Vistas agrupadas

This report proposes that the HPS Standard Plan becomes a set of minimum benefits which apply to all indemnity hospital insurance products (IHIPs). These minimum standards apply to all new products sold in the Individual market immediately upon implementation of HPS. For the Group market, voluntary supplementary plans and conversion option would be introduced in the short to medium term, with the long-term goal of full compliance with the minimum requirements (see Arrangements for the Group Market overleaf). All insurers participating in the IHIP market must offer at least one HPS Standard Plan which offers guaranteed acceptance. All new subscribers would be provided with information about the HPS Standard plan, as a minimum.

The minimum requirements for the HPS Standard plan are summarised below.

Table 1: Summary of HPS Minimum Requirements

Features Concept

Guaranteed

acceptance No turn away of new or migrating subscribers to the HPS Standard Plan during migration window.

After the migration window, guaranteed acceptance to the HPS Standard Plan will be capped at an agreed maximum age.

Guaranteed

Renewability Available for life Coverage of

pre-existing conditions

Cover pre-existing conditions subject to the following waiting period : Year 1 – no coverage

A schedule of the minimum range of procedures to be covered by the HPS Standard plan, along with minimum benefits payable for those services. The range of procedures will include specified ambulatory procedures including diagnostic colonoscopy and endoscopy, certain advanced diagnostic procedures (MRI, CT, PET) and chemotherapy and radiotherapy and related cancer treatment services (subject to the scope as defined by the regulator).

For certain advanced diagnostic tests and procedures, minimum benefits will be defined as a packaged benefit limit.

Policyholder

out-of-pocket costs Annual cap on deductible and the coinsurance paid by insured member

Clarity of out-of-pocket charges in relation to no gap / known gap services, where member chooses a health provider within their insurer’s gap arrangements.

No cap on out-of-pocket charges for expenses in excess of benefit limits.

Premiums Age-banded premiums, with insurers free to underwrite subject to a maximum loading in the HPS Standard Plan of 200%.

Portability Members can switch insurers without re-serving waiting period.

Members can switch insurers without re-underwriting if they have had no claims in the past 3 years.

Switching from an insurer’s group plan on retirement or leaving employment to that insurer’s HPS Standard Plan at standard premium rates (zero loading) , if they have been continuously employed and covered by the Group plan for at least one year.

Streamlined

migration Individual members can opt to migrate to HPS Standard Plan without re-underwriting, for their existing coverages.

High Risk Pool Only HPS Standard Plan applicants will be eligible for access to the High Risk Pool Incentives HPS Standard Plans and Flexi-Plans eligible for incentives, as well as voluntary

supplementary plans held by members of Group plans.

Executive Summary

Yet current data collections in Hong Kong are relatively limited. Private hospitals and private health insurers do not record patient procedures using standardised coding, so industry-wide data collections contain significant gaps. There are no timely data collections available on the profile of policyholders, or the cost of hospital services. Developing a clear data collection and reporting strategy will be an important component of a successful policy initiative.

Key risks will need to be managed when HPS is introduced

In several countries, PHI reforms have fuelled medical inflation and activity growth, because policyholders no longer fund private healthcare directly out-of-pocket and hence are less likely to question the need for services.

Countries like the Netherlands have taken aggressive steps to limit health expenditure growth, by capping overall premium and health price increases in 2012, and all countries in our study have taken direct regulatory action to manage specific health inflation and demand increases in their PHI systems. Chapter 17 discusses these risks and successful management strategies in detail.

Advanced diagnostic and imaging services have been growing strongly in Hong Kong and, with these services to be included in the HPS minimum benefits, careful management of coverage is essential, to ensure demand does not grow uncontrollably. The use of packaged pricing, amongst other measures, will help to manage the risks to insurers associated with this expanding coverage. Cost sharing for certain services may also be required.

