Career Advice Job fairs and Events

Investing in health

The recent Classified Post HR Conference on Employee Healthcare and Retirement focused on the long-awaited Voluntary Health Insurance Scheme (VHIS), which drew much interest from the pubic when it launched in April. The conference benefitted from the knowledge of expert speakers, who gave insights into the scheme, and helped listeners to understand the impact of this highly important social development which affects young and old. The Classified Post HR Conference took place on June 25.

The conference concluded with a barrage of questions from the audience. Representatives of the human resources (HR) profession were keen to find out how the government-regulated health insurance scheme will change the ecosystem of healthcare, and what impact it will have on employee benefits (EB).

Dr Gloria Siu, Gain Miles Group’s chief executive, had some answers. For the last 16 years Gain Miles Group’s Medical Insurance Indices has served as a benchmark for HR professionals and employers. Its findings indicate that the ongoing rise in medical benefit costs, combined the fact that Hong Kong’s population is ageing, will continue to drive up the medical spending of corporations. Annual benefit costs have surged 121 percent, from HK$14,945 to HK$33,001 per employee.

“The change in health status and claim patterns worries us,” says Siu. “That’s because in 2005, there was only one hospital visit out of 12 insured persons, but in 2019, the number rose to one out of 5.5 insured. Furthermore, premiums for group medical have more than doubled, rising from HK$3,010 to HK$6,989. This represents a 132 percent growth in insurance costs. Payments incurred per claim also rose from HK$9,077 to HK$16,244. We also forecast that the Group Medical Premium Index (GMPI) to trend upwards over the next 10 years, due to increasing costs and expenses,” Siu said.

“We conducted a VHIS survey during the Gain Miles Health Forum 2019 to find out why respondents were attracted by the scheme,” Siu added. “Results showed that 87.5 percent of respondents were considering purchasing VHIS, while 68 percent expressed an interest in integrating VHIS into their employee benefit programme. They were attracted by tax benefits for employees, and the additional medical coverage that comes as part of VHIS, like a guaranteed renewal up to the age of 100. So it’s a great opportunity for corporations to review and enhance existing employee benefit programmes, and keep them up to par,” Siu said.

Siu advised HR professionals to consider using incentives to encourage staff to insure themselves with VHIS and integrate it with their employee insurance scheme. VHIS could be filed for the first claim while the second claim could go to the company’s health care plan, she said. “As VHIS guarantees annual renewal based on a community rating, it can act as a buffer to offset the estimated increase in the premium of group medical costs. This would lower the total premium cost per employee, and allow HR to re-invest the saving from the premium in employee benefits to increase the overall employee wellbeing,” Siu said.

Dr Alexander Chiu, AXA Hong Kong’s Medical Director for Health and Employee Benefits, shares the view that VHIS can play a role in offsetting rising costs. “We can encourage staff in the senior age group, that is those above 40, who are prone to illnesses like cancer, to minimize the impact on an employee benefit schemes, since the annual employee premium correlates to the number of claims per year. To encourage staff to purchase VHIS, it would be better to have agreements with the same insurance vendor to offer VHIS. If the first claim is required, a vendor should provide a hassle-free arrangement, that is, an automated second claim process which does not drag staff through a mundane claims processes,” he said.

Conference moderator Elaine Chan, a member of the Food and Health Bureau VHIS Consultative Group, took several questions from the floor. One questioner asked whether VHIS should replace employee insurance. Chiu ruled out this possibility and said that VHIS should be used as a supplement to employee benefits. “As VHIS is based on a community rating concept, fees will probably not rise that much. But we must still factor in medical inflation. For instance, a low adoption rate for generic drugs results in substantial cost increases. On average, cost increases are double those of the Consumer Price Index, at about 8 to 9 percent per year,” Chiu said.

Siu fully agreed with Chiu that VHIS will become a new standard that builds a better and clearer benchmark for medical insurance policies in the future. Stressing the importance of partnering with good insurance providers, Siu said, “Unlike group medical policies, VHIS policies details and fees, are much more transparent, listed on provider websites for easy comparison. If possible, it would be better to have the same provider for both group medical insurance and VHIS because that would provide more bargaining power and integration synergy. Health insurance in Hong Kong is lagging behind other countries, so corporates may consider reviewing their benefit design, and even subsidizing  their staff to purchase VHIS plans,” Siu said.

According to Chan, there are two types of VHIS compliant products, namely the standard plan and the flexi plan. (The flexi plan offers enhanced protection with higher benefit amounts and a greater variety of product.) These deliver wider coverage than group medical policies. For instance, there is no lifetime benefit limit, psychiatric treatment is covered at Hk$30,000 per year, non-surgical cancer treatment at HK$80,000 per year, there is guaranteed renewal up to the age of 100, unknown pre-existing conditions are covered, and the plan can be issued to those between the ages of 15 and 80 via a normal underwriting process. “Flexi plans feature advantages like increase benefits amount or add on additional features beyond the prescribed list for the standard plan. So, for instance, no claim bonus, and reduce deductible amount of advance diagnostic benefit. Looking forward, I am sure more flexi plans will be coming to market from certified providers to suit different needs,” Chan said.

Chan foresaw three possible trends. First, corporations could enhance benefits by aligning the benefit level with the VHIS standard package, and then filling the gap between VHIS and group medical benefits. Corporations will probably readjust their benefits to match, or exceed, what VHIS offers, for the purposes of staff retention and recruitment.

Second, corporations may give incentives or subsidies to encourage staff to buy VHIS. This way, VHIS can be used for the first claim in order to lower the claims total for the group medical plan. Meanwhile, VHIS (which requires underwriting) could replace group medical plans for small-size companies like start-ups. Finally, there’s a hybrid model, a two-pronged approach which subsidises staff so they can buy VHIS, at the same time reducing the benefits offered by the existing group medical plan.

In terms of retirement protection, Lau Ka-shi, BCT Group Managing Director and CEO, strongly recommended leveraging the new MPF tax deductions to enhance retirement protection. “In fact, tax deductions for contributors before April 1, 2019 only catered for mandatory contributions up to HK$18,000. But after April 1, 2019, individuals can gain additional deductions on their salary tax by making voluntary contributions to a Tax Deductible Voluntary Contributions (TVC) account. The maximum tax-deductible limit is HK$60,000. Current members of MPF schemes or MPF-exempted ORSO schemes can open a TVC account in any MPF scheme that offers TVC. The balance in TVC account is subject to the same withdrawal conditions as that for mandatory contributions,” said Lau.

“Apart from flexible contributions, the beauty of TVC is the client can make his/her own choice of fund, and can adjust the amount of the contribution, and stop or re-start it based on individual needs. The power of compounding effect brought about by MPF investing may help increase the expected account balance. So this not only saves on tax payments, but also increases the client’s retirement savings through long-term investment,” said Lau.