Pros & Cons of Outpatient Insurance

In Singapore, many insurance companies offer a variety of healthcare coverage plans that can range from outpatient treatment to disability coverage. Under the Singapore Employment Act, employers must recognise MCs from all registered doctors and dentists, reimburse employees’ consultation fees but they are not obliged to provide private insurance health benefits to their employees. 

With the government helping to take care of citizens’ large hospital bills, employers actively try to cover their employees’ outpatient and smaller bills. Many employees compare the different employee benefits available before deciding which company to join. While it is common for companies buy group insurance for their employees, other companies have opted to follow the reimbursement model for their medical coverage.

Both methods have their pros and cons. The strategy adopted by companies depends on several factors. Here, we focus on outpatient insurance coverage which usually encompasses visits to GP clinics and specialist treatments. To help one better understand which is the most suitable route, we look at the pros and cons of purchasing an outpatient insurance package. 

What’s good about getting an outpatient insurance plan?

1. Corporate rates

When a company opts to purchase a policy from the insurance company to cover their staff, the insurance company will typically be partnered with a Third Party Administrator (TPA), who have a designated panel of healthcare providers. As such, when the company’s employee’s visit the TPA’s panel of clinics, they will have access to pre-negotiated healthcare rates at a lower cost.

2. Automate claims submission and approval

Another plus point about purchasing outpatient insurance is that you need not be as concerned with all the paperwork and submission of claims. Many HRs often feel burdened having to manually collate receipts and subsequently returning the respective amounts due to each individual.

Insurance firms offer the luxury of a cutting down the level of claims that HRs have to handle by a large extent. The company will still be required to submit claims to the insurance company in the event that the employee visits a clinic that does not fall under the panel partnered with the insurance company. This frees up time for HRs, allowing them to devote more attention to other matters at hand.

What’s not so good about outpatient insurance?

When anyone purchases any insurance policy, they are expected to pay the premium upfront. The level of premium is usually decided by the estimated level of payouts that the insurance company would have to give should there be any claims.

To clarify, the claims for a two-days MC due to the common cold would pale in comparison to the claims paid out for a hospitalisation incident. As such, the premium paid to cover in-patient claims will be drastically higher than the premium paid to cover out-patient claims.

Since the possibility of there being an in-patient claim is drastically lower than the chances of out-patient claims, insurance companies will profit a lot from selling in-patient policies as compared to selling out-patient policies. As such, insurance companies have a tendency to sell out-patient plans as a rider (add-on) on top of an in-patient plan.

In summary, companies are usually unable to purchase out-patient plans without first purchasing an in-patient plan, which overlaps with MediShield.

1. Premium negotiation depends on company size

Let us first look at the issue of negotiating premium rates. Assume Company A has a head count of 50 employees while Company B has 2000 staff, an insurance company will be more willing to allow Company B to negotiate regarding the level of premium that they pay because of its sheer head count. Meanwhile, company A’s small employee size limits its power to negotiate premium prices.

2. Over-paying premiums

The insurance policies bought covers the companies for a year before the insurance company reviews the level of claims made and provides the company with a new quotation when the renewal date is near. There can only be two possibilities- either the insurance company finds the level of claims to be acceptable or they find that the level of claims is too high and they are not profiting as much. We will address both of these situations.

The first situation - where the insurance company finds the level of claims to be acceptable. In this case, the premium paid by the company at the time of the renewal will be the same. The company is still ‘overpaying’. For example, in the event that in the second year, the level of claims is 50% of the premium, the quotation provided will be the same as the first year. Come the third year, even in the event that the level of claims has dropped to 47%, the premium will still be the same as the first year.

The second situation - where the insurance company finds the level of claims to be too high. As such, they will undoubtedly increase the level of premium paid come the renewal period. When the time comes to renew the policy again the coming year, if the level of claims are acceptable it will bring us back to the first situation. Otherwise, the premium paid will be loaded (increased) again.

Overall, not only will the company be ‘overpaying’, but they face the risk of the premium increasing which will call for the company to re-allocate the budget and reduce the funds available for other areas.

3. Lack of real-time data insights

As the insurance company is in charge of the claims and do not provide any real-time updates, HRs will be not able to accurately track the usage of the medical benefits nor monitor any trends.

4. Lack of personalisation for a diverse workforce

Insurance companies adopt a one-size-fits-all approach. Due to the diverse demographics in many companies today, some employees may feel that their needs might not be sufficiently covered by the outpatient insurance package.

To create a positive employee benefits experience for all, it has been recommended for employees to be able to personalise their individual healthcare coverage such that it aligns with their own lives. In the long term, the rigid structure that insurance companies adopt might not be the way to go for companies as their employees could be looking beyond the basic healthcare coverage.

5. Rewards sick employees instead of healthy employees

It is only when a person falls sick, then he/she will visit a doctor and enjoy the healthcare benefits. However, for healthy employees, they hardly make use of their entitled employee health benefits. As such, insurance seems to be rewarding only sick employees. The employees who stay healthy should be rewarded as well especially since they continue to contribute to the company’s productivity.

Highlighting the pros and cons of getting an outpatient insurance package will allow you to make a better decision. Some might want wellness benefits to be included in the insurance package, but that depends on individual companies.

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An SME Guide to Better Employee Benefits