Economics of Private Shield

Some insurance agents like to tell scare stories about people who are hit with large medical bills, costing $50,000 or more. These stories are true (and they can provide evidence), but they are exagerated, in the following ways:

a) Only a very small proportion of insured get hit with large bills, maybe less than 1 in 10,000 people (corrected).
b) You have the option to go to a subsidised ward and pay less than one-third of the bill charged by a private hospital.

If you are already insured under a Private Shield, you can be sure that the bill will be high, as the hospital know that it will be paid by Private Shield.

The lifetime cost (from age 25 to 85) of Basic Medishield is $20,000. The lifetime cost of Private Shield is $50,000 for A class(restructured) and $70,000 (private hospital).

If you are well off and have adequate savings for retirement, the additional cost of $30,000 may not be important to you. Go and spend it for the "status". But, if you do not have sufficient savings for retirement, do not waste $30,000 (which is a lot of money to most people).

Some agents will advise you to go to Private Shield when you are young (as the premium is low) and to downgrade to Medishield after you retire. This may make sense, but you must remember that you are more likely to face a big hospital bill after you retire.

Out of the $50,000 that you pay in a lifetime for a Private Shield (class A), about $15,000 (30%) goes to pay commission, expenses and profit. Another $15,000 goes to replace the subsidy that is provided for B2 ward. The real benefit to the patient is quite small, except for the "status" of being treated in class A.

The scare story that you will go bankrupt if you land with a big bill and you are covered under Basic Medishield is exaggerated. But it is effective in getting you to convert to a Private Shield and increase the earnings of the agent. Who convince you anyway?

Tan Kin Lian