Why does VHIS reduce my claim?

What are Reasonable & Customary charges? Why can the insurer reduce my claim?

Reasonable & Customary charges (R&C) is an underlying clause in every Voluntary Health Insurance Scheme (VHIS) certified policy.

In plain terms, it means:

No matter how much the doctor charges, the insurer will only pay up to the “general market level for similar treatment”. If a doctor’s charge is excessive, the insurer has the right to pay only the reasonable portion, with the policyholder making up the difference out of pocket.

Why is the clause designed this way? Two reasons:

1. To stop doctors from inflating prices because the patient is insured —— if the insurer paid whatever the doctor charged, doctors would have no incentive to quote reasonable prices, and the entire industry’s premiums would eventually be pushed up.
2. To keep the insurance pool’s premium discipline intact —— individual large bills still face a payout ceiling, so all renewing policyholders’ premiums do not see major hikes year on year.

The R&C clause is mandated directly by the government’s VHIS Standard Plan Template; the entire industry uses the same wording, and it is not added by individual insurers.

Who decides what is “reasonable and customary”? Is the standard public?

The answer: the insurer determines this itself. The template specifies that the insurer must judge “reasonably and in absolute good faith” whether a charge falls within the customary market range.

When making this determination, the insurer should refer to four categories of information:

• Industry surveys and statistics on insurance or medical treatment charges
• The insurer’s internal or industry claims-statistics data
• The Hong Kong Government Gazette (Hospital Authority private services fee schedule)
• Other relevant local references (e.g. surveys of practising doctors’ fees)

In other words: when you buy the policy, you do not know exactly how the yardstick measures up. You only see the specific haircut percentage when you submit a claim — once the insurer’s settlement letter arrives with the deduction applied.

Can “full coverage” still be cut by R&C? Which calculates first — the per-item cap or R&C?

Many people get this wrong, but the answer is direct: R&C always calculates first; per-item caps come second. Even when a benefit is labelled “Full Cover”, that does not meanunlimited reimbursement.

The actual calculation order

1. The doctor / hospital issues the original bill (e.g. HK$260,000);
2. The insurer determines an “acceptable amount”under R&C (e.g. judging the reasonable level to be HK$200,000);
3. The “acceptable amount” is then compared against the policy’s per-item cap:
   • If there is a hard cap → pay the lower of the two;
   • If “Full Cover” → no hard cap, but the payout is still based on the post-R&C amount;
4. The difference between the original bill and the final payout comes out of your own pocket.

A worked example

Suppose a surgeon’s fee is shown as “Full Cover” with a surgical bill of HK$260,000. The insurer judges the R&C-reasonable level to be HK$200,000. Even though the per-item cap is “no hard cap”, the final payout is HK$200,000, and you must self-fund the HK$60,000 difference. If the bill is 25–30% above the customary market rate, the gap can easily reach six figures.

The phrase “Full Cover” is easily misread as “I do not need to worry about anything”. Some policyholders only realise on receiving the settlement letter that they still owe a top-up — by then it is too late to change doctor or hospital.

What are typical R&C reduction percentages in Hong Kong?

The Insurance Complaints Bureau (ICB) has publicly disclosed three R&C-related teaching cases — currently the most representative and citable real-world figures in Hong Kong. In all three cases, the ICB ruled that the insurer’s reduction was upheld, and the policyholder could only recover a partial payment:

Source: Insurance Complaints Bureau (ICB) introductory presentation submitted to the Insurance Authority’s working group (teaching cases).

Three observations

1. Wide variance —— from 30% to 62%; not a fixed proportion, varying with clinical scenario and how unusual the charge is;
2. All three involve surgeon’s fees —— the surgeon’s fee is the line item where R&C is most often triggered. Hospital bed charges and ancillaries usually generate fewer disputes;
3. ICB rulings are binding but not precedent-setting —— it can help you recover part of the claim, but it does not mean similar future cases will rule the same way.

A separate publicly disclosed Bowtie pre-authorisation case for thyroid surgery offers a useful comparison: the doctor quoted HK$180,000, the insurer pre-approvedHK$115,000, and the market reference level was about HK$100,000. By knowing the HK$65,000 gap upfront, the patient had room to choose another doctor, switch hospital, or budget for the self-funded portion in advance — rather than passively accepting the reduction afterwards.

How can I reduce the risk of an R&C reduction? How does pre-authorisation work?

R&C risk can never be 100% eliminated, but the following steps can significantly reduce surprises:

5.1 Before buying

• Ask about direct billing (cashless hospitalisation) network coverage —— certain large insurers have negotiated rate agreements with private hospitals, with reductions handled at billing stage so you may not even notice;
• Confirm whether the insurer offers a “pre-authorisation” channel —— ask about the process, application deadline, response time in days, and whether the response is in writing;
• Mind the words “Full Cover” —— actively ask your broker or customer service to explain: even though this benefit has no hard cap, how does R&C still factor in?

5.2 Before treatment (the most critical step)

• Ask the doctor for a fee estimate —— including surgical fee, anaesthesia, implants, follow-up; ask the hospital for an itemised quote at the same time;
• Submit for pre-authorisation —— send the complete quote to the insurer and ask for a written response: “Under R&C, we will approve up to X”. If the gap is large, you still have time to consider other options;
• Benchmark against customary market levels —— references include the Hospital Authority’s Government Gazette private services fees and publicly available industry surgical charge surveys.

I have already had a reduction applied. How do I appeal? What is the ICB process?

If you have already received a settlement letter and notice an R&C reduction, the recommended order of action is:

6.1 First, talk to the insurer directly

1. Request a written claim breakdown —— write or email the insurer asking them to specify: what items were reduced, what reference benchmark was used, and how the calculation was done;
2. Ask the hospital for an itemised bill —— R&C usually targets specific charges (most commonly surgeon’s fees), and an itemised list is needed to identify the disputed line items;
3. Ask the doctor for a written clinical note —— if the charge reflects case complexity, special equipment used, or a senior consultant’s grade, the doctor’s letter is critical evidence in an appeal.

6.2 If unresolved → complain to the Insurance Complaints Bureau (ICB)

• Service is free; you do not need a lawyer;
• ICB can handle disputes up to HK$1.2 million(above that requires civil litigation);
• ICB rulings are bindingon the insurer, but do not constitute legal precedent. Even if the ruling goes against you, civil litigation remains available;
• Submission method: complete the complaint form → submit ID copy → submit policy terms copy → submit complete settlement letter and bill copies → wait for ICB to assign a case officer.

According to the South China Morning Post, the ICB processed 857 complaints in 2025, up 32.7% year-on-year, with medical and travel insurance the most-complained categories. R&C is a common dispute area, but rulings depend heavily on case-specific facts — not every complaint successfully overturns the reduction.