Wednesday, July 4, 2018

Older residents to pay more to join CareShield Life; Govt offers incentives to offset higher cost

By Louisa Tang


The new CareShield Life scheme, which replaces the existing ElderShield from 2020, will dole out higher monthly payouts — S$600 instead of up to S$400 — which are payable for life, up from the current cap of six years.

03 July, 2018

SINGAPORE — The majority of older residents who want to be covered under CareShield Life will have to pay a “catch-up component” for a decade, and a base premium which increases over time until they reach 67, it was announced on Tuesday (July 3).

The first cohort to be enrolled in the new scheme will be citizens and permanent residents aged between 30 and 40 in 2020. Younger citizens will be automatically enrolled once they reach 30 years old.

To partially offset the higher cost of joining the enhanced disability scheme for those aged 42 and above in 2021, the Government will be giving them incentives of up to S$2,500 over a span of 10 years. They have to join CareShield Life by 2023 in order to receive the incentives, given based on age, which will be paid out over 10 years.

The CareShield Life scheme, which replaces the existing ElderShield from 2020, will dole out higher monthly payouts — S$600 instead of up to S$400 — which are payable for life, up from the current cap of six years.

The insurance, which covers severely disabled Singapore residents who cannot independently perform at least three out of six activities of daily living, such as eating and dressing, will also be made compulsory for those aged 40 and below in 2020.

Premiums will go up by 2 per cent every year for the first five years, in order to support payout increases. Policyholders will also pay premiums from age 30 to the current re-employment age of 67 — up from the existing range of 40 to 65 under ElderShield.

To help residents through the transition, the Government will give permanent means-tested subsidies of between 20 and 30 per cent for lower- to middle-income residents.

Singapore citizens who join the new scheme in the first five years will also receive up to S$250 in transitional subsidies to help them pay for premiums.

While it is not mandatory for existing cohorts, defined as those born before 1980, the Health Ministry (MOH) on Tuesday announced it will provide participation incentives — ranging from S$500 to S$2,500 to residents born in 1979 or earlier — to encourage them to join the long-term care scheme from 2021.

As of December last year, the existing cohort is made up of some two million residents, said MOH.

Of these, 717,000 residents have opted out of ElderShield. Of those covered by ElderShield, 532,000 are covered under ElderShield 300 — which offers S$300 monthly payouts — and 760,000 are under ElderShield 400 — which offers S$400 monthly payouts.

[From this, there are about 2 million SC aged 40 and above.]

The incentives are aimed at offsetting the higher costs for this group, who have to pay a base premium as well as a “catch-up component”, on top of their yearly premiums.

Source: Ministry of Health, Singapore

Those who join the scheme at age 59 or above will pay their premiums over a period of 10 years. For example, if a 62-year-old joins CareShield Life, he or she will pay premiums till age 71.

Their annual base premium will increase regularly over time till age 67 in order to support increases in payouts, after which it will stay flat as payouts stop escalating then.

If a policyholder has to pay the catch-up component, he or she will pay a flat amount spread over 10 years.

How much one has to pay for their base premium and/or catch-up component will depend on their ElderShield status, age and gender, among other factors.

For example, a 54-year-old man covered under ElderShield 400 will have to pay an estimated base premium of S$620 per year in 2021 under CareShield Life. After 30 per cent premium subsidies and S$1,500 participation incentive, he will pay S$284 a year — or S$24 a month — in premiums in 2021.

Women will have to pay higher premiums, as they are expected to live longer and thus have a higher chance of requiring long-term care. Therefore, in comparison, a 54-year-old woman under the same circumstances has to pay S$410 a year in premiums, or S$34 a month.

Should they become severely disabled at age 67, they can each receive around S$790 a month in payouts.

Policyholders covered under ElderShield 300 or those who opted out of ElderShield will have to pay more in their annual premiums in the form of a “catch-up component” to “catch-up” to those on ElderShield 400, who had paid more premiums.

So, a 54-year-old man covered under ElderShield 300 will have to pay an estimated base premium of S$620 a year, as well as a “catch-up component” of S$70 a year over 10 years. After 30 per cent premium subsidies and S$1,500 participation incentives, his annual premiums will be S$354, or S$30 a month.

[The difference between a 54 yr old on Eldershield 400 and Eldershield 300 is $284 per annum or $354 per annum or $24 p.m. or $30 p.m.]

To make it more convenient for the existing cohort to join CareShield Life, those born between 1970 and 1979, who are covered under the ElderShield 400 plan and not already claiming from it, will be auto-enrolled in CareShield Life in 2021. They can opt out of the scheme within the first two years and receive a premium refund.

[Like any insurance, risk-pooling is necessary for the scheme to be viable. There is a tragedy of the commons potential in any such scheme, unfortunately.]

To further encourage participation in the scheme, MOH said those with pre-existing medical conditions but no severe disabilities can also join the scheme in 2021. This is a more lenient approach than private insurers, the Government said on Tuesday, but the criteria will be tightened after two years.

Following the latest announcement, Health Minister Gan Kim Yong urged older Singaporeans to consider whether it is meaningful for them to join CareShield Life, adding that the Government will conduct outreach programmes with community organisations over the next one-and-a-half-years to explain the scheme to them.

He told reporters that the means-tested subsidies and additional premium support offered to the older cohort are similar to those offered to the younger set, and is aimed at ensuring that those who participate in the scheme do not lose coverage just because they can’t afford premiums.

He also added: “In the end, (CareShield Life) is still a long-term commitment. We would encourage older cohorts to consider whether they would like to participate in the scheme, and the incentives are there to help them tide over the initial period, especially the first 10 years.”

[I have a problem with the implementation of the scheme. But no problem with the scheme. 

Considering that we are all living longer, it is very likely that in our last few years of life, our quality of life will drop. Unless we are so "fortunate" as to drop dead immediately or be killed in a sudden accident.

Even if our parents live to 75, hale and hearty, before dropping dead of some sudden illness, it is likely that we would outlive our parents and lose mobility and independence in our very old age (85 and above).

When you are 85, how old will your children be? 50? 55? If you use up THEIR retirement savings at that age, what will THEY retire on?

My greatest fear is to be a burden to the next generation. Maybe, it is our "role" to be a burden when we are old? To teach their children valuable life lessons or something. Some people seem to think so.

I don't. 

Now, if you have a plan (and the resources) to ensure that you are not a burden in your old age, be brave, be free, and opt out of Careshield. That is your choice. You are probably a high income earner and/or an high net worth individual. You don't need Careshield.

(But you might want to consider that Careshield NEEDS you, or rather your premiums to make it cheaper for others. )

Or if you think that when you are old, it is your role to be a burden to your children, or even your grandchildren, then opt out of Careshield without a plan, without savings, and with god/fate/destiny as your "Assurance". Ruin your children's lives by drawing down on their savings. It is YOUR role to do so. No, it is your DUTY to do so.]

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