The forthcoming healthcare reform will bring lucrative businesses to insurance companies, but cost-effectiveness should be a major concern to these insurers, an academic told China Daily yesterday.

It is highly possible that the working population whose salary exceeds a certain level would be covered by the government under the proposal that is to be announced tomorrow, said Billy Mak, associate professor at the Hong Kong Baptist University department of finance & decision sciences.

The ultimate purpose of health insurance is to relieve the burden of public medical expenses on the government. The private sector has a capacity that is large enough to have all citizens insured, Mak added.

"I think the government will shoulder medical expenses which exceed the insurable limit. The entire population will be insured regardless of their health condition and age, so the premium must be higher than usual," he said.

Mak pointed out problems which could arise from healthcare financing if the reform proposes mandatory health insurance.

"The young generation may not use any medical services within the policy term and the government adopts uniform premium regardless of the demographic pattern," he said.

"Young citizens may find it unfair as they are practically subsidizing the elderly who use medical services more frequently."

"It is like raising the tax," Mak added.

In addition, the government should resolve doubts such as whether the insurers would renew the policy when their customers retire, and who should bear the responsibility if the insurance companies shut down.

Meanwhile, the academic found health savings a conservative measure for protecting retired people.

The value of the money could increase through investment, Mak explained. He also raised concern over citizens' response when they are asked to pay more.

Though the healthcare reform will bring business opportunities to the insurance industry, Mak reminded insurers to keep cost-effectiveness in mind, otherwise the premium might not be adequate to support the medical expenses.

"Some customers may abuse the medical services as they have paid for them," he said, adding this was a possible moral hazard and might lead to an imbalanced account for the insurers.

He suggested the government provide basic medical protection rather than a high-class protection.

"Education is needed to let citizens understand they should not abuse the medical services," Mak added.

(HK Edition 03/12/2008 page1)