VHIS Guide | What is VHIS? Is it worth buying early for employees?

One of the so-called “tax-deductible trio”, the Voluntary Health Insurance Scheme has attracted considerable interest from young people new to the workforce, thanks to its high transparency, guaranteed renewal and tax-deductible benefits. What are the key differences between Voluntary Health Insurance Scheme and conventional medical insurance? For employees who already have company medical insurance, is it still necessary to purchase cover at their own expense?

There are many Voluntary Health Insurance Scheme options, and the terms are not always easy to understand. 10Life will begin with the basic concepts of Voluntary Health Insurance Scheme, plan categories, key advantages and limitations to note, helping you assess more clearly whether it is suitable to take out cover early.

The Voluntary Health Insurance Scheme (VHIS) is a medical insurance scheme introduced by the Health Bureau. Its aim is to encourage the public to make use of private healthcare services, thereby easing the long-term pressure on the public healthcare system.

Unlike ordinary medical insurance, all recognised Voluntary Health Insurance products, regardless of which insurer offers them, must meet the minimum protection requirements specified by the Government. In other words, VHIS has a clearer set of standards in terms of coverage scope, renewal arrangements and product transparency, making it easier for policyholders to compare different products.

Recognised VHIS products mainly have the following features:

• Premiums are tax-deductible: eligible VHIS premiums can be used to apply for salaries tax relief.
• Guaranteed renewal up to age 100: as long as premiums continue to be paid, insurers generally cannot refuse renewal because the insured person's health deteriorates.
• Coverage for unknown pre-existing conditions: pre-existing conditions that were unknown at the time of application are also covered, subject to a waiting period and staged benefit arrangements.
• Day surgery coverage: eligible procedures carried out at day surgical centres are covered even if hospital admission is not required.
• Minimum protection requirements: product design must meet or exceed the basic protection level prescribed by the Government, enhancing transparency of coverage.

You may compare the key differences between VHIS and ordinary medical insurance in the market using the table below:  

What does Voluntary Health Insurance cover? 

The basic coverage under Voluntary Health Insurance mainly focuses on hospitalisation, surgery and related medical expenses, including room and board, doctor’s rounds, specialist fees, surgical fees, anaesthetist’s fees, operating theatre charges, diagnostic imaging tests, and outpatient care before admission and after discharge.

Compared with conventional medical insurance, one notable feature of Voluntary Health Insurance is that Government-recognised products must cover certain benefits that are more easily overlooked, such as unknown pre-existing conditions, day case surgery and inpatient psychiatric treatment in Hong Kong, and also provide guaranteed renewal up to the age of 100.

• Unknown pre-existing conditions: pre-existing conditions unknown at the time of application will have their compensation ratio gradually increased according to the waiting period.
• Day case surgery expenses: covers eligible procedures and related expenses carried out at a day procedure centre.
• Inpatient psychiatric treatment: covers eligible expenses for inpatient psychiatric treatment received at a specialist hospital in Hong Kong.
• Guaranteed renewal up to age 100: the insurer may not refuse renewal solely because the insured person’s health condition deteriorates.

As for private nursing, companion bed charges, additional cancer treatment, outpatient extension benefits and similar items, these are more commonly found in higher-end flexible plans. The actual benefit limits and scope vary by product, so you should compare carefully before applying.

Many people feel that because they are young, healthy, and rarely ill, there is no need to buy medical insurance until later. However, medical protection is often not easy to obtain when you actually need it. For employees who have just started working and have begun earning a steady income, VHIS does not necessarily mean buying the most expensive plan, but it is still worthwhile to understand and plan ahead early.

Below are the 5 major reasons to start considering VHIS.

