Medical Insurance in China How is it different from India?

Medical Insurance in ChinaHow is it different from India?

Medical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010

Slide 2

Agenda

1. A Brief History of Healthcare in China

2. Major Problems in Chinese Healthcare

3. Healthcare Reform in China

4. Private Health Insurance in China

5. Issues for Private Health Insurers in China

6. Health Insurance Product Development in China

7. India and China – Comparisons and Potential Lessons


Slide 3

1. A Brief History of Healthcare in China

1949-1978 Central Planning

– near universal basic healthcare

– low cost with emphasis on prevention

1978-2000s Decentralisation, Market-Based Reforms

– reduced central government funding

– healthcare operators encouraged generate own sources of revenue

– collapse of rural social health insuranceMedical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010

Slide 4


Decline in quality of healthcare

– much slower improvements in life expectancy

– poor handling of epidemics

Inequality of access to healthcare

– lower socio-economic classes and rural population

High Out-of-Pocket Expenditure

– ~50% OOP, even with social health insurance

Misaligned Incentives for Healthcare Providers

– fee for service encourages over-servicing


Slide 5



71 80 91 112 129 155 178 230121 154 179 223259

321389

271 301334

368407

452

485

510

117

0

200

400

600

800

1,000

1,200

2000 2001 2002 2003 2004 2005 2006 2007

CNY billion

Government Social plan & enterprise Household

Source: China’s Ministry of Health

High Out-of-Pocket Costs

Slide 6



High Cost of Pharmaceuticals

2,046 1,992 2,148 2,400

10131320

14121568

1678 16911735

1887

756

680751

844

937 9861090

1176

1,8721,7481,5971,477

0

1000

2000

3000

4000

5000

6000

2001 2002 2003 2004 2005 2006 2007 2008

Inpatient drug bill Doctor's fee Other

Source: China’s Ministry of Health

Average cost per inpatient visit

66 65 68 74

1928

3135

38 4042

45

2117

18

2123 24

26

27

5455 59

62

0

20

40

60

80

100

120

140

160

2001 2002 2003 2004 2005 2006 2007 2008

Outpatient drug bill Consultation fee Other

Average cost per outpatient visit

Slide 7


By 2011

– Expanding Social Health Insurance to cover 90% or more of the population

– Increasing government expenditure on public health services, including primary care gatekeepers

– Reforming the pharmaceutical market

By 2020

– Universal healthcare system

– Accessible and affordable healthcare for allMedical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010

Slide 8


Urban Employee Basic Medical Insurance

New Rural Cooperative System

Administered locally, the funds and accounts are used to finance inpatient and outpatient expenditure within the formularies set by the Ministry of Health and the Price Bureau.

Similar to the urban plan, except that the central and local treasuries contribute instead of the employers. Rural households enroll into this scheme on a voluntary basis.

Slide 9



Total health insurance premium income of Chinese insurers

Sources: Yearbook of China‘s Insurance, CIRC, Swiss Re Economic Research & Consulting

1.1 1.5 1.2 1.12.9

7.2

11.3

18.221.2

25.427.7

42.8

0.3 1.02.5

5.43.3

5.06.8

8.9 10.012.1

10.7

15.7

0

5

10

15

20

25

30

35

40

45

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Individual products Group products

Slide 10



70% individual business, 30% group business

Slide 11


Group Medical Insurance

– Privatised Social Health Insurance

– Qibu – Supplementary reimbursement to SHI

– annually renewable, mostly loss-making

Individual Medical Insurance

– mostly riders to basic life insurance plans

– mostly guaranteed renewable, with reviewable rates

– limited coverage for expenses outside of SHI system

– mostly profitable, but with problematic pockets

Critical Illness, Hospital Cash, Surgical Cash


Slide 12

5. Issues for Private Health Insurers

Interaction with Social Health Insurance

– within SHI framework

– coordination with SHI benefits

Regional and other SHI disparities

– utilisation rates vary

– medical costs vary

– SHI coverage varies

IBNR and Claim Delays

– SHI payments often not resolved until end of year

– Groups renew before claims experience is known


Slide 13

5. Issues for Private Health Insurers

Loss-making business

– withdraw from group market

– focus on smaller groups where competition is less

– focus on individual business with better margins

– upsell as many riders as possible

– importance of data and systems

Claims management

– follow SHI claim payment decisions

– high volume, low cost claims

– late notification of claims


Slide 14

6. Health Insurance Product Development


Lower Mid

Upper Lower/ Mass

Upper Mid

High

Upper High

Global ~ 0.1 0.4mio 15-30K

Upper ~ 9.4 35mio 1-3KMiddle

Lower ~ 12.6 46mio 0.5-1KMiddle

Mass ~ 0.5 2mio 3-12KAffluent

Masses ~ 77.3 284mio 0.3-0.5K

Target premium**

*

No. of urban

Chinese**

Share of Chineseurban

households*

*Data for 2005: In percent (Source: State Statistical Bureau of the People's Republic of China, China Statistical Yearbook)

** Data for 2005: In absolute figures (Source: State Statistical Bureau of the People's Republic of China, China Statistical Yearbook)

***Absolute figures in RMB p.a. (Source: Swiss Re’s estimate)

Customer Segmentation

Slide 15

6. Health Insurance Product Development


Market Segment Product Needs Ordinary Employees (Mass to Upper Mid)

Qibu products complementary to SHI.

Middle Income (Upper Mid to High)

limited network hospitals only, government and low-end private;

comprehensive within the SHI limited outside SHI.

High Income Domestic (High to Upper High)

VIP and higher-end private; comprehensive within and outside

the SHI framework. High Income International (Upper High)

International and Expatriate covers

Customer Segments and Product Needs

Slide 16

7. India and China – Comparisons and Lessons

Socially Disadvantaged and Rural Sector

– government subsidies required

– fee-for-service reimbursement increases utilisation without necessarily improving outcomes

– control over supply-side (eg fixed tariffs, package rates, gatekeepers) necessary to restrain cost

Loss-Making Group Business

– difficult to cross-subsidise large portfolio of loss-making business against other smaller portfolios

– temptation for top-line growth is ever-present

– turning a loss-making portfolio into a profitable one is extremely difficult


Slide 17

7. India and China – Comparisons and Lessons

Reimbursement with Fixed Tariffs

– price regulation on some healthcare costs drives providers towards services with less price regulation

– alignment of provider incentives to government objectives and patient outcomes is crucial

Balance between Acute and Preventative care

– acute and catastrophic care involves high costs and benefits relatively few people, but is where private insurance is most useful

– preventative and basic healthcare is unexciting, but often has a bigger impact on overall health objectives


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Medical Insurance in China How is it different from India?