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Voluntary Health Insurance Scheme (VHIS) – What HR should know

Health and Benefits
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April 11, 2019

The Voluntary Health Insurance Scheme (VHIS) initiative introduced by Hong Kong’s Food and Health Bureau (FHB) was launched on April 1, 2019 with the aim to regulate hospital insurance plans offered to individuals.

With the introduction of Voluntary Health Insurance Scheme (VHIS) and the full implementation of VHIS on April 1, 2019 – a policy initiative introduced by the Government of HKSAR Food and Health Bureau to regulate hospital insurance plans offered to individuals, we would like to take the opportunity to recap and update how VHIS may impact you.

Objectives of VHIS

VHIS seeks to enhance the protection offered to individuals under hospital insurance by:

  • Ensuring policyholders have more confidence in purchasing health insurance and thereby using private healthcare services, relieving the pressure on the public healthcare system in the long run
  • Encouraging the purchase of health insurance policies at a younger age to benefit from continuous protection
  • Setting a benchmark and facilitating sub-par insurance plans to be gradually upgraded to the level of the Standard Plan

VHIS overview

There are two Certified Plans:

  1. Standard Plan: basic protection as per minimum requirements of VHIS
  2. Flexi Plan: enhanced protection with higher benefit amounts and more variety of product choice to meet different consumer’s needs

VHIS plans guarantee renewal up to 100 years old. However, acceptance of an application is not guaranteed. Insurance companies are allowed to underwrite the insured persons; individual premium loading or exclusion may be applied. Coverage is now extended to:

  • Unknown pre-existing conditions (three-year waiting period, 0% of claim amount in the 1st year, 25% in the 2nd year, 50% in the 3rd year, and 100% from the 4th year onwards)
  • Congenital treatment (after eight years old)
  • Ambulatory procedures, including endoscopy
  • In-patient psychiatric treatment
  • Prescribed advanced diagnostic imaging tests
  • Prescribed non-surgical cancer treatments

For employees who purchase Certified Plans for themselves and/or their specified relatives, the premium rates paid on or after April 1, 2019 will be eligible for tax deduction. There is a deduction ceiling of $8,000 per insured person in each assessment year. No cap on the number of dependents that are eligible for tax deduction.

Impacts on employers

In evaluating the attractiveness of VHIS on individuals, we believe group medical policies continue to have attractive features including:

  • Standardised premium rates regardless of age and health profile
  • More lenient approach to underwriting (treatment of pre-existing condition and policy exclusions on employees)
  • Single risk pool for healthy employees and employees with medical conditions which allow affordable and sustainable premium rates
  • High degree of customisation in terms of benefit design
  • Provision of outpatient (clinical and specialist), maternity and dental coverages along with inpatient coverage

For employers who are planning to launch voluntary/top-up medical plans, they should consider to include some Certified Plans to cater for member choice.

FAQ

1. What is the difference between VHIS plans and existing voluntary/top-up plans?

VHIS plans Voluntary/top-up plans
Individual products Group policy OR individual products extended from group policy
Underwriting is required Underwriting could be waived, and pre-existing conditions could be covered
Fully portable Not portable if product is tied under group policy (only individual top-up plan is portable)
Higher cap on entry age (aged between 15 days and 80 years old must be considered by participating insurance companies) Entry age usually cap at 64 years old
Tax deductible for employees with a deduction ceiling of $8,000 per insured person per year. No cap on the number of dependents that are eligible for tax deduction Not tax deductible for employees

2. Can I replace my current group medical plan with a VHIS plan?

No. A VHIS plan cannot replace your current group medical plan because the VHIS plan is an individual product that requires underwriting. This means some employees may not be able to obtain coverage in the VHIS market. Also, for older and/or employees with medical conditions, they may not be able to obtain affordable premium rates at a comparable benefit coverage in the VHIS market. Group medical plans also typically offer out-patient benefits. Should an employer decide to sponsor employees to purchase a VHIS plan, the allowance or reimbursement should be a taxable income to employees.

3. How does the plan help with my current group medical plan design? Do we need to re-design our plan?

If your company is planning to add or already has a voluntary/top-up plan in place, this is an opportunity to encourage your employees to consider individual coverage in the VHIS market. Employees may benefit from the tax deductibility of a VHIS plan. Group insured employees who exceed maximum apply age and thus not eligible to obtain current voluntary/top-up plans will now be able to apply for a VHIS plan.

Please also note that insurance companies who participate in VHIS have to offer its existing policyholders of individual hospital insurance an opportunity to switch to Certified Plans and there may be conversion privilege.

Additional resource

Voluntary Health Insurance Scheme official website

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisers before engaging in any transaction.

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