Raffles Medical won’t be hit by Singapore insurance co-pay spike: UOB KayHian

A Singapore 10-dollar note Photo by Leslie Shaffer

Singapore’s health-insurance policy holders may soon get sticker shock with a spike in co-pays, but Raffles Medical isn’t likely to take a hit, UOB KayHian said in a note on Tuesday.

Regulations for the integrated shield health-insurance plans with “full riders” that allow patients to avoid paying anything for hospital admissions, as well as partial riders, which include co-pays, are changing. That’s because patients with full riders tend to have bills that are on average 60 percent higher than patients without the plans, a cost which has pushed up all insurance premiums across the spectrum, the note said.

New policies will require a co-pay of at least 5 percent of the hospital bill, with a potential cap at S$3,000, the note said.

“While the change in insurance co-pay terms for new policies could have some negative near-term impact, we see limited impact on RMG, given its group practice model, price transparency and peer-doctor review,” UOB KayHian said.

Foreign patients key

It added that this was unlikely to impact RMG’s foreign in-patients, which account for around a third of its in-patient load and tend to have “higher billing intensity.”

Local patients paying by insurance were estimated at 20-30 percent of the total in-patient load, it said, although it noted this could be understated if some patients settle the bills personally and then claim reimbursement from insurers.

Net profit tipped to decline

But while UOB KayHian wasn’t changing its earnings forecast, it noted that net profit could decline gradually due to new capacity, with a trough expected in 2019, when its Shanghai hospital opens.

“Although RMG’s earnings outlook for the next two years is expected to be lacklustre, its long-term growth potential will be significantly enhanced in the next decade due to a near quadrupling of capacity (from around 200 to 1,300 beds when its China hospitals are fully opened),” it said.

“For investors with a longer-term horizon, RMG’s relative underperformance (30 percent below the FSSTI) over the past year is an accumulation opportunity,” UOB KayHian said.

It kept a Buy call with a S$1.32 target. The stock ended Tuesday up 1.71 percent at S$1.19.