Hong Kong Medical Insurance Premiums May Increase

By now you will have already seen your health insurance premium increase for 2014, but Hong Kong medical insurance premiums may increase by as much as 40%. That’s the warning which is being sounded today in the South China Morning Post by Chan Kin-Por, LEGCO member for the insurance functional constituency.

Chan was speaking on the recent health insurance reform proposals put forward by a government consultancy as a solution to alleviate the burden currently being faced by Hong Kong’s public healthcare system. Under the proposals presented by the consultancy insurance companies offering medical and hospital insurance products would be required to include a number of minimum-requirements for their plans.

Much in line with the current health insurance reforms being gradually introduced in the United States of America, health insurance providers offering on-shore products would be required to include minimum coverage provisions for Pre-existing medical conditions, guaranteed renewals, guaranteed acceptance, and standardized policy terms and conditions for the industry as a whole.

Chan made his comments on the TVB program On The Record on December 15th, and suggested that the government vet the consultancy’s proposals inside the Hong Kong insurance sector prior to releasing the idea for public consultation in March or April of 2014.

One of the serious issues in the consultancy’s proposals is the fact that they forecast premium inflation of around 10% per annum, according to Chan. He stated it was more likely that premiums would increase by 30 to 40% per year, and questioned the methods the government consultancy used to arrive at the 10% figure.

Chan further went on to say “At present, many people opt for lower-premium products because they do not think they need broader coverage… The minimum-requirements approach would in effect force them to pay more for services that they might not need.”

This is the latest development in the government’s long running attempt to reform the city’s public healthcare system, and Chan’s comments strongly mirror those made during the debates on America’s Affordable Care Act (ACA), also known as “Obamacare.” In the case of Obamacare the bogeyman of rising premiums seems to be largely hyperbole - whilst premiums have increased there are no indications that this is due to the reforms instituted by the ACA.

However, Americans are taking up the opportunity to receive more comprehensive insurance coverage in greater numbers than ever before; leading to more memberships and policyholders for the insurance companies despite the introduction of regulations which see a number of universal coverage provisions throughout the American insurance industry.

In Hong Kong, according to the Hong Kong Federation of Insurers, most Hong Kong consumers are happy with the current healthcare system and insurance market. However, with increasingly overcrowded public hospitals and a majority of domestic health insurance plans offering coverage benefits which include renewal caps, experience premium ratings, and the ability to unwind insurance contracts, there is a strong division of opinion as to the regulations which should be introduced to help reform the local healthcare industry.

It should be noted that a number of the ideas proposed by the government consultancy in relation to health insurance and healthcare in Hong Kong already exist with the international marketplace. Offshore international health insurance plans generally include guaranteed renewal provisions, the ability to cover pre-existing conditions on a case-by-case basis, and the freedom of the policyholder to choose the medical facility they will receive treatment at.

However, international health insurance plans which include these benefits are generally more expensive than the medical insurance options provided locally in Hong Kong. Part of this is due to the fact that international products are designed to offer coverage in myriad countries around the world, which means that there is a higher risk of more expensive healthcare costs, but it is also partly accountable because of the higher limits and more comprehensive coverage benefits provided by these plans.

The current state of the Hong Kong Healthcare system is untenable, which has forced a number of rounds of consultation with regards to improving healthcare and medical insurance services in the city. With the current reform situation in the USA proving to be a much smoother, and widely welcomed process than initially envisaged, the government of the HKSAR has a strong model to replicated. However, the input of local insurance industry and domestic consumers will be a key aspect of any successful reform process as it is these parties who will be facilitating and making use of the system.

Should the current proposal being considered by the HK government actually force premium increases of up to 40% per year, then any health insurance plans emerging from the proposed reforms will be limited to a much smaller section of the market than the consultancy will have envisioned. As such, more information is required before a complete understanding of the proposal is achieved. As is Chan Kin-Por’s request to understand how the government consultancy arrived at its 10% inflation figure in its report.