Understanding Medical Insurance

Functions of medical insurance

Accidents and illnesses, such as seasonal influenza and COVID-19, are unpredictable and can place pressures both on an individual’s financial situation and on the public healthcare system as a whole. The public healthcare system in Hong Kong offers relatively affordable medical services, but its services are always over-utilised. This often means long waiting times for non-urgent medical treatments, and inconvenience to patients.

Medical insurance is a risk transfer tool. Taking out a medical insurance policy allows an insured person to shift responsibility for some of the medical expenses they incur onto an insurer, thus giving that person more choices for the medication and treatment. Furthermore, an efficient medical insurance market also helps to shift demand for healthcare services from the public healthcare system to the private medical sector, easing pressure on the public healthcare system so it can develop in a more sustainable way.

Common coverage

Medical insurance provides compensation for medical expenses incurred as a result of accidents or illnesses. In general, this compensation is on a reimbursement basis and has a maximum benefit limit. Common coverage includes:

Hospitalisation coverage: mainly expenses in relation to hospitalisation, including room and board, doctor’s visiting fees, surgery fees, miscellaneous charges, etc. Some plans may offer supplementary major medical benefits which allow the insured to claim a prescribed percentage of relevant expenses in excess of the maximum payable benefit.
Outpatient coverage: mainly outpatient medical expenses resulting from consultations with general practitioners, basic medication and laboratory examinations, etc. Some outpatient benefits may also include consultations with Chinese medicine practitioners, physiotherapists, Chinese bonesetters, and even consultations with specialists and related medication expenses.

Some medical insurance plans offer hospital cash benefits to the insured to compensate for loss of income during any stay in hospital. Instead of receiving a reimbursement of medical expenses, the insured receives a fixed daily cash payment according to the number of days they have stayed in the hospital, which comes without any restrictions on its use.

Common insurance classifications

Some employers offer group medical insurance plans to their employees as part of their employee benefits. However, even if you are already covered by a group medical insurance policy, it is worthwhile learning more about the different features of both group medical insurance and individual medical insurance - including the coverage, benefit limits, deductible options and premium levels - so you can assess your needs for taking out an individual medical insurance policy and choose a plan that suits your protection needs.

	Group Medical Insurance	Individual Medical Insurance
Modes of application	An employer takes out a policy for its employees, negotiates the coverage and the benefit limits with the insurer, and pays the premiums.	An individual takes out a policy with a coverage and benefit limit that suits his/her needs, according to his/her own personal circumstances and financial situation.
Product features	Generally, there is a maximum limit for each medical benefit item. Under different policy terms, some benefit limits may not fully cover the medical expenses of the insured. The insured may have to pay any shortfall from his/her own pocket. The protection is terminated immediately when an employee quits his/her job (e.g. due to resignation or retirement). Some group medical insurance plans offer top-up options which allow policy holders to buy an additional individual policy with deductible options. Policy holders can then enjoy a higher coverage with a relatively low premium.	Some traditional plans offer similar coverage as group medical insurance plans, with a maximum limit for each medical benefit item. Some products offer “full cover benefit”, which means the insured can receive 100% reimbursement of expenses for all medical items as long as such expenses fall within the benefit limit for each year or each incident. The lifetime benefit limit for some high-end plans may be up to tens of millions of dollars. However, the higher the benefit limit, the higher the premium payable. These plans normally contain a deductible, which means that the insured has to pay a portion of the medical expenses from his/her own pocket before making a claim to the insurer. If the insured is covered by other medical insurance plans, he/she can minimise out-of-pocket expenses by making a claim with the other insurer(s). Policy holders can choose from among different deductible options. The higher the deductible, the lower the premium payable.

The Voluntary Health Insurance Scheme (VHIS)

The VHIS is a policy initiative implemented by the Health Bureau to regulate indemnity hospital insurance plans offered to individuals by participating insurers. Participation by insurers and individuals is voluntary. Under the VHIS, the indemnity hospital insurance plans offered by participating insurers, including the Standard Plan and the Flexi Plan, are certified. All certified plans must meet or exceed the VHIS minimum product standard, including having standardised policy terms and conditions, guaranteed renewal up to the age of 100, a prescribed level of coverage, etc. In addition, premiums paid for a VHIS policy are eligible for tax deduction under the Inland Revenue Ordinance (Cap. 112). For details, please visit the VHIS website.

Useful information

To be a smart policy holder, study the following sections of this webpage to learn more about the rights and obligations of a policy holder before taking out a medical policy or making a claim.

The above information is for reference only. For the coverage, mode of compensation, benefit limit and premium levels of any specific medical insurance plan, please refer to the relevant policy terms.