Consumer Council Submission to the Food and Health Bureau on "My Health My Choice" Healthcare Reform Second Stage Public Consultation

1. The Consumer Council (the Council) is pleased to submit its views concerning the consultation document issued by the Food and Health Bureau (FHB) on introducing a voluntary Health Protection Scheme (HPS) in Hong Kong.


2. TThe Council is glad that the FHB has made specific proposals for the second stage of the healthcare reform which address the Council's previous comments including regulating the operation of private health insurance and private healthcare service providers in respect of healthcare services to be provided under the HPS, and setting up a designated body for handling health insurance complaints.


3. This submission sets out for consideration of the FHB: (I) the concerns that consumers/patients may have in relation to the proposed features of the HPS; and (II) the Council's responses to the specific questions raised in the consultation document.

I.        ISSUES OF CONCERN TO CONSUMERS

4. The key consideration is whether the proposed HPS would bring actual benefits to consumers, in terms of affordability, access, choice, quality and fairness. Issues of concern and queries that consumers may have in relation to the HPS are as follows:

Can consumers afford to pay the premiums?

5. The objective of the proposed HPS as stated in the consultation document is to enhance the sustainable development of the healthcare system. As far as consumers are concerned, they will be concerned whether they can afford to keep up with health insurance premium in the long run.


6. Apart from enhancing premium transparency for all HPS plans, there is the need for the Government to allay consumer doubts as to the reasonableness of subsequent premium increases.


7. The financial burden to consumers should be taken into account if the HPS is intended to be sustainable (e.g. affordable insurance premiums, co-payments with a reasonable cap).

Will the benefit coverage of the HPS provide adequate protection to consumers?

8. For consumers, in addition to assessing affordability in the purchase of the HPS, they also need to consider if the benefit coverage and limits for the HPS plans would meet their needs and be value-for-money.


9. General out-patient service is an important first step in healthcare. It is of concern that excluding it from the Standard Plans of the HPS may cause people to neglect preventive care or to fail to seek treatment at an early stage, and the subsequent hospitalization cost may be increased.


10. In view that the Government's proposed "co-payment" approach could help reduce abusive use of medical services, out-patient services should be included as core items under the HPS to meet the holistic health concept for better public health protection.

Will there be adequate choice of healthcare services and health insurance plans in the market?

11. Another issue of concern to consumers is whether there will be adequate supply of quality private healthcare services and health insurance to meet the increase in demand arising from implementation of the HPS, failing which healthcare cost will increase. The HPS should be able to bring about more choices of affordable and quality healthcare services and health insurance tailored to consumers' individual needs.

Will the proposed thresholds impede people who are most in need of healthcare protection from accessing the HPS?

12. Under the proposed design of the HPS, only those who are willing and able to pay would be provided with access and choice. This raises concern that some of those most in need of healthcare protection may not have access to the HPS.

How are consumers to choose from HPS plans?

13. Health insurance is a complex product and it is not easy for consumers to make comparison. The issue of concern to consumers is how to make their choice of healthcare insurance under the HPS (as well as of non-HPS plans).

How consumer voice will be heard in respect of the HPS?

14. Notwithstanding that consumers are users and payers of the HPS, their say is as weak as their bargaining power. It is of concern how vulnerable consumers can procure a HPS that is affordable, equitable, with choices, and quality-assured, one that serves to protect their interests in healthcare services and health insurance.
15. The HPS offers various economic incentives such as premium discounts which may attract consumers to participate in the HPS at the beginning. Notwithstanding that, it is necessary for the Government to ensure ongoing participation and the views and concerns of consumers with regard to the HPS have to be tapped and tackled.

II.        RESPONSES TO SPECIFIC QUESTIONS

16. The Council's comments on the specific questions raised in the consultation document are discussed in the following paragraphs.

General Views

(a)        Do you support introducing the voluntary HPS providing health insurance standardized and regulated by the Government?