1. Taking out cover while you are healthy is generally easier to get approved

The underwriting result for medical insurance is usually related to your health condition at the time of application. When you are young, your physical condition is generally better and you usually have fewer medical records, so it is generally easier to apply for medical insurance and more likely to secure more comprehensive protection. By contrast, if health problems arise later, such as high blood pressure, high blood sugar, high cholesterol, thyroid issues, gynaecological conditions, gastrointestinal diseases or other chronic illnesses, insurers may ask for higher premiums, add exclusions, or even decline the application when you apply for medical insurance.

So buying medical insurance is not necessarily because you are about to use it now, but because you are healthy now and can reserve more medical protection options for the future.

2. Protection for unknown pre-existing conditions

Traditional medical insurance more often gives rise to disputes over “pre-existing conditions”, especially when the policyholder may not even know they already have the relevant condition. VHIS has clearer rules in this regard: certified products must cover pre-existing conditions that are unknown at the time of application.

However, unknown pre-existing conditions are not reimbursed in full immediately after taking out the policy. In general, VHIS has a first three-year waiting period and a staged reimbursement arrangement:

• Year 1: no reimbursement
• Year 2: 25% reimbursement
• Year 3: 50% reimbursement
• From Year 4 onwards: 100% cover

Although it does not offer full cover from the outset, this arrangement can provide policyholders with clearer long-term protection compared with having no cover at all.

3. Eligible premiums are tax-deductible

For employees who have just started paying salaries tax, one of the attractive features of VHIS is that eligible premiums can be used for tax deduction.

The Government allows taxpayers to claim VHIS premium deductions for themselves or for “specified relatives” under the Inland Revenue Ordinance. The maximum deduction per insured person is HK$8,000 per year, with no limit on the number of insured persons.

In other words, apart from insuring yourself, taxpayers can also insure and claim deductions for their spouse, children, parents, grandparents, maternal grandparents, and siblings of themselves or their spouse. Of course, the actual tax savings depend on your income and tax rate.

4. Clear coverage for day-case surgery

With advances in medical technology, many minor procedures that used to require several days in hospital can now be completed on the same day at a day procedure centre. VHIS certified products clearly cover day-case surgery, which better matches current healthcare arrangements.

Common examples include cataract surgery, gastroscopy and colonoscopy, but the relevant treatment must generally be medically necessary and recommended or referred by a doctor.

For policyholders, this means there is no need to arrange hospitalisation simply to satisfy insurance claims requirements. As long as the policy terms are met, day-case surgery may also be covered, giving greater flexibility in arrangements.

5. Guaranteed renewable up to age 100

Another key feature of VHIS is that certified products must offer guaranteed renewal up to age 100. Even if you have fallen ill, received treatment, or made a claim after taking out the policy, insurers generally cannot unilaterally refuse renewal because your health has deteriorated.

This is especially important for young people. Once you successfully take out a policy and continue renewing it, you can build a long-term medical protection foundation earlier. Even when you get older or your health changes in the future, you can still keep your existing medical protection without having to reapply only when you truly need it, and face the risk of higher premiums, exclusions or refusal of cover.

In simple terms, the premiums for Voluntary Health Insurance can be used to deduct assessable income. The maximum tax deduction per insured person per year is HK$8,000. Suppose you buy Voluntary Health Insurance for yourself, with an annual premium of HK$8,000, and your applicable marginal tax rate is 17%; the actual tax savings would be approximately:

HK$8,000 x 17% = HK$1,360

In other words, in the above example, the tax deduction can help you save around HK$1,360 in tax, rather than directly saving the HK$8,000 premium. Therefore, the tax deduction benefit of Voluntary Health Insurance can be seen as an additional incentive that helps reduce the overall premium burden. However, salaried employees should still prioritise their protection needs, coverage amount, scope of compensation, deductible and long-term premium affordability when taking out insurance, and should not buy an insurance product that may not suit them solely for the sake of claiming a tax deduction. 

Company medical insurance may not stay with you for life

Many employees are covered by group medical insurance provided by their employer, so they may not immediately consider taking out personal medical insurance. However, company medical insurance is ultimately an employee benefit. Once you change jobs, resign, start a business, or even go through a career break, the existing cover may cease accordingly.

