3 things you need to know about employee health insurance in Singapore

In Singapore, many employee remuneration and benefits packages have a heavy emphasis on access to health insurance. And little wonder this is the case when local health-cost inflation is taken into consideration. Private treatment options are a highly sought after benefit because of the potential costs involved and, for companies of all sizes, this coverage is increasingly seen as a 'must have' by existing and potential staff.

Few local companies have a dedicated benefits manager in this area, with procurement falling often to the Human Resources Department. So HR professionals, often with limited experience of the arcane world of health insurance, find themselves in the unfamiliar position of having to arrange health insurance for their company's employees.

Get this right and it can be great for staff and the CFO. But if crucial mistakes are made, then coverage is limited and costs can be dropped on unsuspecting staff with HR getting the blame! So how do you go about arranging cost-effective cover for your staff?

1) You will need help

Even if you are fairly knowledgeable about health insurance, you won't know as much as the experts. Getting the right advisor helps you assess the impact of a good insurance program on your overall business, will get you a better result, and will reduce your workload.

You can buy health insurance in one of three ways:

- Go direct to an insurer. Some companies do this, normally larger companies with confident procurement. Whilst this cuts out the middleman, it leaves you in the position of fending for yourself and not knowing whether you are getting a good deal relative to the market.

- Buy through an agent. By definition, agents are representatives of the insurance companies they represent and are paid a commission by the insurer for winning and servicing clients. An insurance agent can represent between 1 and 3 insurers and good agents will help you find the right cover and pricing from the insurer they represent as well as help you with the administration of claims.

The downside is when there are "grey area" claims, will they look after your interests or the insurer's? Also they can't search the whole market to get the most cost-effective solution for you or to benchmark what you currently have.

- Brokers are also paid by commission (or a fee) and can approach all insurers who are licensed by the MAS. As they are paid commission by any insurer, they should represent your interests in the case of claims or finding the right solution to meet your needs. As in all walks of life, there are good brokers and bad ones.

As a guide, it is best to find one where you are meaningful business to them. I work for a broker, so should declare an interest, but if you need sophisticated reporting or have some difficult issues to resolve, you are most likely to get the best help from a broker.

2) You need information

The economics of health insurance is quite simple. You pay a premium from which the insurer wants to make a profit.

If your claims are getting close to the cost of the premium, then there will be pressure at the renewal to increase the premium. This is on top of underlying cost pressure as a result of medical inflation of around 10% per annum.

Your agent or broker should be providing information periodically through the year to help you track claims costs. These should be no more than around 70% of premium to help you maintain premiums at their current level. They should also be providing advice on how to manage those claims costs.

3) Understand how to engage the insurance market

In Singapore we regularly see companies trying to buy health insurance as if they are buying stationery. They ask for quotes from three or four brokers and agents which come back in a range of different shapes and sizes…and all with different terminology seemingly designed to confuse.

The Singaporean insurance market doesn't work like an office stationery account. Normally insurers talk to one broker or agent. If there is an appointed broker or agent, they talk to them. Anyone then approaching the insurer is likely to be told that the insurer is already talking to another broker or are working through their agent.

So, a common tactic by brokers in this competitive situation is to "block the market". This is to contact as many insurers as they can to say they are working on behalf of a client to prevent other brokers or agents getting a quote from that insurer.

This is why appointing one broker or agent at the outset makes more sense. One broker can approach the whole insurance market on your behalf and summarise their findings in one renewal proposal.

Getting the package right

Health insurance can be so much more than just a 'rubber stamp' offering. With a tight labour market and an ensuing scramble for the best people, medical coverage is now a central part of talent retention and attraction.

Getting it wrong can have a devastating impact at both the personal level and across a business. After all, who wants to work for an organisation that got this wrong? If you treat health coverage like stationery, don't be surprised if you end up with staples and paperwork.