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Initial Look at Hong Kong’s Voluntary Health Insurance Policy Reveals Problems with Proposal

Pacific Prime looks into the proposed Voluntary Health Policy Scheme from the Hong Kong Government

Posted on Jan 26, 2015 by Alexander Nellist

Hong Kong launched a three-month consultation on the 15th December on a proposed Voluntary Health Insurance scheme. For a premium of HK$3,600 policy holders can be treated at private hospitals, have tests and non-surgical cancer treatment, and with no cost sharing. Policyholders will also be eligible for a HK$450 tax deduction. Designed in mind to be sufficient to cover private hospital care in a general ward, cover room and board as well as doctor's visits and prescribed diagnostic tests the policy also proposes guaranteed renewals and pre-existing conditions cover included in a twelve basic requirement standard that insurance companies must follow. These include accessibility to and continuity of coverage, quality of protection, enhanced transparency and certainty.

Overall Pacific Prime views the proposal as an idea that sounds good, but one that would require mandatory participation from the people, amounting effectively to another form of tax.

As the proposed scheme is voluntary, there is a very high risk of anti-selection, with it being attractive only to the already critically ill or those with pre-existing conditions. There is also further risk of the currently healthy only choosing to elect to join in for the cover only after they fall sick. Those with pre-existing conditions will be accepted for an initial period of time, at which point the policy takes on a more traditional approach to chronic conditions with underwriting procedures to determine the level of cover.

Insurers are also wary on the details concerning government subsidies affecting premiums, and whether it will successfully cover the additional risk. Insurers naturally would not want to cover high risk groups unless the government agrees to carry some of that risk, or unless they are permitted to make the premiums relatively high. Ultimately, the proposed policy could see insurers paying out amounts that are far too high, even with the inclusion of premium loading.

There is little point behind the idea of paying a premium for insurance against something that has not happened but might, and having a government scheme that bails people who suddenly become ill anyway. The scheme would only function within a compulsory framework, but then it is effectively a new mandatory tax for the people.

Ko Wing-man, Secretary for Food and Health has however added to the discussion that the middle class could benefit if the voluntary health policy goes through, stating that the scheme "is not a total solution to the problems of our health-care system, but one of the turning knobs to adjust the balance of the public and private health-care sectors."

With questions on how the policy could affect the private health insurance system, and whether it could spur on innovations in how they could operate in the future, Pacific Prime is again wary.

The medical insurance market in Hong Kong is currently one of the best in Asia, and one of the better ones in the world. It is highly competitive and there are a wide range of products and insurers who compete aggressively in such a small market. There are even concerns that the scheme could detract from the market.

It is a nice idea for the Hong Kong Government to inject 50 billion into ‘public’ healthcare, but it is not a solution. If the proposal is actually accepted, Pacific Prime suspects that any implementation will see an adjustment from the initial plan, and will most likely be a toned down one. There are too many problems with it, and the discussion has come surprisingly far without thought for the above concerns.

The root of the problem with the private medical market in Hong Kong can be looked at as not actually one of insurance but one of treatment, and it’s lack of transparency in the city, namely lack of pricing disclosure and transparency on quality and outcomes. Treatment costs are not being controlled, and if the government wants to lower the cost of healthcare it needs to create a competitive and transparent environment for treatment.

If you are curious to hear more about how the Voluntary Health Insurance Policy would affect your own insurance premiums, or if you need any information on health insurance in hong kong please get in contact with our experts, who will explain everything to you regarding cover of treatment in private hospitals in the city. 

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