What is the Hospitalization and Surgical (H&S) Plan?

What is the Hospitalization and Surgical (H&S) Plan?

As the name suggest, H&S plans are insurance policies meant specifically to cover the medical costs of hospitalization. The point to look out for regarding these plans is that they only pay-out when you incur hospitalization and surgical bills.

In general, the format of the H&S plans usually come in two parts:

1) the 'basic' plan, which is payable using the Medisave
2) the 'rider' plan, which is payable using Cash and covers either:

a) the Deductible,
b) the Co-insurance,
c) or Both

What is the Deductible?

The deductible is the first-part of the bill - the initial $X amount - that the patient have to pay before they can claim the rest of the bill. The deductible range from $1,000 - $4,500 depending on the type of plan, ward or even the age. However do note that if the bill falls below the deductible (i.e. less than $X), the patient will have to pay the entire bill by themselves.

What is the Co-insurance?

The co-insurance is the second-part of the bill (after deducting the deductible) which the patient have to pay. The co-insurance is usually a percentage (10%) of the remaining bill.

How do you decide which H&S you need?

1) Preference of Medical Institutions:

Would you prefer to go to a private hospital or a public (i.e. government or restructured) hospital for treatment? If you prefer the private, do opt for the plan that is meant for the private hospital. The only point to note is this: sometimes the choice might not be available due to the need to seek specialist treatment (usually involving private doctors). Thus, to be on the safe side, is it usually better to choose a plan that allows you to opt for private hospitals.

2) Cost:

The cost of the H&S plans varies accordingly to the plan chosen, and whether you added on the rider or not. For the very-budget conscious, they usually opt for just the basic plan so that they do not have to pay any cash. However the catch is when the bill comes, they have to pay both the deductible and the co-insurance. For those that are value-conscious, they would opt for the rider - either covering the deductible or the co-insurance. For those that want to be 100% covered - they would opt for the rider that covers BOTH the deductible AND co-insurance. The cost for the latter is the highest, and the rider that covers both can cost nearly 3 times as much as the rider that covers only either one.

3) Benefits:

The benefits of the H&S plans are almost identical. For a comprehensive comparison you can refer to the benefit table here.

Terminal Illness versus Critical Illness

I came across a Forum letter in The Sunday Times (10/05/2009, pg. 30), whereby Mr Lim Kim Kok was sharing his claims experience in relation to his medical insurance. Apparently Mr Lim had a Great Eastern insurance policy which covers the 30 critical illness, but he was unable to make a claim when he opted for an agioplasty instead of a bypass (upon the recommendation of his cardiologist) simply because his "illness was not serious enough to warrant a claim (no bypass and dead heart tissue)".

This brings to mind one of my client's term policy, whereby he claimed that it was 'cheap and good'. So when I asked him why does he say that it is good, he says that it covers all the necessary aspects like death, total & permanent disability and other 'illnesses'. Then I asked him what illnesses does it cover, and he thinks that is it the 'usual' 30 critical illness but isn't sure. So I requested him to show me his policy, and then we uncovered a grave misunderstanding - the policy only covers 'terminal' illness.

What is "Terminal Illness"?

According to the policy schedule, "Terminal Illness" is defined as an "illness which in the opinion of the medical specialist and subject to the acceptance of our appointed Medical Officer that the advent of death is highly within 12 months. Terminal Illness in the presence of Human Immunodeficiency Virus (HIV) is excluded". (exact wording)

In short, it means that you have to have DIE of the illness (whatever it maybe, other than AIDS) within 12 months. If you die beyond the period (i.e. you died on the 366th day), then you cannot make the claim. However, the stark difference between this and the 30 critical illness is that for the latter you have the hope of recovering, but for terminal illness is it almost akin to making the death claim - albeit that you can make the claim BEFORE you die rather than AFTER you die.

So in short, when one purchase a policy, the DEFINITIONS given in the policy schedule is of the utmost importance. Apparently Mr Lim cannot claim simply because the clause he might be able to claim under is the "Coronary Artery By-pass Surgery", which is defined as

"The actual undergoing of open-chest surgery to correct the narrowing or blockage of one or more coronary arteries with bypass grafts. This diagnosis must be supported by angiographic evidence of significant coronary artery obstruction and the procedure must be considered medically necessary by a consultant cardiologist.

ANGIOPLASTY and all other intra arterial, catheter based techniques, 'keyhole' or laser procedures are excluded".

So it is the same for my client. When he gets an 'illness' and wants to claim, he might be sorely disappointed to discover that he will not be able to claim unless he dies of it in 12 months. If he gets any of the 30 critical illness, he will not be able to claim at all. So please be aware and beware.

Whole Life Versus Term Plans

When people decide to buy an insurance policy, a common question that arises is "should I buy whole life or term plans?" After going through the explanation with many of my clients, I think its appropriate to highlight some features that everyone should know in order to make an informed decision.

1) What is the difference between whole life and term insurance?

Basically the difference between whole life and term can be identified in terms of 3 aspects:

1) the duration of the coverage
2) the cost of the premiums and
3) whether there are any cash/surrender value

Whole life policies usually offer life-time coverage and the policies will start to accumulate cash/surrender value after the 3rd year, but the premiums, ceteris paribus, for these policies are higher. In comparison, term policies offer temporary coverage over a specific period of time (i.e. 10 years) and the policy does not have any cash/surrender value, but the premiums are much lower.

2) What are the pros and cons of whole life?

The pro of the whole life plan are that it allows you to lock in your insurability and premiums at the point of purchase; and it extends the coverage for life-time. Also, consumers have the option to cash out the plan (but at the expense of giving up the coverage). The cons are that for the traditional whole life plans, you will have to pay the premiums for life.

3) What are the pros and cons of term insurance?

The pros of term insurance are that being a 'pure-protection' policy, you can get a relatively high amount of sum assured at lower premiums. However, since term policies cover a limited period you run the risk of not having any coverage when you need it most. Also, if you should need to renew it upon expiry be prepared to pay higher premiums due to the age, or worst, be declined if your health had deteriorated.

4) Are there any alternatives to whole life and term insurance?

In fact there are some variants of whole life plans that integrate both features of a whole life plan and term plan - the limited-payment whole life combines a limited premium payment period worth a permanent life-long coverage. In short, consumers only need to pay for a certain period of time and then the policy will continue for life.

5) Should people get whole life or term insurance?

Basically it depends on the individual's perspective toward insurance as well as what the insurance is meant for. Generally there are two schools of thoughts: insurance as either an expense or investment. The former is epitomized by the phrase "buy term and invest the rest", while the latter perceive insurance to be an instrument to achieve higher returns. For the former, they would prefer to minimize the cost of insurance so that they can devote more resources to investment, while the latter would encompass people who treat the insurance itself as a form of investment in terms of the cash/surrender value.

Also, if the insurance is meant to cover medical expenses, then it would make sense to get a whole life plan because you might never know when an illness will strike. It might strike you tomorrow, it might come one month after you turn 65 - you never know. If the insurance is meant for a temporary increase in the coverage then it would be advisable to get a term plan. In my humble opinion the best would be a combination of both – for it will allow you to maneuver between the duration, coverage and cost. Essentially there are no bad plans, just a mismatch between the actual and expected benefits of the plans.