What are the advantages of Voluntary Health Insurance Scheme (VHIS)? Four best things about VHIS and three points to consider when switching plans.

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While the Voluntary Health Insurance Scheme (VHIS) has been available since April this year, there are still some consumers considering whether to buy VHIS or to switch from an existing medical insurance to VHIS. What is so attractive about VHIS? If you are interested in enrolling or switching to VHIS, what should you first pay attention to?

Advantage 1 of VHIS: Covers ‘unknown pre-existing’ and ‘congenital’ diseases

One of the advantages of VHIS is that its protection clearly cover ‘unknown pre-existing’ and ‘congenital’ diseases of the insured. The eligible age to insure VHIS is 15 days to 80 years old. As long as the insured enrol in VHIS standard plans or flexi plans after the age of 8, all diseases listed in the terms and conditions will be covered, including unknown pre-existing diseases at the time of purchasing VHIS. This means that treatment of congenital conditions which have manifested or been diagnosed since the age of 8 will be covered.

Advantage 2 of VHIS: Guaranteed annual renewal to provide medical coverage for senior citizens

Besides covering unknown pre-existing diseases, VHIS guarantees renewal up to the age of 100 years. Some flexi plans even provide lifetime renewal guarantee, which is highly beneficial for the elderly. If the elderly are unfortunately diagnosed with severe diseases to the extent that they need non-surgical cancer treatments, diagnostic imaging tests or major surgical operations, they will be covered by VHIS. When the elderly are faced with necessary and urgent medical situations, a health insurance policy can be very helpful from a financial perspective to help them weather the storm.

Advantage 3 of VHIS: No lifetime benefit limit to safeguard long-term patients

The calculation of benefit amounts of VHIS is based on ‘policy year’, which means that it will be ‘reset to the maximum’ at the start of every policy year. As long as the customers renew their policies every year, they can continue to claim reimbursements for disease treatments that are covered by their policies. This kind of unlimited lifetime benefit is an extremely good ‘safety net for medical expenses’ for the chronically ill or elderly who need long-term treatments. However, consumers should note that a few flexi plans currently offered in the market still have upper limits for lifetime benefits. For example, ‘AIA Voluntary Health Insurance Prime Scheme’ offered by AIA has set a $20 million cap on lifetime benefit. ‘Cigna VHIS Series – Flexi Plan (Superior)’ offered by Cigna also has a lifetime benefit limit of $20 million. The insured should choose flexi plans with ‘real’ unlimited lifetime benefits in order to enjoy long-term coverage.

Advantage 4 of VHIS: Insure for the family to get additional tax deduction

Purchasing VHIS not only provides better voluntary health insurance coverage for the family, but also brings tax deductions to the policy owner. The higher the tax rate of the policy owner, the more the corresponding amount of tax deduction. If you purchase VHIS for eligible family members, you can also be entitled to claim the tax deductible amount that your family members are eligible to claim. The tax deductible amount of each VHIS policy is capped at $8,000. Assuming the standard tax rate of the policy owner is 17%, it will be almost equivalent to ‘buying medical insurance with 20% off’.

Switching plans? Consider benefit limits, underwriting procedures and special offers.

For customers with existing medical insurance policies, there are three important factors to consider when deciding whether to switch to VHIS or not: 1) Are the benefit limits attractive? 2) Is underwriting needed ? 3) The relevant details of the special offers.

Detail 1 for switching plans: Compare benefit limits carefully

There are two classifications of VHIS: standard plans and flexi plans. For standard plans, the government has stipulated the minimum requirements for the benefit amounts of each category of claims. For example, the maximum limit of compensation per policy year is $420,000, specialist fee is $4,300 per policy year, etc. Flexi plans, on the other hand, vary on the coverage provided. Consumers should also check the government website for details.

If you already have a medical insurance plan, you should have a careful look at your existing policy. By comparing with your preferred VHIS plan, you can find out whether the relevant compensation of the latter is more or less. If the existing medical insurance is already ‘tailor-made’ with higher benefit amount than VHIS in each category, you should not switch to VHIS simply because of its lower premiums. If you have urgent and high medical expenses due to unforeseen events, you will lose more than the amount of premium saved.

Detail 2 for switching plans: Check whether or not underwriting is required

If an insurance company has participated in VHIS, it must offer its existing policyholders of individual indemnity hospital insurance an opportunity to switch to Certified Plans. However, when a customer tries to switch from a medical plan provided by Insurer A to a VHIS plan provided by Insurer B, it is not mandatory for Insurer B to accept this customer’s application.

Currently, insurers in the market have also stated clearly that they reserve the right to carry out underwriting processes, which include demanding the provision of medical records, information on the nature of work, etc., from new customers who intend to purchase VHIS plans. Then, the insurers would decide whether or not to accept the enrolment to VHIS after carrying out risk assessments.

Take Blue Cross as an example. The insurer stipulates that it can ‘impose case-based exclusion(s) and/or premium loading when accepting an application during the underwriting process of new customers. It also stipulates a fixed geographical loading of 15% shall be applied ‘if the insured person does not have legal right of abode in Hong Kong or Macau’. Therefore, consumers should consult professional advisors before underwriting in order to understand whether transfer to VHIS under the status quo would be successful, or whether there is a chance they may be required to pay additional insurance premiums.

Detail 3 for switching plans: any special offers for switching plans?

Another point to note when switching plans is to make sure whether special offers from existing policies will remain unchanged, or even more special offers are provided, after switching plans. For example, Manulife, the insurer, provides a 10% premium discount for the first policy year for existing customers of medical insurance who switch to its VHIS plans through the ‘VHIS Migration Programme’ during the period from 1 April 2019 to 30 June 2020. This is equivalent to ‘buying medical insurance with 10% off’ for its existing customers, which is better value for money.

In addition to instant special offers, some insurers have also provided ‘continuous special offers’ to VHIS policy owners. Take Manulife’s ‘ManulifeMOVE’ as an example. As long as customers reach the required daily step average, they are entitled to premium discounts of up to 10% (subject to terms and conditions).

Want to learn more about the government’s VHIS? Read our VHIS Guide!