Benefits of Voluntary Health Insurance Scheme covering "unknown pre-existing conditions" and "congenital conditions"

The Voluntary Health Insurance Scheme (VHIS) has been launched for two years and there has been much discussion about it.
Author Bowtie Team
Date 2021-08-13
Updated on 2021-08-13
Definition of Utmost Good Faith principleCongenital conditions vs unknown pre-existing conditionsInsurance companies can refuse to cover congenital conditions

In fact, there are a number of benefits in VHIS, including tax deduction for qualifying premiums, standardized and regulated insurance coverage, and the absence of a lifetime benefit limit. It also covers unknown pre-existing conditions and congenital conditions, which are not usually covered by traditional health insurance.

Previously discussed the benefits of not having a lifetime benefit limit, we would like to talk about the “pre-existing conditions that are unknown at the time of application” and bring out some important insurance concepts, such as Utmost Good Faith and Material Facts, so that you can feel at ease when applying for insurance and making a claim.

Definition of Utmost Good Faith principle

Under common law, commercial contracts must be entered into in good faith. The principle of good faith is divided into ordinary and utmost good faith. Ordinary good faith means the contracting parties must act in good faith in providing true and non-fictional information. However, they are not obligated to ensure that the other party has access to all material information.

In short, you should answer all the questions asked by the other party honestly but you do not have to tell the other party questions they didn’t ask, whether it is important or not.

However, insurance contracts are subject to a more rigid principle of utmost good faith. It means that all material facts must be disclosed to the other party, regardless of whether the other party has asked for the information. What are material facts? It means all circumstances that may affect a prudent insurer’s decisions on setting premiums or risks to bear.

Congenital conditions vs unknown pre-existing conditions

Below is a frequently asked question: if you have never had a body check and are not sure if you have abnormal conditions or diseases to be reported (e.g., you have never had a sleep apnea test), and assumed you do not have sleep apnea at the time of enrollment. Will it affect your claim if you are found to suffer from it in the future?

It leads to another issue, which is that the insurance company does not have concern on whether the insured is aware of the condition, but whether the condition or illness existed (pre-existing conditions) before the policy has been in force. For example, a person was hospitalized for an illness in childhood. Even if he/ she did not know about it. That hospitalization is still considered a pre-existing condition. Of course, this is just a special example to illustrate that we should be aware of our own physical condition or medical history.

But how can we tell how long this condition has existed? The insurance company will rely on medical records and the diagnosis of the practitioner. For example, Samson found out for the first time that his cholesterol is over the limit after a blood test. No one can say for sure whether the problem has existed for 1 day, 1 month, or longer. Therefore, unless there is additional evidence to prove that the condition existed before, a fair and reasonable approach is to determine the time of “first discovery” as the time of “first occurrence”.

Hence, in most cases, a problem discovered after the policy is in force, without any physical abnormality before the person is insured, is considered to be a condition that arises later. Take sleep apnea as an example, if there is no information indicating that the condition existed, it is reasonable to answer that you are healthy at the time of enrollment. Even if sleep apnea is detected in the future, it will not be considered a pre-existing condition and will not affect the claim.

However, why is it applicable to most of the cases but not all? Because certain conditions can be identified as pre-existing conditions at any time. One of the most obvious examples is a congenital condition such as congenital heart disease. Common congenital heart diseases include atrial and ventricular septal defects (commonly known as leaky heart valves). Since congenital diseases must have existed before the policy was effective, general insurance policies will have an exclusion clause that denies coverage for any diseases that existed before the policy was effective, whether the policyholder is aware of it or not.

The above misconceptions have often led to many unnecessary disputes concerning insurance claims. Of course, a professional and responsible insurance advisor should be able to explain the above concepts clearly, try to assist the client to answer the health questionnaire, and provide the required information to the insurance company. However, as a consumer, the insured should also understand the above concepts thoroughly and ask the insurance advisor or insurance company for clarification if they do not understand something.

Insurance companies can refuse to cover congenital conditions

Here is a case for your information. According to the 2018/19 Annual Report of the Insurance Complaints Bureau (ICB), the policyholder purchased medical insurance for his 11-month-old son. His son was admitted to the hospital 5 days after the issuance of the policy for a right inguinal hernia repair. After being discharged from the hospital, the policyholder submitted a claim to the insurance company. Yet the company refused to pay the claim on the grounds that the disease was congenital. The policyholder then filed a complaint with ICB.

ICB’s Insurance Claims Complaints Panel learned from the medical literature that inguinal hernia is one of the most common paediatric congenital defects, caused by the failure of the internal inguinal ring to close after the testicles have passed to the scrotum during fetal development. The Complaints Panel eventually agreed that the insured’s condition was congenital and upheld the insurer’s decision to deny compensation.


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