REVIEW

Integration of current identity-based district-varied healthinsurance schemes in China: implications and challenges

Hai-Qiang Wang, Zhi-Heng Liu, Yong-Zhao Zhang, Zhuo-Jing Luo (✉)

Department of Orthopaedics, Xijing Hospital, Fourth Military Medical University, Xi’an 710032, China

© Higher Education Press and Springer-Verlag Berlin Heidelberg 2012

Abstract With China’s great efforts to improve public health insurance, clear progress has been achieved towardthe ambitious full health insurance coverage strategy for all. The current health insurance schemes in China fallinto three categories: urban employee basic health insurance scheme, urban resident scheme, and new ruralcooperative medical system. Despite their phasic success, these substantially identity-based, district-varied healthinsurance schemes have separate operation mechanisms, various administrative institutions, and consequentlypoor connections. On the other hand, the establishment and implementation of various health insurance schemesprovide the preconditioning of more sophisticated social health insurance schemes, the increase in the income ofurban and rural people, and the great importance attached by the government. Moreover, the reform of the“Hukou” (household register) system provides economical, official, and institutional bases. Therefore, theestablishment of an urban-rural integrated, citizen-based, and nationwide-universal health insurance scheme bythe government is critically important to attain equality and national connection. Accordingly, the differencesbetween urban and rural areas should be minimized. In addition, the current schemes, administrative institutions,and networks should be integrated and interconnected. Moreover, more expenditure on health insurance might beessential for the integration despite the settings of global financial crisis. Regardless of the possible challenges inimplementation, the proposed new scheme is promising and may be applied in the near future for the benefit of theChinese people and global health.

Keywords health insurance; urban employee basic health insurance scheme; urban-resident scheme; new rural cooperativemedical system

Introduction

China, the largest developing country with a quarter of theworld’s population, is experiencing tremendous economicdevelopment and improvement on public health insurance. In2007, Wen [1] reported that the Chinese government hasmade great efforts to improve public health insurance, andclear progress toward the ambitious full coverage strategy forall will be achieved by no later than 2010. In general, thecurrent health insurance schemes in China fall into threecategories, namely, the urban employee basic health insur-ance scheme (UEBMI), urban resident basic medicalinsurance scheme (URBMI), and new rural cooperativemedical system (NRCMS). Moreover, the medical assistance

program implemented by the Civil Affairs Administration is acomplement for the poor. The reform and evolving health caresystems have been well documented [2–7]. However, mostauthors addressing health insurance issues have majored inpublic health rather than in clinical health professions.Nevertheless, paucity of information pertains to the detailsother than the drawbacks and limitations of current healthinsurance schemes in China.

Accordingly, the current study profoundly analyzed thedetails, drawbacks, and limitations of current health insuranceschemes in China from the perspective of clinical doctorsbased on accumulated practices. Subsequently, the currentstudy constructively proposes the current identity-based,district-varied health insurance schemes to be integrated intoa citizen-based, nationwide-universal health insurancescheme. Based on the development of the health insurancepolicy in China over the past decades, the current studycreated a new proposal that could improve China’simplementation of the ambitious health care strategy, which

Received June 21, 2011; accepted December 7, 2011

Correspondence: zjluo@fmmu.edu.cn

Front. Med. 2012, 6(1): 79–84DOI 10.1007/s11684-012-0179-5

could consequently be beneficial for Chinese citizens andeven for the world population health.

Current health insurance schemes andtheir context

Based on the pilot reforms in the cities of Zhenjiang andJiujiang, UEBMI was proposed to replace the governmentinsurance scheme and the labor insurance scheme [8, 9]. Ingeneral, UEBMI stipulates that the employment-based basichealth insurance scheme should cover urban employees,including workers from both public and private enterprises.Self-employed and rural industry workers need to buy into theprogram, which is not included in UEBMI. Retired workersare exempted from premium contributions, and their formeremployers should shoulder the costs of their contributions[10]. By the end of 2010, the basic health insurance scheme(BHIS) has covered more than 237 million people, includingemployees and retirees in urban areas [11].

