Government’s Newborn Insurance Scheme Deeply Flawed

On March 17th 2019 the South China Morning Post reported that the government is set to unveil a new voluntary health insurance scheme that is meant to cater specifically to the medical needs of newborns and children for as little as HK$2,000 per year.

The government has launched the first stage of the Voluntary Health Insurance Scheme (also being called the VHS) with the intent of having young parents cover their children through private health insurance from 15 days to 100 years old.

However, in one major glaring flaw, the policy will not cover congenital conditions for babies, meaning parents whose infants are born with serious medical conditions would not be able to receive coverage for those conditions under a Hong Kong insurance policy offered via the VHS.

Pre-existing medical conditions will still be a very real issue.

But perhaps we’ve jumped ahead of ourselves slightly, and we should step back and look at what it is, exactly, the government is trying to accomplish with the announcement of the Voluntary Health Scheme.

What is the Voluntary Health Insurance Scheme?

The 2019 incarnation of the VHS, set to launch April 1st, is designed to alleviate the burden on the city’s public healthcare system by offering low-cost insurance that allows for private sector healthcare.

Roughly 82% of Hong Kong residents use public medical services, which is causing severe strain on the overall healthcare system. Unfortunately, the cost associated with private medical services in Hong Kong means that the majority of residents are simply unable to access care at privately operated facilities.

By offering a tax break to policyholders purchasing cover through the VHS of up to HK$ 8,000 per year, and by creating minimum coverage requirements (including guaranteeing a renewal age up to 100 years and providing coverage for “unknown” pre-existing conditions). This, they expect, will see roughly 3.1 million Hong Kongers covered under the VHS by 2048.

Without the implementation of the scheme, the government expects 86% of Hong Kong residents to be using public medical services by 2040. After implementation this is forecast to decrease to 77%.

So What is the Catch?

This is not the first time that the government has considered a program like the VHS. In fact, discussions about a VHS have been ongoing since at least 2014. Former Chief Executive Donald Tsang is on record talking about the VHS in 2011. Looking at the conversation in the 8 years it has been developing, and most of the commentators who have been vocal on the issue have not been complementary.

Under the planned April 1st roll out, which has been marketed towards young parents, any congenital conditions which became evident prior to a child’s 16th birthday would not be covered under the plans. While there has been mention of lowering this age to 10 years old for some underwriters, the complete absence of coverage for congenitally related conditions leaves a massive hole in the scheme.

This is particularly problematic as it pertains to newborns, who are at the highest risk of requiring treatment for congenital birth defects and medical conditions which are found to have a congenital cause.

The government has also announced that plans being offered by the VHS program are expected to carry an average annual cost of HK$4,833 per year. This is highly concerning given the initial aim of the program is to shift the burden of treatment away from the public healthcare system.

Under current Hong Kong Health Insurance plans provided by local underwriters an inpatient-only health insurance plan at the lower end of the scale will cost roughly HK$2,718 per year for a 17-year-old.

The level of coverage on offer at this price point is not comprehensive. In fact, these policies are generally only used in catastrophe situations, and do not provide any outpatient protection. At CCW Global we do not see a large volume of these lower level plans being taken out, simply due to the difficulty that policyholders may see in receiving quality treatment under their “protection.”

We certainly do not see 3 million new policyholders based on the fact that comparable insurance plans already exist within the local market.

So Where is Hong Kong’s Healthcare System Headed?

The Voluntary Health Insurance scheme coming into force April 1 2019 is not going to be the cure that fixes the city’s healthcare system. In fact, it isn’t a great stretch of logic to say that the impact the VHS will have in moving patients from the public system to the private system will not be significant.

A policy, using comparable premiums for determining what benefits are being offered, which provides only HK$53,200 in coverage for complex surgeries is not going to be sufficient at a hospital like the Hong Kong Adventist or Sanatorium. Our city’s Private medical services are the second most expensive in the world, and a band aid (which is effectively what $50,000 worth of surgical coverage is) will not enable further access into that system.

What is next for Hong Kong’s healthcare system? It is likely that the worst case forecast of the government will come true, and over the next 20 years we will see an increase of Hong Kong residents using the public healthcare system, not a decrease. We live in one of the most expensive cities in the world and this is just as true for our healthcare as it is for the rest of our lives.

Unless public healthcare services are significantly expanded, or some other form of reform is implemented which enables consumers to access private healthcare services comprehensively, there is going to be no stress relief for our already overburdened Hospital Authority controlled facilities.