Clearly-defined minimum benefits, rather than broad definitions about services provided in hospitals, are also a common feature to manage costs and promote care in the right setting. Australia, Ireland, the Netherlands and Switzerland all define a very detailed list of procedures which are included in the minimum benefits package and all four countries have also defined a minimum benefit to be paid in respect of those services. The US is in the process of defining a package of Essential Health Benefits to come into effect from 2014. Such an

instrument does not yet exist in Hong Kong. In addition to defining what is covered at the outset, active management of the list is required, to respond to new technology and changing medical practices.

To harness the significant potential gains available to industry, consumers and society more broadly, and reflecting the findings of the research, the key recommendations for a technically feasible and actuarially sound design for HPS are set out overleaf, with full details contained in Part A.

Executive Summary

Scheme Design: Minimum Requirements across all IHIPs

This report proposes that the HPS Standard Plan becomes a set of minimum benefits which apply to all indemnity hospital insurance products (IHIPs). These minimum standards apply to all new products sold in the Individual market immediately upon implementation of HPS. For the Group market, voluntary supplementary plans and conversion option would be introduced in the short to medium term, with the long-term goal of full compliance with the minimum requirements (see Arrangements for the Group Market overleaf). All insurers participating in the IHIP market must offer at least one HPS Standard Plan which offers guaranteed acceptance. All new subscribers would be provided with information about the HPS Standard plan, as a minimum.

The minimum requirements for the HPS Standard plan are summarised below.

Table 1: Summary of HPS Minimum Requirements

Features Concept

Guaranteed

acceptance No turn away of new or migrating subscribers to the HPS Standard Plan during migration window.

After the migration window, guaranteed acceptance to the HPS Standard Plan will be capped at an agreed maximum age.

Guaranteed

Renewability Available for life Coverage of

pre-existing conditions

Cover pre-existing conditions subject to the following waiting period : Year 1 – no coverage

A schedule of the minimum range of procedures to be covered by the HPS Standard plan, along with minimum benefits payable for those services. The range of procedures will include specified ambulatory procedures including diagnostic colonoscopy and endoscopy, certain advanced diagnostic procedures (MRI, CT, PET) and chemotherapy and radiotherapy and related cancer treatment services (subject to the scope as defined by the regulator).

For certain advanced diagnostic tests and procedures, minimum benefits will be defined as a packaged benefit limit.

Policyholder

out-of-pocket costs Annual cap on deductible and the coinsurance paid by insured member

Clarity of out-of-pocket charges in relation to no gap / known gap services, where member chooses a health provider within their insurer’s gap arrangements.

No cap on out-of-pocket charges for expenses in excess of benefit limits.

Premiums Age-banded premiums, with insurers free to underwrite subject to a maximum loading in the HPS Standard Plan of 200%.

Portability Members can switch insurers without re-serving waiting period.

Members can switch insurers without re-underwriting if they have had no claims in the past 3 years.

Switching from an insurer’s group plan on retirement or leaving employment to that insurer’s HPS Standard Plan at standard premium rates (zero loading) , if they have been continuously employed and covered by the Group plan for at least one year.

Streamlined

migration Individual members can opt to migrate to HPS Standard Plan without re-underwriting, for their existing coverages.

High Risk Pool Only HPS Standard Plan applicants will be eligible for access to the High Risk Pool Incentives HPS Standard Plans and Flexi-Plans eligible for incentives, as well as voluntary

supplementary plans held by members of Group plans.

Executive Summary

Yet current data collections in Hong Kong are relatively limited. Private hospitals and private health insurers do not record patient procedures using standardised coding, so industry-wide data collections contain significant gaps. There are no timely data collections available on the profile of policyholders, or the cost of hospital services. Developing a clear data collection and reporting strategy will be an important component of a successful policy initiative.

Key risks will need to be managed when HPS is introduced

In several countries, PHI reforms have fuelled medical inflation and activity growth, because policyholders no longer fund private healthcare directly out-of-pocket and hence are less likely to question the need for services.

