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Voluntary Health Insurance: Can an innovative claims mechanism make mass-market medical insurance rival premium cover? (Comparing the Voluntary Health Insurance Flexi Plan (ward))
The COVID-19 pandemic has severely affected businesses across all industries, and many employees are tightening their belts. When it comes to medical protection, consumers must do their homework to obtain better protection within a limited budget. Over the past 10 years, insurance companies have actively promoted high-end medical insurance offering comprehensive cover. Compared with medical insurance that previously paid claims according to itemised limits, the former gives policyholders greater peace of mind. However, premiums for high-end medical insurance without a deductible are not low. Unless consumers choose a plan with a deductible and share the risk with the insurance company, thereby reducing the required premium, the cost can be considerable. This year, an insurance company incorporated comprehensive cover into its VHIS Flexi Plan (Standard Ward). Its premium is competitive, while its protection is becoming more comprehensive.
Innovative claims mechanisms for VHIS Standard Ward plans
VHIS Flexi Plans (Standard Ward) are generally positioned as medical insurance for the mass market. Most products pay claims according to itemised limits, meaning that limits are imposed on individual benefit items such as room charges, surgical fees and miscellaneous expenses, creating various restrictions on claims. 10Life calculates the estimated medical protection for multiple illnesses and injuries under the same policy year. Chart 1 shows that, among the compared products, Standard Ward plans that pay claims according to itemised limits cover more than 95% of the costs of a minor illness such as haemorrhoid surgery. However, protection for major illnesses is clearly insufficient. For example, for liver cancer requiring surgery and targeted therapy, some products cover only approximately 60%–69% of the costs, while haemodialysis is covered by only 1%–26%.
To alleviate customers’ concerns about claims, an insurance company has launched a VHIS Flexi Plan (Standard Ward) offering comprehensive cover (see Note 3). This is mainly subject to the annual benefit limit, lifetime benefit limit, annual benefit limit per illness (where applicable) and/or other relevant conditions. Regardless of whether the illness is minor or major, 10Life’s estimated medical protection rate is close to 100%. If AXA Hong Kong and Macau’s plan without a deductible is selected (see Chart 1), the annual premium would exceed HK$8,000 (35-year-old non-smoker).
Recently, FWDFWD launched a VHIS plan – vCANsurance Medical Plan (Standard Benefit Level: F00051-01-000-01) (“FWD EasyGuard”). Its claims mechanism is more innovative and unique. Each benefit item is calculated per illness per policy year (see Note 4), with a total benefit limit of HK$500,000 per illness per policy year. Within this limit, most hospitalisation and surgical expenses are covered in full, and there is no annual or lifetime benefit limit. According to 10Life’s assessment, the estimated protection rate for both minor and major illnesses is as high as 100%. Compared with general VHIS plans that pay claims according to itemised limits, comprehensive cover combined with a claims mechanism calculated per illness per policy year can enhance protection, particularly when a customer needs to be hospitalised several times in one year due to different illnesses. For a 35-year-old non-smoking male customer, the annual premium is only slightly over HK$5,000.
Take liver cancer requiring surgery and targeted therapy as an example. FWD EasyGuard’s estimated protection rate is as high as 100% because, in addition to the total benefit limit of HK$500,000 per illness per policy year, the product provides an additional benefit limit of HK$350,000 per illness per policy year for prescribed non-surgical cancer treatment (see Note 6) (see Note 7). The total claim limit can therefore reach HK$850,000 per illness per policy year. The product also covers the costs of up to three outpatient visits before hospitalisation and 20 outpatient visits after discharge (see Note 8).
By comparison, the estimated protection rates of AIA’s Flexi Plan, Prudential’s Flexi Plan and Manulife ManuGuard Flexi Plan, which pay claims according to itemised limits, are only approximately 60%. This is because (1) the prescribed non-surgical cancer treatment benefit limit is only HK$80,000; and (2) although the products provide Supplementary Major Medical (SMM) cover to pay part of the expenses exceeding the itemised limits, their SMM does not apply to prescribed non-surgical cancer treatment. Therefore, in this example, the annual claim limit for targeted therapy is restricted to the HK$80,000 provided under the basic cover.
Comprehensive cover and a claims mechanism calculated per illness per policy year enhance protection against multiple illnesses in one year
The above section assumed a single hospitalisation for an illness or injury within the same policy year when calculating the estimated protection rate. In reality, however, it is impossible to predict how long an illness or injury will last, or how many illnesses or injuries one may suffer in a policy year. We will therefore analyse different claims mechanisms using more serious scenarios.
In the first policy year, liver cancer and angioplasty occur in the same year. Products offering comprehensive cover therefore have a significant advantage in terms of protection. FWD EasyGuard, which provides comprehensive cover per illness per policy year, has an estimated protection rate of 100%. The customer has a claim limit of HK$500,000 for the first illness (liver cancer), while the claim limit for another illness (vascular disease) in the same policy year can be recalculated afresh.
Compared with the two illnesses occurring in different years, the estimated protection rate of products that pay claims according to itemised limits may be lower when both illnesses occur in the same policy year. The medical expenses expected to be borne by the customer range from HK$250,000 to HK$360,000. This is because the itemised limits restrict claims. Even if expenses exceeding the itemised limits can be claimed under SMM, customers should note the SMM limit and must first bear 20% of eligible medical expenses under SMM (see Note 9).