When you are young and in better health, many people may not pay particular attention to whether their medical cover is sufficient. Yet as you get older, your health condition may change. If you only consider taking out insurance after resigning, retiring, or when you truly need it, the insurer may impose exclusions, increase the premium, or even decline to provide cover based on your health condition at that time. Therefore, planning personal medical protection early while you are in good health may leave you with more options in the future.

The coverage amount of company medical insurance may be lower than expected

In addition to the stability of cover, the benefit limits of company medical insurance may also be insufficient. Many people assume that having company medical insurance means medical expenses will be reimbursed in full, but in fact most group medical insurance policies have various reimbursement limits. When facing major surgery, a longer hospital stay, or more complex examinations and treatments, company medical insurance may not fully cover the actual costs.

• When assessing whether company medical insurance is sufficient, you may wish to pay particular attention to the following common limitations:
• Ward class restriction: Depending on the terms of the specific company medical insurance, if you choose a higher-class ward, you may need to pay the difference yourself.
• Surgery benefit limit: Different surgical procedures generally have a maximum reimbursement amount, which may not be enough to cover the actual charges at private hospitals.
• Specialist consultation limits: Outpatient specialist consultations, examinations or treatments may be subject to limits on the number of visits and the amount claimable.
• Out-of-pocket payment requirement: Some plans include coinsurance or an excess ratio, meaning employees still have to bear part of the medical costs.

For example, if you unfortunately need to undergo major surgery, stay in hospital for observation, and have examinations such as ultrasound scans and MRI, the total medical expenses could reach more than HK$100,000. Company medical insurance may only reimburse part of this, and you would still need to bear the remaining amount yourself. If you also have personal medical cover, it may help fill the gap left by company medical insurance and reduce the pressure of out-of-pocket medical expenses.

A cover gap may arise when changing jobs, freelancing or starting a business

The modern workplace increasingly values flexibility, and slashed careers (slashers), freelancers and entrepreneurs are becoming more common. However, when you change jobs frequently or choose to go it alone, you may lose the group medical cover provided by your employer. Building your own medical cover early can reduce your reliance on company medical insurance. Whether you change jobs in the future, freelance, start a business, or make other life choices, you can do so with greater peace of mind.

Standard Plan: basic coverage with more affordable premiums

The Voluntary Health Insurance Standard Plan is designed in accordance with the Government’s minimum coverage requirements. As the covered items, reimbursement terms and compensation limits are all standardised, the coverage under Standard Plans offered by different insurers is broadly the same.

The Standard Plan mainly provides basic hospitalisation and surgical cover, including room and board, doctor’s ward visits, miscellaneous hospital charges, surgical fees, anaesthetist’s fees, operating theatre charges and more. Each benefit has a specified reimbursement limit, and premiums are generally more affordable than those of Flexible Plans.

If your budget is limited and you only want to establish basic medical coverage first, the Standard Plan can be a good starting point. However, it is worth noting that the benefit limits may not be sufficient to cover the higher charges of private hospitals, and you may still need to pay part of the medical expenses yourself after discharge.

Flexible Plan: higher coverage, suitable for those who want to stay in a higher ward class

The Flexible Plan can be understood as an upgraded version of the Standard Plan. Insurers build on the Standard Plan by offering higher benefit limits, higher ward class options, or additional benefits to meet the medical needs of different policyholders.

Common upgrades include increasing the annual benefit limit, upgrading the ward class to semi-private or private, and adding cover for cancer treatment, pre- and post-hospitalisation outpatient care, accidental emergency outpatient treatment, emergency overseas assistance, private nursing or companion bed charges, and more. Some premium Flexible Plans even offer “full cover” or fewer sub-limits, giving you greater flexibility when making a claim.

