Sunday, July 22, 2007

Medical & Healthcare Insurance

Health insurance is a type of insurance whereby the insurer pays the medical costs of the insured if the insured becomes sick due to covered causes, or due to accidents. The insurer may be a private organization or a government agency.

A Health insurance policy is an annually renewable contract between an insurance company and an individual. With health insurance claims, the individual policy-holder pays a deductible plus copayment (for instance, a hospital stay might require the first $1000 of fees to be paid by the policy-holder plus $100 per night stayed in hospital). Usually there is a maximum out-of-pocket payment for any single year, and there can be a lifetime maximum.

Inherent problems with private insurance
Any private insurance system will face two inherent challenges: adverse selection and ex-post moral hazard.

Adverse Selection
Insurance companies use the term "adverse selection" to describe the tendency for only those who will benefit from insurance to buy it. Specifically when talking about health insurance, unhealthy people are more likely to purchase health insurance because they anticipate large medical bills. On the other side, people who consider themselves to be reasonably healthy may decide that medical insurance is an unnecessary expense; if they see the doctor once a year and it costs $250, that's much better than making monthly insurance payments of $400 (example figures).

The fundamental concept of insurance is that it balances costs across a large, random sample of individuals. For instance, an insurance company has a pool of 1000 randomly selected subscribers, each paying $100/month. One of them gets really sick while the others stay healthy, which means that the insurance company can use the money paid by the healthy people to treat the sick person. Adverse selection upsets this balance between healthy and sick subscribers. It will leave an insurance company with primarily sick subscribers and no way to balance out the cost of their medical expenses with a large number of healthy subscribers.
Because of adverse selection, insurance companies use a patient's medical history to screen out persons with pre-existing medical conditions. Before buying health insurance, a person typically fills out a comprehensive medical history form that asks whether the person smokes, how much the person weighs, whether the person has been treated for any of a long list of diseases and so on. In general, those who look like they will be large financial burdens are denied coverage or charged high premiums to compensate. On the other side, applicants can actually get discounts if they do not smoke and are healthy.

Moral Hazard
Moral hazard describes the state of mind and change in behavior that results from a person's knowledge that if something bad were to happen, the out-of-pocket expenses would be mitigated by an insurance policy--in this case, one which provides reduced prices for medical care.

Based on this above fact, medical insurance is something which is of great importance specially for someone traveling overseas specially from India. I say this because India is one of the few countries which has medical expenses very less compared to that in other countries around the world. (for an insurance coverage of INR 25000 needs about INR 500 premium per year which is about S$20. This is only for hospitalisation coverage. Apart from this outpatient charges usually will be from INR 40 onwards depending on the complexity of illness & need for specialist etc). As one can notice this cost is pretty little another reason again based on the principle of insurance as explained above, where it depends on the volume of people going for insurance thus resulting in the insurance premiums being lower.

Singapore Medical Cost:

Medical visit to a doctor without an insurance in Singapore will usually cost one from S$ 20-25 for cases like fever/flu, cold or cough & subsequenly rises to exorbitant level. The consultation charges in Singapore are based on some standard charges/10 minutes or 20 minutes & increases based on time spent. So S$25 will be for consultation between 10-20 minutes. This may also go upto S$ 40. For hospitalisation one would need to pay about S$800-1200/per day based on how big and sophisticated the hospital is & what one is getting admitted for and treatment taken. Treatment cost may be over and above the hospital room charges. So it is a heavy burden for someone without medical insurance.

It is advisable to go in for medical insurance. There are 2 types of insurance that one can get covered for:
1) Managed Healthcare System :
This insurance covers the outpatient charges and is accompanied by minimal copayment per visit. Outpatient is the occassional doctor's visit for consultation. There are companies like NTUC Coop which can provide a suitable insurance based on the need of the individual. The copayment is usually S$5 per visit. Insurance premium is for 1 year and the premium is to be paid in lump sum. The premiums vary from S$ 240 & S$ 350 for men and women between age group 31-40 years respectively for the lowest value plan. The additional component that these plans cover are that they cover against hospitalisation as well based on rates for hospital rooms, treatment etc. The premiums are higher for intermediate plan & highest for the best plan which covers the hospitlisation charges for a higher amount. In this case hospital room rates could be around S$ 1500 & it is covered by this plan. Copayment in hospitalisation is 10% of the hospital bill which works out pretty low compared to the actual bill. This plan also takes care of the 30 dreaded diseases recognised by the Singapore medical council. It is advisable to go in for Intermediate MHS plan for anyone coming down to singapore.

2) Medishield
This is an insurance coverage for someone who does not need outpatient coverage but is looking at getting coverage for hospitalisation. In this situation the insurance company will charge a premium which will be around S$ 100 where there is again a co-payment involved which will again be around 10%. There is also an option where the co-payment can also be escaped by premium another premium on top of this which will cover the complete hospitalisation charges. This premium is around S$ 100. I would advise people to go in for this insurance coverage specially for kids below age 10 years and for adults above 30 or 40 years based on health conditions.

For both the above cases, person is given a medical card upon approval, which can be presented during the admission for treatment. For MHS person has to select a clinic suitable for him, based on personal choice and convenience from the list of approved clinics falling under the insuring company. The insured has to visit the same clinic during illness & if recommended by this clinic then the insured may go for a specialist again falling under the approved list of clinics.

For more information or quotation for medical insurance, one can always visit this website or get in touch with Mr. Jeyabalan (93366357) who has been my insurance agent since a few years now & I can guarantee his services.

Some common complaints about private health insurance include:
  • Insurance companies do not announce their health insurance premiums more than a year in advance. This means that, if one becomes ill, he or she may find that their premiums have greatly increased (however, in many states these types of rate increases are prohibited).
  • If insurance companies try to charge different people different amounts based on their own personal health, people may feel they are unfairly treated.
  • When a claim is made, particularly for a sizable amount, insureds may feel as though the insurance company is using paperwork and bureaucracy to attempt to avoid payment of the claim or, at a minimum, greatly delay it.
  • Health insurance is often only widely available at a reasonable cost through an employer-sponsored group plan.
  • In the United States, there are tax advantages to Employer-provided health insurance, whereas individuals must pay tax on income used to fund their own health insurance, although there are a minority of pre-tax health plans currently extant.
  • Experimental treatments are generally not covered.
  • This practice is especially criticized by those who have already tried, and not benefited from, all "standard" medical treatments for their condition.
  • The Health Maintenance Organization (HMO) type of health insurance plan has been criticized for excessive cost-cutting policies in its attempt to offer lower premiums to consumers.
  • As the health care recipient is not directly involved in payment of health care services and products, they are less likely to scrutinize or negotiate the costs of the health care received. The health care company has popular and unpopular ways of controlling this market force.
  • Some health care providers end up with different sets of rates for the same procedure. One for people with insurance and another for those without.
  • Unlike most publicly funded health insurance, many private insurance plans do not provide coverage of dental health care, or only offer such coverage with additional premiums and very low dollar-amount coverages.
  • Insurance Companies can influence the type or amount of treatment that the insured receives by setting limits on the number of visits, types of treatment, etc., it will cover.
Some portion of this article has been taken from

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