In practice, BHIS is comprised of a pooled fund forinpatient stays and individual medical savings accounts foroutpatient usage. UEBMI is funded by payroll taxes derivedfrom employers (6% of the employee’s wage) and employees(2% of the employee’s wage). In detail, the 2% payroll taxand 30% of those from employers (1.8%) run into individualmedical savings accounts, whereas 70% from each employer(4.2%) makes up the social pooled fund. The department ofhuman resources and social security of central and localgovernment agencies are the policy makers and mainstays ofhealth insurance schemes. Moreover, affiliated health insur-ance centers of local government agencies manage theeligibility assessments of employees and reimbursements.In general, UEBMI reimburses approximately 70% ofinpatient expenditure, which should be included in the basicmedication and service categories of health insurance.Otherwise, patients are supposed to pay on their own. Inaddition, outpatient services for special chronic diseases,which have the same reimbursement rate as inpatient services,are gradually included in the main insurance schemes of thegovernment. Outpatient chronic disease categories cover 175kinds of common outpatient disorders, such as diabetesmellitus and its complications, including hypertension,radiotherapy of malignant tumors, peptic ulcers, anti-rejectionoral medications after organ transplantation, systemic lupuserythematosus, avascular necrosis of femoral head, andrheumatoid arthritis, among others. According to ChinaStatistical Yearbook 2011, the policy has been implementedsystematically in over 1 949 cities in China [11]. Moreover,certain special diagnostic imaging methods, such as com-puted tomography and magnetic resonance imaging, in bothoutpatient and inpatient departments are covered by UEBMIwith the same reimbursement rate in a multitude of districts.Virtually, the coverage of outpatient chronic diseases andspecial diagnostic imaging differs regionally without inte-grated national criterion.

In 2003, China launched NRCMS, a greatly subsidizedvoluntary health insurance program for rural residents.NRCMS serves as a replacement for the old village-basedrural health insurance program. This program is a voluntaryscheme, with contributions supplemented by governmentsubsidies. Furthermore, NRCMS operates at the county levelrather than at the village or township level; thus, it provides alarger risk pool and economies of scale in organization andmanagement [12]. The ministry of health of central and localgovernment agencies is the policy maker and mainstay ofNRCMS. Central and local governments initially contributed40 Renminbi (RMB) for each enrollee annually since 2003,whereas participants only contributed 10 RMB. This criteriondoubled in 2008; that is, central and local governmentscontributed 80 RMB, whereas individual participants con-tributed 20 RMB. In practice, NRCMS reimburses approxi-mately 30% of inpatient expenditures [7].

In contrast to the relatively mature schemes of UEBMI andNRCMS, URBMI started in July 2007 [13], and its chiefenrollees include children, college students, and migrantworkers, which are also noted as the “floating population”[10]. In contrast to previous health insurance schemes, theenrollees of URBMI consist of “special” groups of residents,who are economically dependent or floating with employ-ment and are consequently temporary residents [10].Expanding the health insurance coverage for children hasbeen a concern for both governments and public healthprofessionals [14–16]. Insurance coverage has been noted asan important factor in the access of children to health care[17]. College students have similar hallmarks with children.Moreover, given the increasing numbers of rural migrantworkers with economic development and automation, thehealth care and insurance coverage of the floating populationshould not be neglected [18]. Despite their young ages, themigrant workers’ working conditions are relatively rigorousand more stressful. Therefore, we should remain cognizantthat the health conditions of the population might not be sosatisfactory in terms of contagious diseases, workplaceaccidents, occupational hazards, and psychological health[19]. Furthermore, the willingness of migrant workeremployers to become participants in health insurance isrelatively low [20]. The insurance coverage on the particularpopulation should be paid more attention to.

The coverage of URBMI has reached 317 cities, with over110 million participants by the end of 2008 [21]. In 2007,central and local governments initially contributed 20 RMBfor each enrollee annually, and the contributions of theparticipants varied with respect to their areas and ages.Subsequently, this criterion doubled; that is, central and localgovernments contributed 40 RMB. However, individualcontributions remained the same. The average of the totalpremium of each URBMI enrollee was 236 RMB (range: 150RMB to 300 RMB) and 97 RMB (range: 50 RMB to 100RMB) for adults and children, respectively [22]. URBMIreimburses approximately 50% of inpatient expenditures [13].

80 Integration of current health insurance schemes in China

The derivation, overall making up, and usage of the pooledfund of the health insurance schemes in China arerecapitulated in Fig. 1. In practice, the flowchart for patientscovered by public health insurance to hospitals might be

relatively intricate even though it has been significantlyimproved (Fig. 2). Hospitals usually place conspicuousposters in the outpatient department to guide patients forthe proceedings.