Countries like the Netherlands have taken aggressive steps to limit health expenditure growth, by capping overall premium and health price increases in 2012, and all countries in our study have taken direct regulatory action to manage specific health inflation and demand increases in their PHI systems. Chapter 17 discusses these risks and successful management strategies in detail.

Advanced diagnostic and imaging services have been growing strongly in Hong Kong and, with these services to be included in the HPS minimum benefits, careful management of coverage is essential, to ensure demand does not grow uncontrollably. The use of packaged pricing, amongst other measures, will help to manage the risks to insurers associated with this expanding coverage. Cost sharing for certain services may also be required.

Clearly-defined minimum benefits, rather than broad definitions about services provided in hospitals, are also a common feature to manage costs and promote care in the right setting. Australia, Ireland, the Netherlands and Switzerland all define a very detailed list of procedures which are included in the minimum benefits package and all four countries have also defined a minimum benefit to be paid in respect of those services. The US is in the process of defining a package of Essential Health Benefits to come into effect from 2014. Such an

instrument does not yet exist in Hong Kong. In addition to defining what is covered at the outset, active management of the list is required, to respond to new technology and changing medical practices.

To harness the significant potential gains available to industry, consumers and society more broadly, and reflecting the findings of the research, the key recommendations for a technically feasible and actuarially sound design for HPS are set out overleaf, with full details contained in Part A.

Executive Summary

their treatment. This should be undertaken for all types of claims, not just those provided on a ‘no gap / known gap’ basis.

Third, there will be an annual cap on the deductible and coinsurance payable (up to the prescribed benefit limit) which insurers can include in a HPS Plan. A sensible annual cap on the deductible and co-insurance allowed in the plan will minimise the risk of policyholders falling back on the public hospital system, because of expensive out-of-pocket costs. This approach provides more protection and certainty for policyholders than the approach proposed in the Second Stage Consultation, which allowed insurers to set a deductible at any level.

Fourth, there will be no lifetime benefit limits. Lifetime benefit limits leave considerable uncertainty for policyholders who maintain their insurance over longer periods of time. Indeed, it can be particularly punitive for people who have held IHIP for some time, which is inconsistent with HPS goals to make coverage accessible into older ages.

Premium Structure

Under this proposal, insurers retain the ability to establish their own premium rates, subject to the prescribed premium structure for a HPS Standard plan. The Second Stage Consultation proposed that age-based

premiums be charged, with insurers retaining the flexibility to underwrite new policyholders subject to a maximum loading of 200% of the standard premium for a person in that age band. To enhance consumer transparency, we propose that premiums are published on a standardised basis, using ‘age last birthday’ as the common standard. Rates may be separately identified for males and females. Insurers retain the right to use their own underwriting standards for HPS applicants. This includes determination of policyholders with a 200% or more loading and hence eligible for the High Risk Pool.

The No Claims Discount proposed in the Second Stage Consultation would be voluntary only. An alternative to the NCD being used in many countries is involvement in wellness programs and incentives or discounts for those who participate. Indeed, the US legislation will allow premium penalties for people who don’t participate in appropriate wellness programs. Research presented in Chapter 17 highlights a number of ‘Best Buys’ and other strategies the World Health Organisation sees as effective in reducing the burden of chronic disease.

Portability

To enhance portability and so improve competition, specific provisions are proposed for policyholders transferring from one HPS-compliant product to another HPS Standard plan, and who have had no claims in the three preceding years. These people will be eligible for entry to the new Standard Plan using the same underwriting class as applied at their previous insurer, and will not be required to re-serve waiting periods.

Detailed provisions and operational procedures for portability will need to be agreed with industry as HPS rolls out.

Without this provision, portability and hence both consumer protection and market competition would be seriously hampered. The approach we propose reflects a pragmatic balance between the need to provide barrier-free portability and the need to protect insurers from adverse selection. The operational success of these elements in enhancing portability must be monitored over time, and adapted where necessary to improve market competition.

