For those not already familiar with ElderShield, it provides basic long-term care insurance targeted at severe disability. When Singaporeans and Permanent Residents (PRs) turn 40, they can choose to enrol for severe disability coverage via ElderShield. Those who do not want such coverage can opt-out.
From 2020, this will change with the introduction of CareShield Life, which replaces the current ElderShield scheme. While CareShield Life will only come online in the next two years, it is important that we start to understand its implications today, since anyone under 38 today will automatically be included in the scheme, and even those who are older can choose to come onto CareShield Life.
Here are 11 important things we need to know about CareShield Life.
# 1 What Happens To ElderShield?
There will be no change for Singaporeans and PRs already on ElderShield. The scheme will continue to function as usual for them.
The only real impact CareShield Life will have is that those already on ElderShield, or those who have opted out initially, can choose to opt to switch into CareShield Life from 2021. Of course, this is only for people who are not already claiming from ElderShield or been incapacitated by a disability.
# 2 Administration Of Scheme
ElderShield was administered by private insurance companies, NTUC Income, Aviva and Great Eastern.
CareShield Life will be administered by the Singapore government.
This means two things:
First, the government will have to set up necessary infrastructure to be able to start administering CareShield Life. This will be a costly but necessary, and the government will foot the bill without dipping into premium payments.
Secondly, government will have to invest premiums collected, earn interest on it, and maintain liquidity for claims. From our understanding, the bulk of this investment will be in the form of Singapore Government Securities.
# 3 Coverage Option
ElderShield was an opt-out scheme for Singaporeans and PRs when they turn 40.
CareShield Life is compulsory for Singaporeans and PRs who will be between 30 and 40 years old in 2020. Thereafter, the scheme will also be compulsory for all Singaporeans and PRs once they turn 30.
# 4 Coverage Term
Under both ElderShield and CareShield Life, we are covered for life. This means that our coverage continues even after we stop paying premiums.
This is in contrast with most private disability plans, where coverage usually ends at 65. This is the life stage when we are most likely to need to make a claim on our policies. This means private insurers need to be a lot more innovative with their products and offer a better solution to customers.
# 5 Pre-Existing Disabilities
For ElderShield, those with pre-existing disabilities were excluded from the scheme.
Under CareShield Life’s universal coverage, everyone, including those with pre-existing disabilities, including autism, will come onto the scheme. This means that anyone who already has a pre-existing disability and will be under 40 in 2020, will just have to make a one premium payment before being able to start receiving payouts, subject to satisfying the disability assessment.
Also, the Ministry of Health (MOH) shared that “the intention is to have a lenient underwriting process” to allow as many to join the CareShield Life scheme as possible. This includes those who have common chronic conditions such as diabetes, hypertension as well as other illnesses. This is quite different from how private insurers underwrite clients.
However, those who are above 40 in 2020, and who also have a pre-existing disability, cannot come into CareShield Life and start claiming benefits. They have to tap on other government subsidies and schemes for support.
# 6 Definition Of Disability
The definition of disability for CareShield Life will remain largely the same as ElderShield. To be able to make a claim on CareShield Life, a person must require assistance for at least three of the six Activities of Daily Living (ADLs)
The ADLs include:
i) Washing: ability to wash in the bath or shower (including getting in and out of the bath or show) or wash by other means
ii) Dressing: ability to put on, take off, secure and unfasten all garments and, as appropriate, any braces, artificial limbs or other surgical medical appliances.
iii) Feeding: ability to feed oneself food after it has been prepared and made available.
iv) Going to the toilet: ability to use the lavatory or manage bowel and bladder function through the use of protective undergarments or surgical appliances if appropriate.
v) Walking or moving around: ability to move indoors from room to room on level surfaces
vi) Transferring: ability to move from bed to an upright chair or wheelchair, and vice versa.
This is generally more stringent that private disability insurance. The reasoning for CareShield Life coverage being equally stringent is because this universal coverage is meant for severe cases of disability.
Another update will be to the assessment of disability for a person’s cognitive ability to complete the ADLs. While this is already in place for ElderShield, not having explicit guidelines can lead to inconsistent outcomes in assessment. The assessment framework will be modified to provide explicit guidance to consider policyholders’ ability to initiate a task, plan and finally complete an ADL effectively and safely.