Need of regulatory oversight

17. In previous submission, the Council expressed the need for the Government to take some form of regulatory oversight of healthcare services and health insurance as an inseparable component of any policy that would move more of the population to the health insurance market. The Council is glad to note the Government's launch of the second stage healthcare reform with proposals on introduction of a voluntary and government-regulated HPS.


18. The Council believes that many features of the HPS will help address health insurance problems faced by consumers such as uncertainty of coverage and policy terms, uncertainty of medical charges, exclusion of pre-existing conditions, no guaranteed renewal of policies, lack of transparency on insurance premium adjustment, non-portability of insurance and disputes over insurance claims. All these features will strengthen consumer confidence in participating in the HPS.

Objectives of the HPS

19. Having said that, the Council considers it necessary for the Government to explain to the public the fundamental objective of the HPS - is it for enhancing people's general physical well-being, or is it for bringing in healthcare financing? These two objectives would lead to distinctly different directions in designing the HPS.


20. If the former objective is to be achieved, the scope of the HPS should aim to provide healthcare to more people (regardless of their age, state of health or financial capability). If it is the latter objective, the HPS would serve the more limited purpose of channeling those who can afford to pay for private healthcare services, thereby easing the burden of public healthcare financing. But for that the Government's proposition that private insurance will relieve pressure on the public healthcare sector remains to be proved. The Council is of the view that estimation figures should be given to support the effectiveness of the HPS in this respect.

(b)        Do you support regulating health insurance plans under the HPS to provide protection and better choices to consumers?

21. The Council supports regulating health insurance plans under the HPS to provide protection and better choices to consumers. With respect to the proposed measures related to regulation of HPS plans and premiums, the Council has the following comments:

Guidelines for premium adjustment

22. With regard to the Government's proposed guidelines for premium adjustment based on claims and costs, the Council is of the view that the Government should clearly state whether the guidelines will be subject to regulation, or whether they are for industry self-compliance only.


23. The Council considers that there is the need to give the guidelines legal backing. If the guidelines are not legally binding, and no penalties are set for improper conducts such as non-compliance of the guidelines and giving false information, enhancement of premium transparency on its own is unlikely to reduce consumers' worries. It will also be unfair to honest traders.

Cost containment measures

24. The consultation document proposes a number of cost containment measures to be incorporated into the HPS, including co-payment, deductible and benefit limit, to prevent abusive use of healthcare services and to curb moral hazard, thereby reducing the premium level.


25. However, apart from rise in medical claims, other factors such as medical costs, administrative charges, commissions, investment returns and reserve levels also lead to premium increases. It is therefore equally important for the Government to adopt appropriate regulatory measures to ensure there is also cost effectiveness in respect of those factors.

Premium transparency

26. Regarding the proposal of requiring insurers to be transparent in relation to insurance costs, the Council believes that it is definitely useful in enhancing premium transparency. However, if the requirement is limited only to reporting and making disclosure, it will not meet public expectation that the HPS is to be effectively regulated by the Government.


27. Although the Government has made it clear that the HPS will be subject to a regulated framework, the Council considers it necessary for the Government to give details of the scope of regulation, particularly with regard to the Government's role in premium adjustment. For example, will insurers be required to submit supporting data to justify premium adjustment and obtain approval of the Government, and under what circumstances will the Government intervene in premium adjustment?

Responsibility of the dedicated agency

28. The Council is of the view that the dedicated agency proposed to be set up for supervising the implementation and operations of the HPS should be responsible for monitoring premium adjustment, conducting systematic analyzes and studies (including collecting local data and comparing with health insurance costs of similar overseas systems), as well as providing the public with readily understandable analytical data (e.g. claim ratio), to help the public better understand the reasons for premium increases.


29. Another important function that should be undertaken by the dedicated agency is to provide information services to the public. One such service is making private health insurance comparisons across premium and service levels.


