Product Solutions
  • Articles
  • August 2021
  • 5 minutes

Health Insurance in China: Evolving Challenges and Solutions

Busy chinese commerical street
In Brief

China is committed to making quality healthcare affordable and accessible to its residents, however it faces substantial challenges. RGA's Dipali Jawalkar provides an overview of China's health infrastructure, technology's impact on insurance product innovation, and more.

Reprinted with permission of The Asia Insurance Review (AIR)

However, the great migration over the past 40+ years of half a billion poorer rural workers to urban areas in search of economic opportunity has generated sizable health infrastructure gaps as well as high and rising healthcare costs. These factors pose substantial challenges to China’s ongoing commitment to making quality healthcare both affordable and accessible to all of its citizens and residents.

The enormous population shift along with the rise of China’s middle class has driven increasing disparities in health infrastructure and manpower. The burgeoning middle class is pushing service expectations higher as well as demand for easily accessible high-quality medical services. However, the country’s medical infrastructure is still catching up with these demands.

The Current Landscape

Although China’s government provides facilities for different levels of care, people tend to seek their preventative, primary, and tertiary care from hospitals, where they believe they will receive a higher quality of care. This has unfortunately resulted in overburdened and short-staffed hospitals, long waiting periods for care, and limited ability for patients to see best-in-class specialists and access state-of-the-art technology and treatment. Other factors include high out-of-pocket co-pays, especially for complex procedures and medical devices, low reimbursement caps, and unsatisfactory service standards. In addition, despite insurance coverage, drug exclusions, especially for patented drugs, can create huge financial burdens for patients, as well as the potential for compromised treatment if they choose not to take on the drug costs.

China’s government as well as insurers have been identifying these gaps and challenges, and both are focused on building solutions. Already, private insurers are offering cost-sharing plans that can cover deductibles, co-payments, and other expenses, facilitating cashless payments and reducing high upfront out-of-pocket expenses.

The government has also sought to improve quality of care by instituting an accreditation framework for both general and specialty hospitals. Accreditation of these institutions is provided by local health authorities and focuses on resource and infrastructure; physicians are licensed by the hospitals in which they practice. This is improving day-to-day functioning of healthcare facilities and producing better clinical outcomes.

Meanwhile, private insurance companies, both local and multinational, have begun to work with hospitals to understand their operational procedures. The insurers are developing their own accreditation system, which highlights quality of service, and aim to gain insights into how hospitals function in China and the types of clinical outcomes produced. This has helped develop a panel of doctors and a group of hospitals working to facilitate cashless payments, thereby reducing the burden for out-of-pocket expenses upfront.

The State Council is also supporting plans to accredit hospitals in the proposed Greater Bay Area innovation hub, currently under development. Healthcare providers are also exploring managed or integrated health services, either through ownership or partnership. This would allow them to provide hassle-free cashless service, better service offerings, and cost management as a differentiator.

Technology-Enabled Innovation

China’s abundant digital infrastructure is enabling its insurers and healthcare stakeholders to utilize data technologies in innovative ways that may make healthcare processes more relevant and simpler, and able to be supported by insurance benefits.

COVID-19 restrictions on in-person healthcare services have increased acceptance of telehealth throughout China, expanding the use of internet hospitals, one of the newest digital healthcare innovations in this market. These hospitals provide an effective telemedicine service infrastructure for routine and chronic disease treatment that includes remote consultation, diagnosis, treatment, and health management. Patients needing follow-ups with primary care physicians or offline care are provided referrals, and e-pharmacy services are also available.

A great example of these internet hospitals is the Smart Field Hospital, which opened in Wuhan, China not long after the pandemic exploded. The hospital, a partnership of Wuhan Wuchang Hospital, China Mobile, and CloudMinds, a maker of cloud robotics systems in the U.S. and China, sought to make healthcare delivery more efficient, ease stress on overworked healthcare providers, and reduce infectivity risk. A March 2020 article published by CNBC detailed how technology was enabling safe healthcare at this facility: people entering the hospital were screened by 5G-connected thermometers to alert staff to anyone with a fever; smart bracelets and rings synced with CloudMinds’ artificial intelligence (AI) platform monitored vital signs; robots walked (or rolled) the halls, providing food, drink, medication, and even entertainment; and autonomous droids cleaned floors and sprayed the halls with disinfectant.