Fig. 1 Derivation, making-up, and usage of pooled fund and individual medical savings accounts (MSAs) of the current health insuranceschemes in China.

Fig. 2 Flowchart of handling the proceedings of medical insurance for patients in hospitals, including outpatient and inpatient diagnosesand therapies.

Hai-Qiang Wang et al. 81

Hallmarks of current health insuranceschemes in China and implications for thenew scheme

Hitherto, the health insurance schemes have achieved phasicsuccess. NRCMS has covered 836 million rural people with acoverage rate of 96.5% until September 2010 [23]. More than317 million urban people have participated in either UEBMIor URBMI until the end of 2008 [24]. Moreover, the currenthealth insurance schemes in China have contributed to anoverall improvement in the access to care of the generalpopulation, and the schemes increased outpatient andinpatient utilization, and reduced delivery costs [25, 26]. Inaddition, the schemes significantly reduced pain/discomfortand anxiety/depression of the general population, and theyposed positive effects on the mobility and usual activities ofindividuals over 55 years old [27].

However, the three current health insurance schemes havethe following important hallmarks, which greatly limit theirbest utilization.

First, the three schemes are identity based. From theperspective of current policy makers, Chinese citizens areclassified into urban employees, urban residents, and ruralpeople. Various identities in Chinese society fit in diverseschemes with different reimbursement criteria, whichundoubtedly result in inequality. The identity with thecorresponding health policy is assumed constant. However,the scenario might change with time. With the marketeconomic development and agricultural market reforms,many rural workers, the floating population, transit to citiesfor employment. The transition of identities of these workersinvolves both NRCMS and UEBMI, which indicates a puzzleand economic burden for individual rural workers. On theother hand, the reform of the current “Hukou” system aims toeliminate the gap between urban and rural areas, andestablishing the citizen “Hukou” system sheds light on theintegrated health insurance scheme.

Second, the three schemes are district varied. The pooledfunds of NRCMS, UEBMI, and URBMI are on the levels ofcounties or districts of cities. Even the reimbursements ofenrollees in the different districts of the same city, who areadmitted in the same ward of a hospital, will vary based onlocal policies. Therefore, the details regarding the utilizationand reimbursement of health insurance policies widely vary.In this scenario, patients in a district are supposed to selecthospitals within the area to attain the most reimbursement,which is inappropriate for most patients. For example, theXijing Hospital is one of the biggest hospitals in northwestChina, and it is the preference of most patients for diagnosisand therapy. However, patients have to get first an approvalfrom local administrative institutions of health insurance,revert to private financing (self-pay), and then return to localadministrative institutions for reimbursement. Usually,patients only get a reimbursement rate of 15%, and mostpatients from other provinces complain about the separate

mechanisms of health insurance, which is common duringdaily ward rounds. Patients with specific diseases should bereferred to big hospitals by their primary care physicians. Iftheir referral is approved, their reimbursements should havesimilar rates as local hospitals. This scenario may be a way tocope with the situation. On the other hand, the experience andnetworks of the current schemes maximize the possibility of anew nationwide scheme.

Third, the coexistence of the three schemes with separateoperation mechanisms and different administrative institu-tions leads to their poor interconnections. The elements ofenrollees with health insurance schemes vary with differentages, employment, and dwelling regions, which inevitablyresult in the transition of health insurance schemes.

Therefore, the current identity-based, district-varied healthinsurance schemes cannot continue unchallenged. An urgentneed exists in reshaping the public health insurance policy tohelp close the growing and destructive gap between healthinsurance schemes and public health requirements.

Proposal of an urban-rural integratedcitizen-based health insurance scheme

All citizens of a nation with sufficient financial support shouldhave basic health insurance, regardless of their identity,vocation, or which district they belong to. Having a healthinsurance makes a big difference, at least under the rapidlyincreasing cost of hospital admission. For example, kneeosteoarthritis is among the most common orthopedicdisorders in the elderly population. Total knee arthroplasty(or replacement) remains the ultimate efficient therapy for thisdisorder. The cost of the surgery, including the prostheses, arehigh (i.e. more than 40 000 RMB). Therefore, osteoarthritispatients without health insurance have slim chances toundergo total knee arthroplasty. On the other hand, theywould indisputably opt for surgery if they were covered byhealth insurance. That is, the pooled fund would reimburse70% or less of their total hospital costs.