In the second policy year, targeted therapy for liver cancer continues. FWD EasyGuard’s total benefit limit per illness per policy year and its additional benefit limit for prescribed non-surgical cancer treatment are reset in the new policy year to HK$500,000 and HK$350,000 per illness per policy year respectively. Its estimated claim coverage therefore remains 100%. Another plan offering comprehensive cover with an annual benefit limit that resets, AXA WiseGuard, also provides a very high level of estimated protection.
Although the itemised limits of other products that pay claims according to itemised limits are reset in the new policy year, their estimated protection rates in the second policy year remain clearly insufficient. The medical expenses expected to be borne by the customer range from approximately HK$60,000 to HK$190,000. The insufficient claims coverage is due to the prescribed non-surgical cancer treatment benefit limit being only HK$80,000, while the SMM of some products does not cover prescribed non-surgical cancer treatment.
Beyond tax savings: enhanced protection terms under VHIS
In addition to tax deductions and standardised basic terms, VHIS allows insurance companies to enhance protection under Flexi Plans. One key feature is cover for pre-existing conditions that were unknown at the time of application. However, the reimbursement percentage depends on the waiting period, and plans generally only pay 100% of the benefit amount from the fourth policy year onwards. AXA WiseGuard, however, pays the full benefit amount once the policy takes effect, without a waiting period.
In addition, the Food and Health Bureau requires VHIS to cover congenital conditions that manifest or are diagnosed at age 8 or above. FWD EasyGuard, however, provides cover for pre-existing conditions that were unknown at the time of application and congenital conditions from the 31st day after the policy takes effect. A paediatrics professor has pointed out that more than 90% of congenital conditions manifest before the age of 1, while haemophilia and leukaemia also usually develop before the age of 8 (see Note 10). If a healthy infant is insured at 15 days old, the earliest age for enrolment, the infant may obtain this protection at around two months old. Even if a congenital condition is unfortunately diagnosed subsequently, a claim may still be made.
This article discusses VHIS Standard Ward plans. Customers wishing to upgrade their ward level may also choose a Semi-Private Ward plan. However, readers who intend to maintain cover over the long term should also consider future premiums. In general, medical insurance premiums increase annually with age and rising healthcare costs. In old age, the premiums for a Standard Ward plan are relatively more affordable.
[ Compare VHIS Semi-Private Ward plans, adults ]
[ Compare VHIS Standard Ward plans, adults ]
[ Compare VHIS Semi-Private Ward plans, children ]
[ Compare VHIS Standard Ward plans, children ]
[ Compare VHIS Standard Ward plans, adults ]
[ Compare VHIS Semi-Private Ward plans, children ]
[ Compare VHIS Standard Ward plans, children ]
Finally, please remember to understand whether a product meets your needs and affordability before taking out a policy. You can visit 10Life to compare various VHIS plans on the market and analyse their protection.
Notes:
- The above product information does not include the complete policy terms and conditions (the complete terms are set out in the policy provisions) and is subject to the terms and conditions of the relevant plans. For details of the above product features, coverage benefits and terms, exclusions and key product risks, please refer to the websites, product brochures and policy provisions of the relevant plans.
- The above information is provided by 10Life for reference only and is intended to describe the key features of the products. It does not constitute an offer to sell. Readers should not rely solely on this material when taking out a policy. The above information was updated on 9 November 2020.
- “Comprehensive cover” means that the insurance company will pay in full for eligible medical and other expenses after deducting the remaining amount of any deductible, subject to the annual benefit limit (where applicable), lifetime benefit limit (where applicable), annual benefit limit per illness (where applicable) and/or other relevant conditions. Comprehensive cover applies only to specified benefit items, while other benefit items are subject to the relevant benefit limits. Claims must satisfy the requirement of being “medically necessary”, and the expenses must be “reasonable and customary”. Please refer to the benefit schedule and policy provisions of the relevant product for details.
- For each hospitalisation or day-case procedure for the same illness, the applicable benefit limit and/or total benefit limit per illness per policy year will be recalculated, provided that the hospitalisation or day-case procedure does not take place within 90 consecutive days from the last day of the previous hospitalisation or day-case procedure for the same illness. When an insured person is hospitalised or undergoes any day-case procedure for more than one illness, all different illnesses involved in the same hospitalisation or day-case procedure will be subject to one applicable benefit limit and/or total benefit limit per illness per policy year.
- The estimated medical expenses above are calculated based on the expenses generally incurred for the illness. They are intended to estimate the claim amount payable under medical insurance and the consumer’s estimated out-of-pocket expenses (if any), and are for reference only. Readers should not regard them as actual medical expenses.
- Prescribed non-surgical cancer treatment includes radiotherapy, chemotherapy, targeted therapy, immunotherapy and hormonal therapy.
- This limit is the benefit limit for additional cover for prescribed non-surgical cancer treatment and renal dialysis.
- For outpatient care before hospitalisation or before and after a day-case procedure, the vCANsurance Medical Plan (Standard Benefit Level) launched by FWD provides comprehensive cover for up to three outpatient or emergency consultations before hospitalisation/day-case surgery and up to 20 follow-up outpatient consultations within 90 days after discharge. However, if the follow-up outpatient consultation after discharge/day-case surgery is for physiotherapy or chiropractic treatment, a limit of HK$600 per visit applies.
- The coinsurance for the Supplementary Major Medical cover mentioned in the article (if any) is 20%, calculated entirely based on non-network medical treatment.
- Reference: HKET Topick, 22 February 2018, “More than 8 years of age at onset: difficult for children with congenital diseases to obtain protection”.
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.
10Life Editorial Team
Our team of professional content researchers focussing on insurance
10Life Editorial Team
Our team of professional content researchers focussing on insurance
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