# 7 Getting Assessed For Disability
Under the current ElderShield scheme, policyholders have to pay between $50 to $150 to get assessed for disability. While this isn’t a hefty amount, those most likely to forgo it tend to be the segment of policyholders who most require it.
Under CareShield Life, the first assessment will be free. Again, MOH clarified that they do not expect people to be abusing the system, and will only go for assessments, or bring in their loved one’s for assessments, if they truly believe they will qualify. The cost of subsequent assessments will also be refunded if the policyholder qualifies for CareShield Life payouts.
These will be paid by the premiums collected from policyholders.
# 8 Payouts And Payout Duration
Of course, everyone is looking at what the payouts will look like.
Eldershield had two schemes, ElderShield 300 and ElderShield 400. ElderShield 300 allows us to claim $300 a month for a period of five years, while ElderShield 400 allows us to claim $400 a month for a period of six years.
These are fixed payouts.
Under CareShield Life, we will receive $600 if we start claiming in 2020. These payouts will increase every year until we stop paying premiums. Of course, we will only stop paying premiums under two conditions – when we make a successful claim or when we turn 67 (when we are no longer required to make premium payments but continue to enjoy coverage). For current cohorts, the age we will stop paying premiums is 67, however, this may increase for future cohorts as the re-employment age is revised upwards in future.
These payouts will also continue for as long as we live. This means that those who are immediately going to make a claim upon entering the scheme will receive $600 a month, with no increments thereafter. For those who do not make claims, the estimated monthly payouts will be close to $1,200, based on a 2% annual increment.
It is not clear how much payouts will increase each year, though initial figures presented to us by MOH depict an annual increment of 2%. While this figure falls far below medical inflation, it’s generally in line with overall inflation levels in Singapore.
# 9 Premiums We Need To Pay And The Premium Term
Being a compulsory scheme, this brings us to a question that will surely be on everyone’s mind – how much premiums do we need to pay for our CareShield Life coverage?
First up, both ElderShield requires us to pay for premiums until we turn 65, while CareShield Life requires us to pay for premiums until we turn 67. In both cases, we will continue enjoying coverage for life without having to pay any additional premiums. What this means is that our premiums are front-loaded, while we’re still working, and will continue to enjoy coverage even after we become seniors – regardless of whether we are still working.
Under ElderShield, our premiums are fixed, and do not increase as we age. Currently, males and females joining ElderShield will need to pay annual premiums of $174.96 and $217.76 respectively.
For CareShield Life, males and females, who are 40 years old in 2020, will need to pay annual premiums of $300 and $360 respectively. While this is significantly higher than 40-year-olds joining ElderShield, the improved benefits need to be taken into consideration.
For 30-year-olds joining CareShield Life in 2020, annual premiums will come up to $204 and $252 for males and females respectively.
Similar to payouts, our premiums will also increase by an estimated 2% each year.
# 10 How Are Premiums Going To Increase?
As stated, the premiums will go up by an estimated 2% each year. This isn’t fixed, and there are many factors that can affect this number.
Firstly, this is an estimate based on the core inflation rate in Singapore in recent times. This could go up or down based on future inflation rates.
Premiums are also based on the fact that the government can achieve long-term returns of 4% on premiums invested. Again, there’s no guarantee they are able to achieve this. On the other hand, they may do better.
Another big factor that may affect premiums is the amount of claims made and how much is given in payouts each year.
All this pose a big question mark for Singaporeans and PRs as to how much we may be expected to pay for premiums over the long term.
# 11 Payment Method
The entire sum of our yearly premiums can be paid for utilising our Medisave Account balances for both ElderShield and CareShield Life. This means we won’t have to dip into our take-home pay or cash savings.
CareShield Life Is A Public Good
At the end of the day, CareShield Life is a public good – administered by the government for Singaporeans and PRs. It is meant for healthy Singaporeans to slightly over for our brethren who require more help.
The second point we need to understand is that it is a public good, meant to cater for our basic needs. If we find that the $600 payout per month is insufficient, we should supplement it with private disability insurance.
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