Fresh ideas on health insurance welcome

PUBLISHED : Thursday, 18 February, 2010, 12:00am
UPDATED : Thursday, 18 February, 2010, 12:00am

Yet another public consultation later this year makes reform of health-care financing look like a process of consensus by exhaustion. That said, the government's latest proposals for voluntary medical insurance could show the way forward. It does not rule out setting up its own health insurance company to compete with private insurers. That is not the way business is usually done in this town and such a step should not be taken lightly. But there is a case for it in the short term, at least to play a part in keeping private insurers 'honest', to quote an official.

Health insurance is not to be compared with general insurance like fire, motor vehicle or liability. It is a social safety net that cannot be dependent on cross-subsidy from other insurance classes or exposed to losses in them. A public option run on commercial principles would give the government exposure to local claims experience and an independent window on prudent premium pricing, reserves and investment policies. Insurance sector legislator Chan Kin-por argues that a transparent mechanism for setting premiums would make this unnecessary. In time that may turn out to be so. But it is good that the industry does not rule out such competition, so long as it is on a level playing field. Consumer demand should determine whether it becomes a permanent fixture.

A government official has rightly ruled out a call for some of the HK$50 billion start-up fund for health financing reform to be used to subsidise higher premiums for people with pre-existing conditions. The industry has hardly established a case for it yet. The issue poses some serious problems. But there does not seem to have been much discussion of options like qualifying periods and discrimination between different conditions. For example, coverage for a hip replacement in a private hospital after payment of premiums for a year or two does not pose the same risk as open-ended, continuing benefits for a chronic pre-existing condition. If private medical insurance is to be viable and affordable, it may be necessary to accept annual limits on benefits beyond which a public subsidy kicks in, or the public system takes over.