Chatbots are part of this matrix as well, enabling patient queries to be handled by bots and then routed to appropriate nurses or primary care providers in online clinics and hospitals.

Digital wellness and chronic disease management programs are also growing in availability and popularity, both publicly and through health insurance companies, which are utilizing these programs as differentiators. People want ease of access to the most up-to-date information about disease management, existing and new pharmaceuticals, and preventive care. These programs could have a lasting impact on improving overall health indicators and reducing costs.

Telehealth also has the potential to improve healthcare access by bringing previously unavailable services to more remote Chinese geographies. China’s rollout of 5G broadband in late 2019 is enabling healthcare consumers to more easily access specialist second opinions, whether in China or overseas, and may help manage costs as well. Corresponding telehealth coverage from insurers may allow private health insurance to further penetrate smaller, more remote cities.

These and other technology initiatives and solutions promise to help reduce the burden on China’s healthcare providers. They have the potential to return the focus of medicine in China to primary care, target specialized care needs more effectively, reduce the burden of primary care on tertiary care hospitals, and ultimately, bring healthcare costs down.

Next-Generation Products and Processes

Product innovations in healthcare could have major implications for insurers, especially for simple and small health insurance policies. Just-in-time healthcare products have emerged in the microinsurance space, such as cover for liver disorders for spectators during sports competitions or for the deleterious side effects of beauty treatments.  

Health platforms are also collaborating with diagnostic centers and other service platforms to accelerate product innovation and enable AI-powered trend analyses. Larger carriers in China are utilizing these platforms to test product innovations and find out which features have better uptake. This is reducing the time it takes to bring well-designed products to market. One possible product from such a collaboration could be cover for diagnosis and treatment of incidental findings (such as thyroid nodules) detected during routine screenings.

New technologies and data streams are also generating innovations in sales. Companies with access to multiple streams of data generated by shopping activities, pharmacies, diagnostic centers, mobile usage, and more, are able to track behaviors and use them to upsell or cross-sell products, subject to data law compliance. For example, purchases of child products could generate leads for children’s education policies.

The Chinese government has been driving adoption of electronic health records (EHRs), and adoption at hospitals sampled for a nationwide study is now at 85%. This is providing substantial opportunities for health data portability between doctors and institutions in different provinces and offering the potential for seamless health services among multiple providers. Data generated by EHR systems can also be harnessed for process efficiencies: platforms can analyze and connect data to provide current and longitudinal information about of a patient’s health status. This information can then be converted to health scores, which can simplify underwriting and policy issuance and enable higher covers and individualized pricing. At the same time, the information can verify disclosures, further simplifying the underwriting process.

Recently, a health insurance company utilized its digital network to introduce free health cover for a year. Data algorithms helped select the risks with predictable expenses by using only behavioral data and at the same time provided risk assessment using data analytics. The offering also included the option for people who opted for these policies to upgrade their coverage by providing health declarations. Product uptake was significant, especially among younger people. This is a good example of an insurance product impacting customer behavior by inculcating awareness of the value of insurance.

Technology is also driving innovation in claims processes. The range of technology-driven health claims services now includes information processing support to speed and simplify claims assessment and payment. Insurers are utilizing electronic health data and health scores to identify claims that might need investigation, thus reducing the time and cost for claims processing for those with better scores, and investigation itself is increasingly automated.

Massive adoption of digital technologies and the infrastructure to support them, along with easy data access, provide key differentiators for China that will significantly change the pace of health insurance innovation and likely consumer health outcomes.

More Like This...

Related Solutions

Meet the Authors & Experts

Jawalkar Dipali
Dipali Jawalkar
Executive Director, Underwriting, RGA Hong Kong