30. The Government should consider constructing a website similar to the one set up by the Australian Government (www.privatehealth.gov.au), and listing for comparison information (including protection coverage and premiums) on all HPS plans. Such a website can enable consumers to search for appropriate health insurance plans and make informed choices, as well as promote market competition.

Regulatory concern with top-ups

31. As proposed in the HPS, individuals may purchase on an optional basis any other non-core items (e.g. for better amenities, higher benefit limits, lower co-payments, and/or broader service coverage such as out-patient, dental and maternity) in the form of top-up components to suit their needs.


32. However, according to the Council's experience, many top-up products or services (such as those involved in telecommunications, broadcasting, and beauty services) were major subjects of consumer complaints, involving improper sales practices such as false or misleading claims, tie-in sales, etc.


33. The Government suggests that premium schedules for Standard Plans and other HPS plans (top-ups) be published for public information. The Council considers that this would only enhance premium transparency, but effective regulation should also cover sales practices regarding Standard Plans and other HPS plans (top-ups).

(c)        Do you support increasing private healthcare sector capacity and strengthening quality assurance measures in support of the HPS?

Monitoring quality of private healthcare services

34. In relation to the Government's proposals to increase private healthcare sector capacity, the Council understands that this policy is for relieving pressure on the public healthcare system. Yet, expanding the private sector may draw resources out of the public healthcare sector (i.e. manpower) which ends up in increase in costs.


35. Quality is an equally important parameter. The Council urges the Government to consider means to ensure consumers will benefit from appropriate and good quality healthcare services. For instance, quality assurance/performance benchmarks should be in place for assessment of quality of private healthcare. Such assessment results should be made public to provide patients with information for making informed choices.

HPS Design

(d)        Do you agree with the proposals for allowing higher risk groups to access health insurance?

Access concern of high risk groups

36. There are proposals to allow higher risk groups to access health insurance subject to conditions. The Council is concerned that those most in need of healthcare protection may not have access to the HPS, and what can be done about them.


37. Despite that the HPS is promoted as "accessible to all", the HPS as proposed will not provide universal access. Some consumers would be denial access to the HPS. For instance, those with pre-existing medical conditions would be subject to waiting periods and reimbursement limits. High risk individuals would be subject to premium loadings, and those aged 65 or above can only join the HPS within the first year after launch.


38. Compared to the present situation, the HPS will set out in clearer terms the conditions of insurance (such as specifying the premium loading ceiling, the maximum length of waiting period and entry age limit). Although these measures can reduce insurers' underwriting risks, some of those most in need of healthcare protection (i.e. those chronically ill and the elderly) may not be able to afford costly premiums or even have the opportunity to participate in the HPS.
39. The Council queries the rationales for limiting those aged 65 or above to join the HPS within the first year after launch and applying no premium loading cap even if they can join the HPS. The design of the HPS as such will discourage access of the elderly in particular.
40. The Council understands the need for sharing of risks and minimizing the financial burden of premium payment for other individuals. Yet the Government should consider how, where circumstances permit, to assist those most in need of healthcare protection to have easier and affordable access to healthcare services, either through lowering the entry barriers to the HPS (including increasing direct subsidies), or by inclusion of those being excluded from the HPS into the public healthcare system.

(e)        Which option to save for future premium do you prefer?

Factors to consider regarding future saving options

41. At this stage, the Council cannot conclude which proposed option is to be preferred in regard to saving for future premium. The Council is of the view that it is too early to discuss this since the key features of the HPS are yet unsettled. The Council believes the most important thing at the present time is for the Government to make the scheme objectives clear to the public.


42. Nevertheless, the Council shares the Government's view that people with means should prepare for their own future healthcare needs in order to have a better retirement life. Whilst ensuring people lead a healthy retirement life is essential, the Council feels that the Government should take into account the following factors in the design of any saving arrangements:
     
    1. Financial implication: Whatever saving option is taken, subscribers should be able to maintain a healthcare reserve which does not impact severely on their present financial conditions.
        
