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
Medical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010
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
2. Major Problems in Chinese Healthcare
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
Medical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010
Slide 5
2. Major Problems in Chinese Healthcare
Medical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010
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
2. Major Problems in Chinese Healthcare
Medical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010
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
3. Healthcare Reform in China
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
3. Healthcare Reform in China
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
4. Private Health Insurance in China
Medical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010
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
4. Private Health Insurance in China
Medical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010
70% individual business, 30% group business
Slide 11
4. Private Health Insurance in China
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
Medical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010
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
Medical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010
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
Medical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010
Slide 14
6. Health Insurance Product Development
Medical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010
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
Medical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010
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
Medical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010
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
Medical Insurance in ChinaGlobal Conference of ActuariesMumbai, February 2010