of say $5,000 - will be waived if the insured dies during hospitalisation or within a stipulated period after discharge from the hospital. Not all plans provide this benefit.

· If you are warded: Your insurer may provide a letter of guarantee - an assurance of payment for the portion of the bill covered by the insurer. It can help to reduce the upfront payment to the hospital.

But the sum indicated in the letter may not be sufficient for the entire bill. To better plan for the cost, ask the hospital for an estimated billing amount, and also query the insurer on the basis for the sum indicated in its letter of guarantee.

To compare benefits, coverage, policy features and the premiums for the different Integrated Shield plans here, go to the health care financing section of the Health Ministry's website (www.moh.gov. sg).

You can contact me if you wish to know more about the  Integrated Shield plans.