EMPLOYER ACTION CODE: ACT
The Food and Health Bureau (FHB) has introduced a new Voluntary Health Insurance Scheme (VHIS) under which hospital insurance plans that meet certain minimum coverage and feature requirements are certified by the FHB. Moreover, individuals’ premiums paid to such insurance plans are tax-deductible (up to a cap). The objective is to make available an enhanced level of hospital insurance cover, offering consumers more choice and hopefully relieving pressure on the public health care system by encouraging more people, especially the younger generation, to purchase private health insurance and use private health care facilities. Due to the limitations of the public health care system (which is financed through general tax revenue), there is a highly developed network of private service providers and private health insurance (PHI) insurers. According to data from the Census and Statistics Department, a little over 50% of the population is covered by PHI policies. Of those covered, one-third receive PHI through their employers, one-third purchase coverage individually and the remaining one-third are a combination of the two.
With effect from April 1, 2019, individuals are able to purchase one of two types of FHB “Certified Plans”: 1) “Standard Plans” are of a fixed design and must adhere to the minimum VHIS requirements set out by the FHB, and 2) “Flexi Plans” offer protection and benefits in excess of those offered by Standard Plans, such as higher benefit limits or a broader range of benefits provided. As of the launch date, already 25 registered insurance companies are certified by the FHB to provide VHIS products.
The minimum features of a Standard Plan include the following:
- Members must be provided with guaranteed renewal of their policy up to age 100, with no regard to changes in their health.
- While there may be individual benefit limits on the cost of various types of care, there is no lifetime limit on benefits.
- Coverage must include unknown preexisting conditions (commonly excluded from existing insurance policies) subject to a phased coverage over the first three years of the policy.
As an incentive for purchasing a certified VHIS policy, individual policyholders benefit from a tax deduction on premiums paid. Taxpayers are able to claim a tax deduction of up to HKD 8,000 per year and per insured on premiums paid for either themselves or any of their dependents (including their spouse, children and their/their spouse’s parents, grandparents and siblings). The VHIS is established for individual indemnity hospital insurance policies but not group medical insurance policies; therefore, employers may not be entitled to the tax deduction under the VHIS.
Supplemental health insurance is a very common employee benefit as it offers access to private service providers and shorter waiting times. However, VHIS has been established for individual rather than group policies. Willis Towers Watson believes that group policies will continue to have a number of attractive features for both the employer and employees, but for some older employees or those with ongoing medical conditions it will likely be cheaper for the employee to have a VHIS rather than be a member of the group policy. Employers already offering individual insurance plans for their employees may wish to consider also offering a FHB Certified Plan, and those considering offering private health care in the future will need to include some Certified Plans for their members to choose from. Employees who are already members of an existing voluntary health insurance plan must be offered the opportunity to consider switching from their existing plan to a Certified Plan by their insurance provider.