The Voluntary Health Insurance Scheme (VHIS), which has been under discussion for several years, is finally set to materialize, the Hong Kong Economic Journal reports.
In his budget speech delivered on Wednesday, Financial Secretary Paul Chan Mo-po said the government scheme, subject to the passage of relevant legislative amendments, is expected to be launched as early as next year.
The scheme offers tax deductions and other benefits to participants, although it is likely to reduce the government’s tax revenue by around HK$800 million a year, according to a government source.
Those who purchase eligible health insurance products for themselves or their dependents under the scheme can deduct the paid premium from their taxable income. The ceiling for deductible premiums per year is set at HK$8,000 per insured person.
The annual premium for the 20-24 age group is about HK$2,000-HK$2,400, HK$4,000 for those aged 40-44, and HK$10,000 for those aged 60-64, with average being HK$4,800.
A taxpayer who earns HK$600,000 a year and pays an annual premium of HK$8,000 for an insurance product under the scheme can see payable tax reduced by HK$1,360 if the person is subject to the highest 17 percent tax rate after all deductions.
By comparison, the tax benefit for a fresh graduate who earns HK$180,000 a year and pays an annual premium of HK$2,000 is about HK$40.
The government source said taxpayers can buy VHIS products for their family members, but the tax benefit can only apply to up to six people.
Aside from the tax benefit, the scheme can prevent the insured from being charged with a significantly higher premium after making an insurance claim, which should be attractive to young people, the source said.
About 1.5 million are expected to join the scheme in the first three years after it is launched, including about 1 million who are taxpayers and their dependents.
Welcoming the tax incentives offered by the VHIS, the Hong Kong Federation of Insurers said the proposal reflected the government’s determination to encourage more members of the public to use the scheme to help increase the usage rate of the private health care system and ease the burden of public hospitals.
However, lawmaker Dr. Pierre Chan Pui-yin, who represents the medical functional constituency, said the proposed scheme has lost its appeal because two major provisions－guaranteed acceptance and high-risk pool－have been canceled.
He also doubts its effectiveness as it lacks sufficient oversight and restricts the insured people’s choices when they are sick.
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