In December, the government launched a three-month public consultation on the proposed voluntary health insurance program.
I mentioned some of the shortcomings of the proposal in this column last week, such as the lack of financial incentives for young people to join. This time, I would like to focus on some other problems.
As far as the average citizen is concerned, the rate of premium is often a primary concern when deciding whether or not to get insured.
However, the government has estimated that the average rate of premium a policyholder will have to pay under the proposed scheme is about HK$3,600, which is 9 percent higher than most policies on the market.
The government has also stated that it has no intention of regulating insurance premium rates and would rather rely on free market competition to drive down cost.
It is indeed highly disappointing because it simply doesn’t make any sense to expect our fellow citizens to buy a health insurance under the government’s scheme which costs a lot more and whose coverage is similar to those of other policies already on the market.
Besides, who would buy an insurance policy which is already more expensive and whose cost is likely to soar in the future without limitation?
Even though the government has pledged to introduce measures such as tax allowance to offset a rise in premium rates, I still have serious doubts about the effectiveness of the program if the administration doesn’t get to the root of the issue and regulate insurance premium rates.
The government has also refused to regulate administrative fees charged by insurance companies.
According to figures in the consultation document, administrative fees, commissions and profits can be as much as 36 percent of the premium, which means only 64 percent of the money paid by policyholders will be used to settle their claims.
In most developed countries, administrative charges for a health insurance policy are usually capped at about 10 percent.
In fact, the last administration under Donald Tsang once said it would do its best to limit the administrative charges of the government scheme to no more than 10 percent of the premium.
Higher administrative charges not only lead to higher premiums but also mean policyholders are getting less protection.
The incentive to buy private health insurance among local citizens is already low due to soaring premium rates in recent years.
The majority of the public are looking forward to a government scheme that allows them to get a fairer and more affordable deal.
Much to their disappointment, however, it turns out the government’s latest proposal fails to fulfill that public expectation.
Sustainability in doubt
Some members of the public are concerned about the inconsistency in government policy. Their concerns are not unfounded. The incumbent government’s stand on health insurance is a far cry from that of its predecessor.
What if the future government changes its mind about health insurance again?
People are worried that the money they have paid will not give them the kind of protection they expect in the long run.
Given soaring premium rates, the policy consistency issue, plus the risks one has to take in filing claims and other unstable factors I mentioned last week, the program just doesn’t seem to appeal to people who are not yet insured, let alone people who have already bought policies at a cheaper rate.
Under the government’s proposal, all insurance coverage will be standardized and buyers can no longer customize their policy to suit their medical needs, nor can they choose a cheaper policy that provides less coverage.
It’s hard to understand why the government on one hand encourages the public to join the scheme but on the other comes up with a proposal that offers even fewer choices and less flexibility than products that already exist in the open market.
In conclusion, there are a lot of unresolved issues regarding the implementation of the voluntary health insurance scheme.
Its objectives are unclear and there are too many variables.
With little appeal to the public, the government’s initial plan to relieve the growing pressure on our public healthcare services by drawing more people to the private market through this voluntary health insurance scheme might not work in the end, or even backfire.
This article appeared in the Hong Kong Economic Journal on Jan 16.
Translation by Alan Lee
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