Sunday, 20 August 2017

Buying the Most Expensive Integrated Shield Plan When Young and Downgrading When Old

Integrated Shield Plans (IPs) are hospitalisation insurance plans offered by private insurance companies to cover hospital stays in public and private hospitals. They are integrated with the basic Medishield Life plan run by CPF. There are typically 3 types of IPs, namely those covering Class B1 wards, Class A wards and private hospitals. For ease of reference, they are named as Class B1, A and P plans respectively. Annual premiums increase with age and are most expensive for Class P plans. For this post, I will use the IPs offered by my insurer as the basis for discussion, since I signed up with them and have records dating back to 2006 when as-charged plans were first introduced. I believe the trends discussed below are applicable to all other insurance companies offering IPs.

Private hospitals offer the best care compared to public hospitals. However, Class P plans are the most expensive compared to other plans. One of the strategies used by some people to afford private hospital care is to sign up for Class P plans when they are young and premiums are affordable, and downgrade to Class A/B1 plans when they age and premiums become more expensive. As an example, for the Class P plan offered by my insurer, premiums for a person aged 25 is only $417. However, as he ages, premiums increase rapidly to $2,639 when he reaches 70. At this age, the corresponding premiums for Class A and B1 plans are $1,758 and $1,428 respectively, which are equivalent to 67% and 54% of the Class P plan premiums.

It is a good strategy to use, but do note that annual premiums do not stay static. The figures below show the annual premiums for Class B1/A/P plans since 2006, which have been increasing. To be fair, the increases in premiums are also accompanied by enhancement in insurance coverage.

Fig. 1: Class B Plan Annual Premiums Since 2006

Fig. 2: Class A Plan Annual Premiums Since 2006

Fig. 3: Class P Plan Annual Premiums Since 2006

Thus, when you buy an IP, please take note that annual premiums are not static and are expected to rise over time. And for those who plan to use the above-mentioned strategy of buying the most expensive Class P plan when young and downgrading to Class A/B1 plans when older, be prepared to downgrade earlier than expected.

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