Of course, the higher the coverage, the higher the premium is likely to be. Therefore, when choosing a Flexible Plan, in addition to looking at the benefit limits, you should also consider whether the premium is affordable in the long term, especially as medical premiums generally rise with age. If you want more coverage but do not want your premium to increase year after year, you may wish to consider a plan with an excess. Want to estimate your future VHIS premiums? You can use the VHIS Premium Increase Calculator to work it out.

10Life’s view: start with your budget, then decide how much coverage you want

If you are a young employee just starting work and your budget is not particularly ample, you may wish to consider the Standard Plan first to establish basic protection early, while retaining flexibility to upgrade your medical cover later.

However, if you place greater importance on private hospital choice, ward environment, benefit limits and claims flexibility, a Flexible Plan is more worthy of consideration. In particular, for those who hope to stay in a semi-private or private room, the Standard Plan alone may not be sufficient. Before taking out cover, you should compare the benefit limits, excess, ward class restrictions and long-term premiums of different products.

Before taking out Voluntary Health Insurance, in addition to understanding its coverage benefits, you should also be clear about the product limitations to avoid discrepancies when making a claim in the future. Below are three key points that are more easily overlooked when applying:

• No cover for general outpatient consultations: Routine GP consultations, such as for colds, flu, or standard follow-up visits, are generally not covered under Voluntary Health Insurance.
• It does not necessarily mean full reimbursement: In particular, the Standard Plan, or Flexi Plans without a “full reimbursement” clause, may impose reimbursement limits on various medical expenses. If the actual expenses exceed the limit, the difference must still be borne by the insured person.
• Pre-existing conditions may not be fully covered immediately: Voluntary Health Insurance covers pre-existing conditions that were unknown at the time of application, but it is subject to a waiting period and staged reimbursement arrangements. As for medical history that was already known before application, the insurer may still, during underwriting, impose an additional premium, exclude the condition, or even decline cover.

Many young people, when considering medical insurance, often ask first: “I’m so healthy right now — do I really need it?”

But the key point of medical insurance is often not to buy it only when you need it, but to preserve your options while you are still in good health. As you get older, minor ailments, chronic conditions, or medical examination records may arise. If you apply for insurance later, the insurer may increase the premium, add exclusions, or even decline cover.

By contrast, if you take out cover early while you are young and healthy, and keep renewing it, you can retain a personal medical protection plan of your own even if you change jobs later, your company medical insurance changes, or your health condition changes.

Tax deduction is of course attractive, but VHIS should not be purchased solely for tax savings. More importantly, whether the plan suits your medical needs, whether the premium remains affordable in the long term, and whether the protection can support you further into the future.

There are many forms of VHIS; it is advisable to consult an expert before taking out cover

VHIS involves different factors such as room class, deductible, co-insurance, coverage area, and long-term premium arrangements. Even among 5-star products, different combinations may suit different needs, and the underwriting requirements of different companies may vary. Extra care should therefore be taken when considering customers with pre-existing health conditions.

If you would like to further compare the 5-star VHIS combinations that suit you best, you may use the 10Life product comparison tool, or feel free to contact a 10Life insurance adviser via WhatsApp for enquiries.

Can company medical insurance completely replace VHIS?

No. Company medical insurance usually offers a lower level of cover and is tied to the employment relationship. Once you resign, change jobs or retire, the cover will end immediately. By contrast, VHIS is a personal policy and will not be affected by a change in employment. The two should be regarded as complementary.

At what age is it most worthwhile to buy VHIS?

In principle, the younger you are when you buy it, the more worthwhile it is. This is because younger people are usually in better health, allowing them to obtain cover at a lower premium, while also avoiding exclusions or extra premiums arising from medical history developed later in life.

Can children take out insurance for their parents and still enjoy tax deductions?

Yes. VHIS allows taxpayers to claim tax deductions when paying premiums for a “qualified insured person”. The covered insured persons include a spouse, children, and the taxpayer’s or spouse’s parents and grandparents. Taking out insurance for parents also qualifies for a tax deduction of up to HK$8,000 per insured person per year. 

This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.