MR CHAN KIN-POR (in Cantonese): President, the consultation on the Voluntary Health Insurance Scheme (VHIS) will come to an end in mid-March this year. The insurance industry is still striving for a sustainable proposal that is acceptable to various sectors. Over the past three years, the insurance industry has been discussing with the Food and Health Bureau on an ongoing basis and eventually drew up 12 Minimum Requirements to perfect the health insurance products. For example, we have formulated a Standard Plan and provided better protection for policyholders. We are basically supportive of the VHIS.
There are only two problems which remain unresolved. First, the Food and Health Bureau did not keep the promise made by the Government of the last term to use the $50 billion set aside for offering discounts to first-time and long-term policyholders (except the high risk pool). As a result, it fails to attract young and healthy people to join the VHIS.
The VHIS has prescribed 12 Minimum Requirements to provide better protection with wider coverage which will, however, definitely be reflected in the premiums. According to the estimate of the Government’s consultant, the average annual standard premium is $3,600. Yet, the amount of $3,600 is calculated by using the prices in 2012 while the VHIS will be implemented in 2017 at the earliest. Since medical expenses have increased continuously every year at a rate higher than inflation, there will be an increase in premiums every year. The premiums of health insurance by that time will far exceed the estimate of 2012. Meanwhile, the older the policyholders are, the more they have to pay in premium. For example, the consultant’s estimated premium for people aged 45 to 49 is $4,750. If the premium is increased by 6% every year, it will become $6,350 when the VHIS is implemented. Together with a margin of 45% in the estimate of the consultant, the premium may increase to $9,200. If we look at the example of people aged 60 to 64, the consultant’s estimated premium is $6,900. Together with the annual premium increase, it will then become $9,232. When we factor into this the margin, the maximum premium will be around $13,000.
The premiums are really expensive. If the Government does not provide sufficient financial incentives for health insurance, including the previous promise of offering discounts to first-time and long-term policyholders, and only provide a tax deduction of several hundred dollars instead, it will definitely be difficult to attract young and healthy people to join the VHIS. The rationale behind insurance is risk sharing. The VHIS will be sustainable only if there are healthy and young people joining the VHIS one after another to share the risks. It will be difficult to remain sustainable if there are only high-risk people joining the VHIS.
Another unresolved problem is that the insurance industry is allowed to offer only standard health insurance products which comply with the 12 Minimum Requirements. As a result, those low-cost health insurance plans with lower benefit limits cannot be offered on the market. I hope the Government will understand that the recommendation made by the Food and Health Bureau actually intervenes in the market direct with the visible hand, such that members of the public cannot choose health insurance plans according to their own needs and financial capacity.
The Food and Health Bureau considers that the protection of low-cost health insurance plans is insufficient which, even if some people take out such insurance policies, are actually useless. Therefore, it wants to stipulate that insurance companies can only offer health insurance plans which comply with the 12 Minimum Requirements so as to protect the public. However, it turned out to be doing a disservice out of good intentions as the problem itself is very complicated.
There are currently a total of 185 (sic) individual health insurance policies in Hong Kong, half of which have an annual premium of less than $3,000. These are what we call the low-cost health insurance and it reflects that there is a strong demand in the market. Members may ask why there are so many people taking out those low-cost health insurance policies which cannot provide sufficient protection? In fact, according to the analysis of the insurance industry, there are at least several groups of people who need to take out these low-cost insurance policies.
The first group is those policyholders who took out health insurance years ago. As time went by, however, the benefit limits can no longer cover the expenses. Therefore, they take out another low-cost health insurance policy to increase the benefit limits and cover the expenses. This is why there are a considerable number of people currently in Hong Kong who have taken out several insurance policies. The second group is the employees of small and medium enterprises who are each covered by one health insurance policy taken out by their employers. These employees considered that the protection is insufficient and therefore took out another low-cost insurance policy to increase the coverage. The third group is patients with chronic diseases. As existing illnesses are not covered by insurance, they can only take out low-cost insurance policies to cover diseases which they do not have. The fourth group is young people with limited financial means who believe their chances of falling ill are small. Therefore, they first take out low-cost health insurance policies and will consider increasing the benefit limits when necessary in the future.
I, therefore, wish Members could understand that because of various reasons, the public has a really strong demand for low-cost insurance policies. If the Government mandatorily prohibits the public who cannot afford expensive standard plans from taking out low-cost insurance policies, they can only return to public hospitals when they fall ill. There may be hundreds of thousands of them. By then, the number of people waiting at public hospitals will increase drastically instead, which completely defeats the purpose of the VHIS. Meanwhile, if low-cost insurance policies are not available, small and medium companies can hardly compete with large companies. In the end, large insurance companies may monopolize the health insurance market. I think none of us would like to see that outcome.
In fact, the insurance industry has discussed the VHIS for years and solved numerous problems. We are actually only one step from success and I hope the Food and Health Bureau can seriously consider the views of the insurance industry. First, the Government should use the $50 billion earmarked to offer discounts to first-time and long-term policyholders such that healthy and young people will also be willing to take out health insurance policies and share the risks, thereby actually achieving sustainable development of the VHIS. Second, the Government should abolish the mandatory requirement that insurance companies can only offer insurance products which comply with the 12 Minimum Requirements so as to allow free competition in the market. However, in order to protect the consumers, the Government can make it mandatory for insurance companies to provide clear and full disclosure of the differences in protection between low-cost products and standard products to the consumers.
Actually, there is another option. The 12 Minimum Requirements can serve as a blueprint for the insurance industry. Apart from one or two items which will drastically increase the premiums, thereby making the VHIS practically unable to remain sustainable, the insurance sector can make an undertaking on complying with all the requirements before a specific date, which will be subject to supervision by an Independent Insurance Authority. This suggestion will not only allow members of the public to enjoy most of the benefits of standard plans, but also pre-empt a drastic increase in premiums. Therefore, I think the Government should take this proposal into consideration.
Lastly, I hope the Food and Health Bureau can take an open attitude to discuss with the insurance sector and draw on collective wisdom such that we can strive for a health insurance system with better protection, premiums and transparency for members of the public.
I so submit.