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LCQ7: Health Protection Scheme

     Following is a question by the Dr Hon Leung Ka-lau and a written reply by the Secretary for Food and Health, Dr York Chow, in the Legislative Council today (December 8):


     In the Healthcare Reform Second Stage Consultation Document (the consultation document), the Food and Health Bureau proposes a voluntary Health Protection Scheme for the supplementary financing of Hong Kong's healthcare system.  According to the relevant actuarial data, the parties concerned have preliminarily calculated the indicative premiums for all age groups under the Standard Health Insurance Plans (Standard Plans) based on the charges for median-priced private hospital services, as well as the administrative expenses and profit margins comparable to market figures.  Regarding the "pricing methodology" on page 71 of the consultation document, will the Government inform this Council:

(a) of the data used by the Government in calculating the premiums in the Indicative Premium Schedule of Standard Plans on page 70 of the consultation document, and set out the information according to the attached Annex and

(b) how the calculation of the indicative premiums under the "premium for higher deductible" on page 70 is reflected in the formula for calculating the premium rate as set out on page 71 of the consultation document?



     The Food and Health Bureau has commissioned an actuarial consultant to devise an illustrative standard health insurance plan (Standard Plan) based on the features and content of the proposed Health Protection Scheme (HPS) and the operation of the current health insurance and healthcare markets, and to work out an indicative premium schedule of the Standard Plan for illustrative purpose using professional actuarial method.  The actuarial consultant's report can be accessed at the Healthcare Reform Second Stage Consultation website (

(a) As the actuarial method adopted for estimating the premium levels shown in the indicative premium schedule of the Standard Plan under HPS entails a host of variables and sophisticated calculation formulae, we cannot set out in a simplistic way the actual data used and the formulae involved in the process.

     Generally speaking, in the premium estimation process, the actuarial consultant would make use of their professional judgement and actuarial models to analyse the relevant variables and categorise them into some major parameters for the purposes of making reasonable assumptions and calculations.   These major parameters include: existing expected medical claim costs; additional medical claim costs due to coverage of pre-existing conditions of the currently insured people; administrative expenses; High-Risk Pool reinsurance rate; and profit margin of the insurance companies.  A detailed description of these parameters and the calculation methods is set out in the report of the actuarial consultant, which is not repeated here in view of length limitation.

(b) From the perspective of actuarial estimation, the inclusion of deductible is tantamount to adding another variable in the actuarial model.  This would mainly affect the medical claim costs and administrative expenses among the aforesaid parameters.  As far as the actuarial estimation of the premium levels of the Standard Plan is concerned, the inclusion of deductible would lead to a reduction in the number of claims with small amounts (with claims amount being less than or on par with the level of deductible) and a lower average amount of claim payout per case (as the deductible will be deducted from the compensation amount) as well as a reduction in administrative expenses required for handling claims  (due to a decrease in the number of claims).  These would have the effect of lowering the insurance premium.

Ends/Wednesday, December 8, 2010
Issued at HKT 16:15


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