The full coverage implementation of health insurance and anew integrated health insurance scheme might not beachieved overnight. However, the appropriate timing isapproaching after years of exploration by the governmentand policy makers. The government needs to grasp theopportunities and subsequently integrate the current healthinsurance schemes into a new promising scheme. Theestablishment and implementation of various health insuranceschemes provide the preconditioning of more sophisticatedsocial health insurance schemes. However, the increase inurban and rural people’s income, the great importanceattached by the government, and the reform of the “Hukou”system provide economic, official, and institutional bases fora new integrated health insurance scheme.

Combined with the analysis of current health insuranceschemes and the experience of health insurance works, anurban-rural integrated, citizen-based, and nationwide-universal

82 Integration of current health insurance schemes in China

health insurance scheme was constructively proposed to beestablished to attain equality and national connection.

Discussion

The reform of current health insurance schemes in China hasgained worldwide attention. The merits and challenges duringthe process will contribute to global health because of China’sgreat population share in the world and the experiences thatwill serve as reference for other countries [4]. Moreover,everyone should undoubtedly make every effort to improvethe health insurance policy according to the feedback duringimplementation. Even though the proposal in the currentstudy might meet the points of Chinese citizen’s healthinsurance requirements, several challenges may lie aheadduring its implementation.

First, the differences between urban and rural areas, as wellas between employees and residents, should be minimized tobuild a harmonious health insurance scheme that will meet thepoints of the current policy of “building a harmonioussociety.” Given the existing differences in reimbursementrates among UEBMI, URBMI, and NRCMS, policy makersshould ensure equality from the perspective of urban-ruralintegration to abolish institutional discriminations.

Second, the current schemes, administrative institutions,and networks should be integrated and interconnected. Underthe current health insurance schemes, such as UEBMI(Fig. 3), financial resources are not well allocated to where

they would have the greatest health benefit. The balanceincreases annually with increasing enrollment. By the end of2009, the total balance of the pooled fund of UEBMI andURBMI reached 4 006.1 billion RMB [11]. On the otherhand, outpatient services are very insufficiently insured inmany parts of China. Inpatient services leave patients withsignificant costs (self-pay or additional fees) to bear [4],especially on medications or medical services beyond thenational basic categories. Therefore, the accumulated balancemight be a challenge rather than a merit, which urgently isbest utilized to close the gap between unsolved requirementsand surplus balance. Furthermore, the details and operationmechanisms of the current three schemes differ in application.Moreover, the administrative institutions of the three schemesvary. Great efforts and exploration might be given during theintegration of the schemes and administrative institutions.

Third, the government may have to increase further itsexpenditures on health insurance. The government has beenconsiderably increasing its financial support for health care[28, 29]. However, the current public health system cannotprovide efficient health care services to the whole population[30]. The elderly population in China is increasing; that is, theproportion of population aged above 65 years has reached123.56 million or 9.36% of China’s total population in 2007[11], and it is expected to increase at an annual rate of 3.28%during the next 14 years to peak in the 2030s [31]. Withincreasing elderly population, the needs and expenditures oftotal health insurance will correspondingly increase. In

Fig. 3 Increasing enrollment of the basic health insurance scheme and the balance of the social pooled fund. Note that the balance in2007 and 2008 includes the pooled fund of both basic health insurance and urban resident schemes. Data were according to Refs. 11 and32.

Hai-Qiang Wang et al. 83

addition, the expenditures and subsidies of the governmentfor equalizing the reimbursement rate under the new proposedscheme should increase as well. However, the global financialcrisis results in the continuous drop in economic growth,which contributes to the decline in government revenues andincrease in government expenditures [32]. Therefore, thegovernment might have to cope with the combined global anddomestic settings to meet the needs of health insurance [24].

Combining the points stated above, a new urban-ruralintegrated, nationwide-universal health insurance scheme isproposed to be established based on current health insurancereform. Despite the challenges that lie ahead in theimplementation, the new scheme is promising and may beapplied in the near future, which may be beneficial for theChinese people and global health.

Conflict of interest: The current study did not receive any funding.The authors declare no conflicts of interest.

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