Reducing and Downgrading my Integrated Shield Plan Benefits – Reasons and Risks in doing so
Downgrading your Integrated Shield Plan (IP) in Singapore is a decision many individuals consider, often due to rising healthcare costs. However, it’s crucial to understand both the reasons and the associated risks before making such a change.
Reasons for Downgrading an Integrated Shield Plan (ISP):
- Rising Premiums: This is by far the most common reason. As you age, IP premiums increase significantly due to higher health risks. Coupled with general medical inflation and changes to MediShield Life premiums (which the IP builds upon), the cost can become a substantial financial burden, especially for retirees on a fixed income.
- Affordability Concerns: If your financial situation changes (e.g., retirement, job loss, reduced income), maintaining a high-tier IP might become unsustainable. Downgrading helps reduce immediate out-of-pocket expenses for premiums.
- Over-insurance / Under-utilisation: Many people find they are paying for higher ward classes (e.g., private hospital or Class A) but consistently opt for lower-tier public hospital wards (e.g., B2/C) for various reasons (e.g., familiarity with public hospitals, perceived higher quality of care for certain conditions, or simply choosing a subsidised option). If you rarely use the benefits of your high-tier plan, downgrading can align your coverage with your actual usage patterns.
- Changes in Healthcare Preferences: Your preference for private vs. public healthcare, or the level of comfort and privacy you desire, might change over time. If you become comfortable with public hospital care or a shared ward, a high-tier plan might no longer be necessary.
- Re-evaluating Rider Benefits: IP riders, which cover deductibles and co-insurance, significantly increase overall premiums. Some policyholders choose to downgrade or remove riders to reduce costs, understanding that they will have higher out-of-pocket expenses if they make a claim.
- Company Health Benefits: If your employer provides comprehensive health insurance that adequately covers your needs, you might consider downgrading your personal IP to avoid overlapping coverage and reduce personal premiums.
Risks of Downgrading an Integrated Shield Plan (ISP):
- Reduced Coverage and Higher Out-of-Pocket Expenses: This is the most significant risk. Downgrading means you will have:
- Lower Annual Policy Limits: Your maximum claimable amount for medical bills will be reduced.
- Less Comprehensive Benefits: Certain benefits, like “as-charged” coverage for pre/post-hospitalisation or specific treatments (especially for non-Cancer Drug List items), might be reduced or removed.
- Higher Deductibles and Co-insurance: If you downgrade or remove riders, you will bear a larger portion of your medical bills yourself, which can be substantial for serious illnesses or complex treatments.
- Limited Choice of Hospitals/Doctors: Lower-tier plans restrict your choice of hospital ward (e.g., from private to Class A, or Class A to B1/B2/C) and may limit your access to specific doctors or specialists.
- Underwriting for Future Upgrades: If you downgrade and later wish to upgrade to a higher-tier plan (even with the same insurer), you will likely need to go through medical underwriting again. If you’ve developed any new health conditions since your initial application, these might be excluded from your new, higher-tier coverage, or you might face higher premiums or be denied the upgrade. This is a crucial consideration, especially as you age and health issues become more common.
- Loss of Continuity Benefits: Some insurers offer loyalty benefits or reduced waiting periods for certain conditions that build up over time. Downgrading might reset these benefits, potentially losing you protections you’ve already earned.
- Impact on Critical Illnesses: For critical illnesses like cancer, downgrading could mean lower limits for expensive treatments, potentially leaving you with significant out-of-pocket costs, especially for non-standard or newer therapies not fully covered by the lower-tier plan or the Cancer Drug List.
- Psychological Impact: Knowing you have less comprehensive coverage can cause anxiety, especially if you face a major medical event.
Before downgrading, it is highly recommended to:
- Review your policy documents: Understand exactly what coverage you will lose and what your new out-of-pocket expenses might be.
- Consider alternatives: Instead of a full downgrade, sometimes adjusting riders or choosing a slightly lower tier might suffice without significantly compromising crucial coverage.
Downgrading or reducing coverage does not work for everyone though – some policy members who are already on medical treatments or have received previous treatment before and may have chances or relapse should not be downgrade their coverage, in the event their future treatment costs may escalate (medical costing inflation and new, but costlier treatment options as examples). Downgrading of plans may mean having to cough out additional out of pocket expenses, digging into our personal savings to pay for the medical bills.
You may contact me for a review and assessment of your health insurance plans, where I can go through your current health, financial situation, and future needs, and help you understand the full implications of downgrading for your specific circumstances.
Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek unbiased financial advice that is customised to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
Published By:
Judy Lang
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