【Insurers' Secret Weapon for Denying Claims】Medical insurance "full reimbursement" — Does it cover everything? The must-know "medical necessity" clause

Among the many insurance products, medical insurance is often one of the most disputed; policyholders complaining that insurers "do not pay enough" are common. Insurers frequently use "full reimbursement" as a selling point for medical insurance and even boast of policy coverage limits of up to tens of millions of dollars per year. Taken literally, consumers may easily misunderstand "full reimbursement" to mean everything is covered — after paying premiums, patients can be hospitalized at will and have the insurer foot the bill.

In fact, "full reimbursement" is not automatic; it is conditional on being "medically necessary" (also called "medical need" or "medical necessity," English: Medically Necessary) and on the costs being reasonable and customary (English: Reasonably and Customary). This article discusses what "medically necessary" means so that patients do not discover they are not covered after using expensive private medical services. 

Many medical insurance claim denials or disputes involve "medical necessity". Consider the following cases (see Note 1). Do you think they meet "medical necessity"?

• Case A: Ms. A was admitted for a routine full-body medical examination.
• Case B:  Mr. B frequently had blood in his stool; on the doctor's advice he was admitted for a colonoscopy. Mr. B had no other illnesses.
• Case C:  Ms. C, who has cancer, went to the United States for experimental treatment.
• Case D:  Mr. D sought treatment for back pain; the doctor determined further tests were needed. Because the clinic's appointments were fully booked, Mr. D was admitted to hospital, during which magnetic resonance imaging, X-ray examinations, and other tests were performed, and he was diagnosed with a mild disc protrusion.  

Before discussing the case above, let’s first understand the definition of "medical necessity".

Since 2018 the government has implemented the Voluntary Health Insurance Scheme (VHIS), which regulates insurers' hospital insurance products and standardizes the definition of "medical necessity". "Medical necessity" means the need to receive medical services for the diagnosis or treatment of an illness or injury in accordance with generally accepted medical standards, and the medical services must meet the following criteria:

• Require the professional expertise of, or referral by, a registered medical practitioner
• Be appropriate for the diagnosis and treatment needs of the condition
• Be provided in accordance with sound and prudent medical standards and the careful professional judgment of the attending registered medical practitioner, and not be provided primarily for the convenience or comfort of the insured person, their family members, caregivers, or the attending registered medical practitioner
• Be delivered in the most appropriate setting and with equipment that complies with generally accepted medical standards
• Be provided to the insured safely and effectively at the most appropriate level, according to the careful professional judgment of the attending registered medical practitioner

For other high-end medical insurance plans outside the VHIS, some insurers use the VHIS definition of "medical necessity", for example AXA Hong Kong's 臻尚環球醫療保障 and Cigna's 尊尚360 medical plan.

However, some high-end medical insurance plans define "medical necessity" differently, such as Chow Tai Fook Life's "世逸" Premier Medical Protection Plan and AIA's 極臻‧至尊 Medical Plan.

Taking AIA's product as an example, "medical necessity" refers to medical services, diagnoses and/or treatments that:

• Are consistent with professional medical practice;
• Are necessary; and
• Cannot be performed at a lower level of medical care, and do not include experimental, screening, or preventive services or items. 

Different insurance companies have similar ideas about the definition of "medically necessary," but their wording can be more lenient or more stringent. For example, some high-end medical insurance policies state that medical services "cannot be carried out at a lower level of medical care and do not include experimental, screening, or preventive services or items." Taken literally, this can be understood as the minimum safe level of care — how can that be acceptable to policyholders who paid high premiums!

Additionally, many insurers state explicitly that services or tests done purely for the convenience of the insured or the doctor, for diagnostic scanning purposes, imaging examinations, etc., are not considered "medically necessary". 

Below is a comparison of several medical insurance definitions of "medically necessary":

With regard to the cases above, insurers may consider they are not "medically necessary" because...

• Case A: A full-body checkup is a preventive medical service; therefore, being admitted to hospital for a full-body checkup is not "medically necessary".
• Case B: Some insurers consider a routine colonoscopy can be performed in an outpatient clinic. Mr. B in this case has no other conditions, so having a colonoscopy at a day clinic should be safe. Such insurers may therefore consider the hospitalization was not "medically necessary".
• Case C: The treatment is an experimental new medical technology and is not "medically necessary".
• Case D: The relevant tests and examinations can be carried out at a day clinic; the hospitalization was only for the convenience of the doctor (because his clinic appointments were fully booked), and thus not "medically necessary".

10Life recommends that if the situation is not an emergency, you should first consult the doctor about the fees for the medical services, and before admission apply to the insurer for pre-authorization for hospitalization to avoid large unexpected expenses.

There are many medical insurance products on the market, and consumers can easily get confused. Want someone to help explain complicated policy terms so you can understand the coverage of different products? Feel free to contact 10Life insurance advisors via WhatsApp for enquiries.

Further reading: [Claim-denial secret weapon] Will insurers cover medical costs no matter how high? Understanding "Reasonable and Customary" charges

Note:
The above cases are partly sourced from the following news:
Source for Case C: Different interpretations of medical necessity: hospital tests may be denied
Last updated: February 18, 2025

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.