Swiss Re study cites solutions to China's healthcare challenge: proposes market solutions to ensure protection for 1.3 billion population
09 March 2007, China, Beijing
The world's leading reinsurer, Swiss Re, today published a report proposing a public-private partnership approach for the Chinese government's consideration in tackling healthcare financing for China's 1.3 billion people, more than 60% of whom have limited or no access to affordable health protection schemes.
The report, "Reforming Chinese healthcare through public-private partnership", is the result of a year-long study involving key Chinese policymakers, insurers, regulators and other stakeholders, as well as an investigation into various global systems and best practices. The study was conducted in response to an invitation by the China Insurance Regulatory Commission (CIRC) to undertake an independent review and recommendations of the nation's healthcare system.
Commenting on the report's findings, CIRC Assistant Chairman Mr Chen Wenhui said, "The Swiss Re study proposes some worthwhile strategies for our review of China's medical insurance system, in particular by highlighting the need for and role of a highly effective commercial health insurance market. Over the past few years, insurance companies have already launched many different commercial health insurance products tailored to the needs of the individual and corporate sectors, contributing constructively to the medical insurance system."
The report says that although some countries have pursued state-run systems in the past, private medical insurance is increasingly being emphasised as the alternative, emerging mode of healthcare financing worldwide. This change has posed numerous challenges to both governments and insurers, while at the same time creating opportunities to combine their resources and expertise to tackle the healthcare challenge.
Clarence Wong, Swiss Re's chief economist for Asia and an editor of the influential insurance industry journal sigma, said, "With no cohesive national schemes and little private medical insurance in place, China's healthcare insurance system can be viewed as a fresh canvas - on which policymakers stand an excellent chance of achieving sustainable success especially if they assimilate the lessons of the past and fully leverage the commercial sector."
The report proposes a "public-private partnership" in which commercial insurers can focus not only on developing the voluntary market that will supplement the statutory (required) coverage, but can also assist the government in administering its social insurance programmes. The report includes success stories featuring insurance companies which have already assisted a number of Chinese cities and local counties in nurturing and administering social schemes.
CIRC Assistant Chairman Mr Chen praised the public-private partnership concept as a tangible response to the State Council's 2006 paper, "Opinions on Insurance Industry Reform and Development".
Swiss Re's Head of Life, Health for China, Wil Chong, said a joint public-private approach was the most efficient and effective way forward in creating a sustainable health insurance industry in China.
Such a partnership, the report said, would embrace three key improvement principles:
- Firstly, China should develop a multi-level health insurance system that ranges from basic medical insurance coverage to the full spectrum of commercial market offerings, with clearly defined roles for each level. Such a structure would be consistent with the direction taken by most regimes around the world today.
- Secondly, the report calls for measures that would allow hospitals and patients to be part of the risk-sharing community, together with insurance carriers (both commercial and social), thus minimising unnecessary care and excessive claims.
- Thirdly, the government should leverage the private insurance industry's expertise, professional administration experience and commercial instincts to uplift the standard of industry practice throughout the entire medical insurance delivery chain.
The report further highlights a number of key challenges that lie ahead.
- Firstly, local authorities need to align with the original intent of the State Council's Urban Basic Medical Insurance Scheme, which was to focus local authorities on providing a consistent, basic level of coverage across the country, and for the commercial sector to create products to serve needs above that level. Currently, local authorities tend to offer insurance products that can be much more efficiently provided by the commercial market. This potential overlap between social health insurance and commercial insurance can significantly affect the effectiveness of the overall healthcare protection system.
- Secondly, healthcare spending is growing by an average of 13% a year in China (1). The current medical behaviours of patients as well as that of medical service providers are inconsistent with the goal of cost-effective healthcare, and are partly responsible for this escalation of medical expenditure. Any new system would need to tackle the incentives structure for medical service providers which has encouraged the over-prescribing that is endemic in China. Also, the employment of insurance deductibles or co-payment can have a positive effect in guiding patients' care seeking decisions.
In addition, standards and infrastructure within the whole medical insurance value chain should be reviewed with the aim of better facilitating the professional operation of medical insurance schemes, whether social or commercial. This can include encouraging data sharing among stakeholders and developing common platforms and protocols. The use of third party administrators (TPAs) to process insurance claims and increase administrative efficiencies, a practice that is in its infancy in China, should be considered given the benefits TPAs offer.
Above all, China should have as a long term vision the development of a comprehensive multi-level health insurance market that includes a basic level of affordable coverage as a social scheme available to everyone, and a voluntary supplement from the private insurance sector.
Mr Chong concluded, "Success requires the blessing of the Chinese Government and the full commitment of the private sector. The government should look to the private insurance sector for an efficient and effective partner which will work diligently to uplift the overall standard of the healthcare sector and contribute to attaining the goal of universal health protection. "
Footnotes: (1) Average annual growth 2000 to 2004
Notes to editors
Swiss Re is the world's leading and most diversified global reinsurer. The company operates through offices in more than 25 countries. Founded in Zurich, Switzerland, in 1863, Swiss Re offers financial services products that enable risk-taking essential to enterprise and progress. The company's traditional reinsurance products and related services for property and casualty, as well as the life and health business are complemented by insurance-based corporate finance solutions and supplementary services for comprehensive risk management. Swiss Re is rated "AA-" by Standard, Poor's, "Aa2" by Moody's and "A+" by A.M. Best.
Swiss Re has been associated with Asia since 1913 and now has more than 900 staff in Asia Pacific. The company has been present in China since 1995, and opened its branch in Beijing in 2003 to offer the full range of reinsurance products and services. Swiss Re's Asian headquarters are in Hong Kong.
In 2006, Swiss Re celebrated 50 years since opening its first offices in Asia Pacific.
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