Overall product viability

In order to test the viability of the proposed HPS Plan, a consumer survey targeted at middle-income individuals has been conducted through face-to-face household interviews. The main objective was to test respondents' willingness-to-pay and preference towards a draft illustrative HPS Standard Plan. A strong majority of respondents (about 70%) indicated that they would be willing to purchase the proposed HPS Standard Plan. This result was consistent regardless of whether they are currently covered by individual or family indemnity hospital insurance. The respondents also responded strongly regarding the importance of

Executive Summary

These features expand and refine the high level design for HPS presented as part of the Second Stage

Consultation, in order to ensure scheme viability and sustainability. Key features are explained further below.

Guaranteed Acceptance

This proposal sees guaranteed acceptance into the HPS Standard Plan available during the migration window for all new members and all members migrating from an existing IHIP, regardless of age. After the migration window, guaranteed acceptance would be available only for new subscribers up to age 40, and for those eligible for portability (see Portability overleaf). This is a departure from the Second Stage Consultation which proposed guaranteed acceptance up to age 65. Research indicates that a high guaranteed acceptance age may not be sustainable and may lead to significant government outlays through the High Risk Pool. It may send the wrong signal to consumers who may be encouraged to wait until they are older or have developed a health condition to take-up IHIP. A lower guaranteed acceptance age provides a clear signal to members to take-up IHIP at an earlier age, reduces uncertainty for insurers, and reduces the potential cost of the High Risk Pool.

Minimum Benefit Coverage

A detailed schedule identifying what procedures are to be covered in the minimum package, and what minimum amount will be paid in respect of those services will be established. This approach is quite different from current insurance products which are defined more in terms of the setting of care (ie:

whether the care was provided in a hospital inpatient setting). Establishing a detailed schedule of procedures and treatments which are covered avoids the need to adopt general definitions of hospital services, according to minimum periods of stay in hospital, a feature of many Hong Kong IHIP contracts. These definitions have provided a perverse incentive to provide less efficient care – overnight stays, when a day procedure would be adequate; inpatient day surgery when outpatient treatment would be appropriate. As well as encouraging efficiency in service delivery, establishing a list of covered procedures establishes a clear boundary between primary care – which is not intended to be covered by the HPS - and the hospital-equivalent services, which are covered. Without a clear list of what is covered and what is not, there would be constant tension between what is covered and what is not, with health providers having strong incentives to find ways to fall within the HPS definition.

The procedures included in the schedule will include an agreed set of procedures and advanced diagnostic tests which are more typically provided in an ambulatory, rather than an inpatient setting, and the circumstances under which they are covered. Consultations and research for this project suggest this should include: Certain advanced diagnostic tests (MRI, CT and PET scans); diagnostic colonoscopies and endoscopies; and

chemotherapy and radiotherapy and related treatment services.

The minimum benefits schedule will identify the minimum benefit limits to be paid in respect of those services, targeting Ward level care and an expected patient co-payment. Benefits can be set to give a clear signal to providers to provide care in an efficient way – setting the minimum benefit at a ‘day procedure’

rate rather than the cost of an overnight stay. For certain procedures, the benefit limits will be set in terms of a packaged benefit limit and not the more traditional ‘itemised’ benefit limits.

Policyholder out-of-pocket costs

To enhance certainty for policyholders, we propose four important changes. First, insurers will offer ‘no gap / known gap’ arrangements for an agreed set of services, which fix the out of pocket costs the policyholder will pay if they use health providers working within their insurers’ gap arrangements. Further information on ‘no gap / known gap’ follows later, and a complete discussion is included in the appendix to Chapter 17, including measures which Government and health providers will need to implement, to enable insurers to offer ‘no gap/ known gap’ reimbursement.

Second, except for emergency cases, providers will be required to obtain informed financial consent from the patients so that patients are aware of the costs and the out-of-pockets costs that they will pay in advance of

Executive Summary

their treatment. This should be undertaken for all types of claims, not just those provided on a ‘no gap / known

their treatment. This should be undertaken for all types of claims, not just those provided on a ‘no gap / known