    2. Cost implication: The costs to be involved in the HPS plans should not erode the savings available to cover future healthcare need (at old age).
        
    3. Lock-in effect: Any adverse effect on individuals of having their savings locked in to pay for future premiums should be minimized.
        
43. With regard to the proposed "required in-policy savings" option, this could be of significant affordability concern to the working population as this would exert additional financial burden (on top of MPF contributions and income tax) on them and their families. Administration costs would also be of concern to them.

(f)        Do you agree with the proposals to introduce packaged charging for private healthcare services, to require insurers to facilitate migration of existing health insurance, and to establish a government‐regulated claims arbitration mechanism?

Feasibility and quality concerns with package charging

44. The proposed HPS places emphasis on developing package charging for common medical procedures to enhance price transparency. Whilst packaged charging would help to address cost transparency and impart certainty to users of medical services, there is a need for private healthcare providers to provide adequate supply of affordable and quality private healthcare services.


45. The Council has concerns as to whether private healthcare service providers will adopt package charging in providing medical services, and how ready the Government is to take up the role of setting benchmark pricing if the private sector is not interested in offering package charging services.


46. In light of the views expressed by medical professionals about trade-off between service quality and package pricing, the Council considers that quality assurance and benchmarking of private healthcare services would be necessary to ensure there is value-for-money service.

Decision making on migration of existing health insurance

47. It is noted in the consultation document that the HPS will be voluntary for individuals and employers with existing medical insurance, who may choose on their own accord whether to migrate to HPS Plans.


48. With regard to the portability of health insurance plans, the issue lies in whether existing health insurance provided by employers would be able to migrate to the HPS. The decision to migrate or not solely lies with the employers, and individual employees cannot on their own initiative shift to the HPS to enjoy benefits such as coverage of pre-existing conditions on retirement. If the employers choose not to join the HPS, the employees concerned will have to face insurance screening and high premium payments upon their retirement. The proposed HPS has not offered any solution in this respect.


49. At present, existing employer-provided health insurance accounts for a substantial market share. In the Council's view, it will be advantageous for the Government to promote and encourage employers to migrate their existing health insurance to the HPS. The Government may consider means to encourage employers to switch to HPS so as to enable their employees to enjoy portability benefits and cover for pre-existing conditions on retirement. This would benefit employees by giving them coverage on retirement without undergoing re-underwriting, and would serve as a pilot in implementation of the HPS.
50. As pointed out in previous submission, the Council considers it important to ensure consumers' benefits after the healthcare reform should not be lower than the present level. It is therefore suggested that the Government should formulate appropriate safeguards to prevent employers from reducing employee medical benefits so as to ensure that employees' healthcare coverage and benefits upon migration to the HPS would not be lower than the current level.
51. Furthermore, the Council urges the Government to give more details about the migration arrangement, including any supportive measures to facilitate transfer and continuity, reduce administrative costs, and to introduce safeguards against subscribers being misinformed, in order to enhance protection of the interests of employees and individuals.

Scope of the health insurance claims arbitration mechanism

52. In previous submission, the Council expressed the view that an option to coping with increased demand of health insurance, which will inevitably result in a higher level of consumer inquiries and disputes, would be to consider setting up a designated body for healthcare insurance complaints. Thus the proposed establishment of a government-regulated health insurance claims arbitration mechanism to handle disputes over health insurance claims under the HPS is a welcomed move.


53. The Council is of the view that the mechanism should be made transparent and independent, as well as given legal backing to ensure its impartiality and effectiveness in protecting consumers' interests in healthcare insurance.


54. According to the experience of the Council in its complaint handling work, many of the insurance related problems giving rise to consumer disputes are not only about claims, but also conduct or sales practice. For example, complaints can involve inadequate information provided by health insurers, insurance promotional materials and notification of changes to insurance policies.
55. The Council therefore supports having the proposed new dedicated agency responsible for administering consumer protection initiatives under the HPS including claims arbitration and complaint handling.

