Managing health insurance costs after retirement
06 Sep 2022
The Straits Times
Insurers' premiums will rise as one ages, so planning ahead is vital
Nine in 10 Singaporeans may be confident of retiring by the age of 65, but not all are convinced they can retire without worry.
In a survey by life and general insurer Etiqa Insurance Singapore released on Tuesday, 44 per cent of those who are confident of retiring by 65 do not believe they can retire comfortably and happily.
Their top concerns were failing health (42 per cent) and that they will run out of money for their retirement (23 per cent).
Nearly 1,030 individuals aged 18 to 64 took part in the online survey, which Etiqa conducted together with market research company Kantar, in May.
The concerns over health are very real because the risk of getting a chronic disease increases with age. The elderly are also more likely to develop disabilities.
Factors such as these push up their medical expenses, and insurance companies will charge higher premiums as one ages.
Premiums also increase more frequently when one is older. They rise every 10 years for someone under 61, go up every five years for those in the 61 to 70 age group, and every two to three years for those over the age of 71.
How can one better manage healthcare and insurance costs to enjoy a more comfortable retirement? The Straits Times explains.
Q: I want to reassess my coverage. What are the different options available?
A: MediShield Life is the basic medical insurance, covering every Singaporean and permanent resident, including individuals with pre-existing medical conditions.
It covers stays in B2 and C class wards in public hospitals, and the premiums are fully payable by MediSave.
If you prefer to stay at a private hospital or in B1 or A class wards in a public hospital, you will have to top up your MediShield Life premiums for an Integrated Shield Plan (IP).
You can pay the additional premiums using MediSave, but only up to the additional withdrawal limits - $300 a year for those under 40; $600 a year for those 41 to 70; and $900 a year for people over 71.
You will have to pay any excess premiums in cash.
Ms Lee Meng, executive financial services consultant at Gen Financial Advisory, says premiums for a private hospital IP are usually about 10 per cent of a retiree's monthly expenses, so individuals need to factor that into their retirement budget.
Q: If I cannot afford the premiums for a private IP, should I downgrade my coverage?
A: Ms Lee says that everyone should find a balance between their healthcare preferences and their budget and consider downgrading their coverage if the premiums exceed their retirement budget.
But Mr Carlos Lee, immediate past president of the Insurance and Financial Practitioners Association of Singapore, says that people should think twice before downgrading from an IP to a plan with lower medical entitlements or to the basic coverage under MediShield Life, as it will be hard to get another IP.
He says that insurers will check if the person has any pre-existing conditions. If there are pre-existing conditions, which is usually the case as people age, the person will not be able to get private insurance coverage.
Mr Lee says he has encountered cases where elderly clients downgraded their insurance plans and ended up with cancer one or two years later.
He adds that children can help their elderly parents with the premiums on their IPs by using their own MediSave funds, subject to additional withdrawal limits.
Say, for example, that a parent is 72 years old, with a MediSave additional withdrawal limit of $900. The person's child is 45 and his additional withdrawal limit is $600.
The child can use up to $1,500 from his MediSave to fund both his and his parent's premiums.
Mr Lee says this option is still cheaper for the children than having to foot hefty hospital bills if their parents end up with basic, or worse, no coverage.
Q: If I want to stay on my shield plan, how can I fund it into my retirement years?
A: Mr Raymond Ong, chief executive of Etiqa Singapore, says one should start planning for retirement early, adding that one should take into account medical insurance premiums in old age in addition to the usual daily expenses or yearly travel expenditures.
Mr Ong also recommends that people top up their MediSave accounts from a young age and benefit from interest rates of 4 per cent a year, which will give them a bigger nest egg for heavy medical expenses in their later years.
The maximum amount that you can voluntarily top up your MediSave account with is the difference between your Basic Healthcare Sum (BHS) and your current MediSave balance.
The BHS is the estimated amount of savings an individual needs in his MediSave Account for basic healthcare needs in old age.
This is $66,000 now and will be adjusted every year for those under 65.
Ms Lee says one can also invest to generate better returns, which can offset the impact of escalating IP premiums.
But before putting money into any single investment, Mr Eddy Cheong, head of the solutions team at wealth management and advisory firm Providend, says an investor should understand what his goal is, what resources he has and what risk level he is willing to tolerate.
If he has all that in mind, he will know what the right investment for him is, Mr Cheong says.
Source: The Straits Times © Singapore Press Holdings Limited. Reproduced with permission.
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