All Singaporeans automatically are opted into the Basic Medishield when their CPF account is first opened. This is typically when they start their first job. For those who want a better coverage, they would look at those “enhanced” shield plans called the private-integrated shield plans. Why are they called integrated shield plan?
When a person buys a private shield plan, the Basic Medishield does not cease. Take for example, say a person buys NTUC Enhanced Incomeshield Preferred Plan. This Incomeshield internally consists of two portions namely the liability insured by NTUC Income and the liability by CPF Board which is the Basic Medishield portion. So effectively there are two insurances “integrated” into one. However, the policyholder only pays one premium to the insurer. This premium is inclusive of the premium for Medishield. From transaction point of view, the CPF member will only see a single deduction of premium from his medisave account by the insurer. But in reality, that single deduction of premium is inclusive of the Medishield’s premium. When comes to claim, the insured claims from his own insurer – not CPF Board. However, the liability is shared between the insurer and CPF Board. This is done transparently to the insured.
The advantages of having an integrated shield plan are: (1) If the insured decide to switch to another insurer, the Basic Medishield remains unchanged. While the new insurer may exclude pre-existing illnesses, the Basic Medishield will not have this issue since it was never terminated. (2) The claim process is quite easy. The insured just needs to tell the hospital staff that he wishes to claim from his shield plan and they will be able to process the claim automatically. The staff will know about this shield plan because of the integrated computer system.
However, there are complications that many financial advisers and consumers are not aware of.
Most shield plans these day can be paid by cash instead of medisave. There are many people who pay the shield plan by cash. These are those without medisave account. All foreigners such as those holding work permits and employment passes do not have a medisave account. So they have no choice but pay by cash.
If the shield plan is paid by cash, it means it is not integrated. The policy becomes like a standalone medical insurance policy. The implication is that the claim process becomes manual driven and less efficient. Another implication is that the insurer now bears the entire risk by itself as there is no more risk sharing with CPF Board because there is no Basic Medishield component within the policy.
The complication of cash-only shield plan comes in when the insured wants to integrate with Basic Medishield. For example, when a foreigner becomes a Singapore Permanent Resident the CPF account will open. But there is risk of integrating. When the shield plan is integrated, would the Basic Medishield be underwritten on the date of integration? Remember that the Basic Medishield is a new insurance policy and so rightfully it should be underwritten. If this is a case, there is a risk of pre-existing illness exclusion on the Medishield portion. One insurer told me for such a case, the Basic Medishield will not be underwritten as new but will take whatever underwriting decision made on the date when the cash-only shield plan was incepted earlier. However, another colleague got a conflicting reply when he asked from the same insurer on the same question. My opinion is that the insurer itself has no right to answer this question in the first place because that portion of the risk in question is the Basic Medishield which only CPF Board can answer. Therefore, unless CPF Board gives a written confirmation, there is still a risk.
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