Financial Incentives for HPS

(g)        Do you support government injection into the High-Risk Pool where necessary to protect high-risk individuals and avoid premium increases for the healthy under the HPS?

Appropriate use of resources and future commitment

56. It is proposed in the consultation document that financial incentives be provided in 3 aspects, making use of the $50 billion fiscal reserve earmarked to support healthcare reform - (i) government injection into the High-Risk Pool to protect high-risk individuals; (ii) provision of premium discounts for new subscribers of HPS plans and for those subscribers aged below 30; and (iii) offering of incentives for savings by individuals for paying future premium at older age.


57. The Council considers all these are good initiatives to help encourage more people to join the HPS. But from the perspective of appropriate use of the limited government resources, helping the poor and needy is more recommendable. In the Council's view, a higher priority should be given to lessen the financial burden of those who need healthcare the most to enable them to have affordable access to HPS, rather than to enhance the attractiveness of HPS to young and healthy individuals for them to join and stay insured.


58. As regards the Government's pledge to provide fundings, the Council expects to see more details as to the allocation arrangement including the Government's financial commitments to give continuous support to the HPS (e.g. when the $50 billion fiscal reserve is used up) in the next stage of consultation.

(h)        Do you support that there should be a no-claim premium discount up to 30% of premium for all new subscribers for a limited period after the introduction of the HPS?

Disincentive arising from "no-claim discount" (NCD)

59. The Government proposes to require participating insurers to offer NCD for HPS plans to individuals who make no claim within a certain period. The Council understands that the proposal can help to keep premiums lower, and provide incentives for healthy individuals to join the HPS.


60. However, the Council has concerns about the appropriateness of adopting for health insurance which concerns human health the NCD approach used for motor vehicle insurance to encourage road safety.


61. The Council considers that the NCD may constitute a disincentive for consumers to seek medical treatment and make a subsequent claim even when they are sick. Some possible undesirable situations to occur from provision of the NCD include, for instance, consumers postponing medical treatment of illnesses in order to get the NCD upon their policy renewal, or using cheaper treatment with no quality assurance instead of making a claim. In brief, NCD can become a consumer detriment in disguise.
62. The Government should consider introducing other modes of premium discounts, for example, to provide one-time discount to attract people to join the HPS at the beginning, to give premium rebates for continuous participation in the HPS, (proportional to the length of staying insured), to grant premium discounts to the young and households to encourage them to purchase health insurance early or to purchase family insurance package.

(i)        Do you support that there should be rebate up to a certain percentage of savings used to pay Standard Plan premiums under the HPS on or after age 65?

Certainty on premium levels

63. As to giving rebate up to a certain percentage of savings to pay Standard Plan premiums under the HPS on or after age 65, the Council believes the offer of premium rebate would encourage individuals to stay insured.


64. Nevertheless, the feature of not extending the high-risk premium loading cap to individuals at older age (aged 65 or above) may cancel out the attractiveness of incentives to encourage individuals to take up and stay insured. The Council is of the view that having certainty with premium levels to be paid at older age is more important in giving peace of mind to subscribers. The Council believes that further deliberation should be given by the Government in this respect.

CONCLUSION

Making things right for consumers

65. As noted earlier, the Council shares the Government's views that there is a need to regulate private healthcare services and health insurance to safeguard consumers who wish and choose to acquire private healthcare services and health insurance for protection of their own healthcare.


66. The Council considers that standardized terms and conditions, better handling of consumer complaints in relation to healthcare insurance and enhancing transparency of healthcare service fees should be the concern of a responsible government, regardless of whether the HPS is to be implemented. The Council would expect better consumer protection safeguards to be in place to improve the existing shortcomings in the health insurance and healthcare service markets as identified in the consultation document.

Embracing consumer protection

67. As regards the HPS, the Council hopes to see that protection of consumer interests in respect of healthcare services and health insurance will form a core consideration in the design of the details for the HPS.