China's private health-insurance industry revenue almost doubled in the January–July period and an increasing number of domestic firms are planning to enter the market, according to Bloomberg, citing data from the China Insurance Regulatory Commission (CIRC).
Implications | According to the CIRC, premium income from private health-insurance firms surged by 94% during the first seven months of 2016, compared with growth of 52% last year. |
Outlook | Rising demand for private health insurance is expected to lead to greater uptake of pharmaceutical treatments for chronic diseases in China, with multinational health insurers also expected to benefit from increasing incentives to enter the market. |
Growth was primarily driven by the Chinese government's policy incentives, as well as the increasing prevalence of chronic diseases among the country's rapidly ageing population, such as cancer, diabetes, and cardiovascular disease.
In addition, data from the China Insurance Regulatory Commission (CIRC) coincide with a forecast by German reinsurer Munich Re that, on average, China's private health-insurance market will grow by 35–40% annually to CNY1.1 trillion (USD160 billion) by 2020, compared with CNY241 billion in 2015. According to the forecast, growth will be driven by the middle classes' dissatisfaction with public healthcare (see China: 26 August 2016: China's private health insurance forecast to grow to USD167 bil. by 2020). In addition, BCG said that in 2015, private health insurance made up approximately only 7% of personal health spending in China.
China's overburdened public health system, and the slow pace of healthcare reform, have led to increasing government incentives for private companies to enter the private health-insurance industry. These include a trial reform covering 31 pilot cities, in which authorities offered an exemption on income-tax-insurance premium payments (capped at CNY 2,400 per year).
Several Chinese firms are expected to enter the domestic health-insurance market, with at least 29 listed domestic companies since last year publicly outlining this strategy according to Bloomberg, citing a report by VC Beat as well as corporate statements.
Chinese companies planning to enter the health insurance space include Kangmei Pharmaceutical; Meinian Onehealth Healthcare; property developer Suning Universal; and online games developer Dalian Zeus Entertainment Group.
In addition, Alibaba Health Information Technology (AliHealth, China) has already stated plans to establish a joint venture (JV) with China Taiping Insurance (among other partners) for online health-insurance-related projects. AliHealth's China Healthcare and Drug Pioneer Alliance had planned to overhaul China's drug retail system, as well as integrate several healthcare-related functions including health insurance programmes (see China: 2 June 2016: Chinese e-commerce firm Alibaba orders pharmaceutical retailers to halt sales after official intervention); however, foreign companies attempting to enter China's health insurance space are required to form joint ventures with local partners.
Outlook and implications
Looking ahead, rising demand for private health insurance is expected to lead to greater uptake of pharmaceutical treatments for chronic diseases, particularly as the incidence of such diseases rises. However, multinational insurers are expected to continue to face red tape as they attempt to expand, though Chinese authorities are also expected to make the regulations less onerous.
Several fundamental factors are expected to further encourage the rapid growth of private health insurance in China. First, despite the rapid pace of healthcare reform, public dissatisfaction with state hospitals remains high, due to overcrowded conditions, persistently high medicine and medical-service prices, and complaints over staff attitudes that have even resulted in violence. Partly fuelling this dissatisfaction is high public mistrust after a series of high-profile healthcare scandals that have highlighted the need for greater government oversight (see China: 15 July 2016: Despite scandal, illegal immuno-therapies still found at Chinese military-operated hospitals, and China: 23 March 2016: China arrests 37 as fake-vaccine scandal draws national outrage). The middle classes are the most likely to be able to afford private health-insurance premiums, and are expected to contribute the most to the sector's growth.
Second, despite China's expansion of universal healthcare to virtually the entire population, coverage remains shallow. In addition, more time will be required before the overlapping layers of the Urban Resident Basic Medical Insurance (URBMI) and the New Rural Cooperative Medical Scheme (NCRMS) can be fully merged in all provinces; for instance, in several provinces some treatments are currently reimbursed for rural residents, but not for urban residents. Further, despite the recent introduction of the critical-illness insurance system (da bing bao xian), many costly drugs for chronic diseases are still not covered.