After criticising some private insurance schemes for insufficient coverage, the Government is fighting back with a proposal to introduce its own voluntary medical insurance scheme. The government is hoping that over half a million individuals in Hong Kong will take up voluntary insurance coverage—allowing access to a more comprehensive range of healthcare options for patients who can afford private insurance. The global debate on healthcare reform continues and the Hong Kong Government has recently entered the arena with the proposal to introduce a voluntary medical insurance scheme.
The government has expressed concern over excessive profits that are made via certain medical insurance schemes which offer policyholders insufficient coverage to allow private sector care and leave them with no option but to stay at public hospitals—which are far cheaper for insurers to cover. The government is hoping that over half a million individuals in Hong Kong will take up voluntary insurance coverage—allowing access to a more comprehensive range of healthcare options for patients who can afford private insurance.
Local insurance market overview
Hong Kong is one of the healthiest places in the world: early health education, professional health services, and a well-developed healthcare system have all combined to afford Hongkongers the second highest life expectancies, and the fourth lowest infant mortality rate in the world.
With the population of Hong Kong standing at a shade over seven million, just under half of residents currently have some form of medical insurance. Around one million have individual health insurance policies with just over two million being covered by corporate health insurance schemes. The remainder of the population, access the government-funded public healthcare system.
Recently, the insurance sector has come under criticism for lack of competition between different providers in the market. The government has indicated that insurance companies providing health insurance schemes must provide reasonable levels of coverage.
If the private sector does not live up to government expectations, then the government may set up its own insurance company to compete with the private insurers in the marketplace. The government proposes to set up its own voluntary medical insurance scheme to help set a benchmark within the industry and introduce competition to help keep coverage provided by existing players at reasonable levels.
There are no plans at this stage to turn this government scheme into an across-the-board public insurance scheme. Rather, the idea of the government scheme is to help ensure meaningful competition in the market and help avoid price-fixing among insurers. The scheme forms part of the government healthcare reforms and will be opened for public consultation later this year.
Scheme objectives
The proposed voluntary medical insurance scheme would be set up to try and move people away from the public system towards competitively-priced private medical schemes. If implemented, the scheme should bring two main benefits. Firstly, it will help level the playing field within the health insurance market by creating a set of industry standards for private medical services and medical insurance. Secondly, it will help reduce the huge financial burden that exists on the SAR’s over-burdened public healthcare system in the midst of an ageing population.
Scheme overview
The government plans to inject around HK$50 billion in start-up funds into the proposed scheme—which it stipulates is to be used to help include as many people as possible. In doing so, the government then aims to spread the insurance risks throughout the population of Hong Kong.
If passed by the legislature, the scheme would only affect health insurance policies administered in Hong Kong. International health insurance plans that are administered outside the SAR would remain unaffected by any reforms.
The Hong Kong Federation of Insurers, representing local insurers, has agreed, in principle, to applying a ‘basic level’ of cover to the scheme. This coverage would mean all insurance premiums would become age-specific, as opposed to experience-rated; and existing exclusions on the coverage of mental illnesses and congenital defects would be removed. The proposed ‘basic’ insurance would only cover policyholders for in-patient healthcare in Hong Kong. For optional additional fees, policyholders would also be able to extend policy coverage to include additional benefits such as emergency medical evacuation and global portability, if required.
Spanner in the works
The issue of covering ‘pre-existing conditions’ has thrown something of a spanner in the works.
Many in the insurance sector are less than comfortable with the proposed age-rated government insurance scheme that would offer coverage of pre-existing conditions. Insurers point out that as the scheme is voluntary, those suffering from existing illnesses would have to pay higher premiums than people with no pre-existing conditions, in order to offset the higher cost of healthcare they are likely to require. Existing insurance policies typically handle ‘pre-existing conditions’ by exclusion, moratorium, or coverage with an additional premium.
Many insurers are of the opinion that clients who have pre-existing conditions should pay higher premiums under community-rated or shared-risk schemes. If this is not the case under the proposed government schemes then this is likely to mean that healthy people would have to pay their share of the higher premiums—something perhaps acceptable under a universal mandatory scheme, but obviously not popular under a voluntary scheme.
Unless this key issue can be addressed, with high premiums payable by all parties, it is unlikely that such a scheme will see much uptake at all.
More recently, insurers and members of the medical profession have both expressed reservations about the government’s proposal to set up its own insurance company to compete within the voluntary medical insurance market.
Critics have argued that if the government does embark on taking part in the market, it may be extremely difficult for them to withdraw later on. Premium adjustments, in subsequent years would also be challenging and highly political—requiring LEGCO approval.
Moreover, the government is likely to face criticism if its own insurance company generated a profit.
Future
One solution may be that the government subsidises the health insurance premiums of individuals with pre-existing conditions, to help offset the higher premiums. However, in doing so, the scheme would then run the risk of becoming very similar to the existing publicly-funded healthcare system.
It is important that the distinction be made that this proposal is only aimed at voluntary private medical insurance, rather than being an extension of the whole healthcare system for Hongkongers.
With the introduction of the proposed government schemes and resultant competition in the market, this will certainly be beneficial for end users. The government, however, needs to be extremely careful in deciding whether the scheme will be wholly run on commercial principles or will be run with a public subsidy element.
Paul Arkwright
Publisher
