Published on: 16 January 2014 by Michael Lamb
The recent proposal by the government to provide tax breaks for Hong Kong health insurance plans which offer coverage regulated under the Health Protection Scheme (HPS), may lead to lowered company benefits for employees in the city, according to experts.
The plan to standardize medical insurance products offered by Hong Kong insurance companies in an oncoming government reform campaign may mean that workers are set to lose out as employers could simply stop providing medical insurance benefits to their staff. According to Professor Peter Yuen Pok Man at the Polytechnic University the proposal to standardize coverage offers, even with the idea of tax breaks for individual purchasers included, “ is not likely to attract employers current providing various types of health insurance plans to migrate their plans to HPS.”
This is due to the fact that the overall cost of coverage will increase but the scope of protection being offered under the standardized products is actually lower than that currently being offered by many employers. Under the HPS proposal employees may lose the ability to receive outpatient medical treatment as non-hospitalization coverage is not included in the scheme being floated by the HPS.
In a recent South China Morning Post* article Professor Yuen cited a 2011 survey which looked at 409 companies from 10 different business sectors that found most employers offering a group health insurance scheme included both inpatient and outpatient coverage under the plan. Current statistics indicate that approximately 20 per cent of Hong Kong workers are receiving some form group health insurance coverage from their employers.
However, with the implementation of a standardization scheme under the HPS proposals, the likelihood of a price increase for basic inpatient-only policies will be high. If, following the reform implementation, inpatient only plans are more expensive than more comprehensive coverage options then companies may decide to stop providing health insurance altogether. The cost increases for inpatient only coverage will stem from medical inflation due to the wider coverage on offer through the HPS scheme, which will push costs associated with insurance coverage in the city up.
According to the Food and Health Bureau the cost of basic Hong Kong health insurance plans are likely to increase by 10 per cent after the standardization of policies. In contrast to this the insurance industry believes that the premium increases following the reform are more likely to be in the region of 30 per cent, due to the extensive overhaul of existing coverage options from local insurance companies,
Furthermore, according to Legislator for the Insurance Sector Functional Constituency, Chan Kin Por, even with the company provided schemes, it is normal for many Hong Kong workers to obtain small, cheaper top-up health insurance plans on top of the coverage being offered by their employers. And this currently means that workers are normally able to claim some (or even all) of their costs for doctor’s visits, TCM procedures, and other outpatient care via health insurance coverage.
Despite the indication that continuation may be offered to employees under the HPS plan – allowing workers to switch to an individual policy from a group health insurance plan, without underwriting, in the event that they leave a company – the financial situation means that many companies are likely to drop the benefit all together. In the current market, the range of diverse options at an array of flexible price points is the only reason that a large number of organizations are able to provide health insurance benefits to their workers at all.
If companies are set to see an increase of up to 30 per cent on their health insurance plans, then realistically the same inflation rates are likely to hit individual policyholders. As such, even with a continuation option on the table it may simply be too expensive for a person to afford continuation coverage on a personal basis – even with the tax breaks currently being considered! This is due to the fact that, as previously discussed, to receive tax breaks for the purchase of an insurance plan an individual must cover all their dependents, even their parents. This has its own set of problems, but on top of the chance that companies could drop their health insurance schemes following implementation of the HPS means that employees could be left with no private healthcare solutions – returning the burden of care to the public healthcare system.
This is a situation which the government would like to avoid, primarily due to the fact that this does nothing to ease the pressure currently being faced by public healthcare institutions throughout the city. However, without the introduction of a structured reform program which provides more than mandatory minimums for the coverage being offered by Hong Kong Insurance Companies under the HPS program even with the tax credit offer on the table the situation could potentially be highly worrying for both companies and workers in Asia’s world city.