Chinese Insurance: Who's Covered?

As of 2020, about 95% of the Chinese population has at least basic health insurance coverage. However, in 2022, 17.05 million fewer people were enrolled in the state-subsidized basic health insurance compared to 2021. This drop in enrollment can be attributed to steadily rising premiums, reduced benefits, and a failure of the insurance plan to address some major illnesses. Despite the high percentage of the population with health insurance, there are still disparities in the accessibility and quality of healthcare, particularly in rural areas.

The cost of health insurance in China

Public Healthcare System

China has established a national healthcare system that covers around 90% of its population. The system is funded by the government and offers basic coverage for the majority of native citizens and expats. However, coverage varies based on regional interpretations of national laws, and some areas may not require foreign residents to contribute to the local healthcare system, resulting in a lack of coverage.

In the public sector, healthcare is affordable but may be of poor quality, with long waiting times due to a lack of facilities and functionality. There is also a language barrier for non-Chinese speakers, although major hospitals have departments for foreigners. The cost of a consultation with a general practitioner in a public hospital is typically around 15 CNY for locals and 200 CNY for "VIP" (Western-style) service.

Employee Hospitalization Insurance

This type of insurance covers urban employees and retirees of state-owned enterprises and some private-sector businesses. It is managed by municipal governments, which form employee insurance pools to cover hospitalization and some outpatient expenses. Companies contribute an amount equal to up to 9.8% of an employee's salary, while employees do not contribute themselves. The cost of employee hospitalization insurance can vary depending on the region and the specific plan.

Residents Insurance

This type of insurance covers other urban residents who are not employed by state-owned enterprises or covered by employee hospitalization insurance. It is funded by the state and the individuals themselves. The cost of this insurance can vary depending on the region and the individual's income.

Private Health Insurance

Private health insurance in China can be expensive and confusing due to a lack of understanding of consumer needs and cooperation between hospitals and insurers. The average costs are rarely affordable for people with average wages. Private healthcare facilities are of excellent quality but are very costly. A consultation with a general practitioner in a private hospital can range from 200 to 1,200 CNY, depending on the emergency and the patient's condition.

Expat Health Insurance

Expatriates in China may choose to purchase international health insurance, which can cost an average of US $4,382 per year. Premiums can range from as low as $1,000 to over $10,000 per year for premium coverage. The cost depends on factors such as age, benefits package, plan design, and deductible selected. Expat health insurance is necessary due to the high cost of private medical care and the lack of adaptation of local health insurance to expats' healthcare habits.

Maternity Care

Maternity care costs vary significantly in China, depending on the type of delivery, region, hospital, and ward. Public hospitals typically charge between 2,000 and 10,000 CNY for maternity expenses, while private clinics can charge over 50,000 CNY on average.

Dental and Vision Care

Dental and vision care are better in private facilities, where staff speaks languages other than Chinese. These services can be expensive, so it is recommended to include coverage for these costs in insurance plans.

Overall Cost of Healthcare in China

The cost of healthcare in China is generally high and constantly increasing due to the privatized nature of the healthcare system. International insurers rank China in the top 10 most expensive countries for healthcare. While the major cities have satisfactory healthcare, there are risks related to air pollution and infectious diseases in some regions.

The impact of COVID-19 on health insurance coverage

The COVID-19 pandemic has had a notable impact on health insurance coverage in China. A survey of Chinese insurance agents by McKinsey revealed that while the overall economic sentiment in China was positive, the outlook for the insurance industry was complex, with some lines of insurance faring well and others suffering significant declines.

Health insurance in China experienced a boost during the pandemic, with a 17% growth in sales from the first quarter of 2019 to the first quarter of 2020. This increase in demand can be attributed to heightened awareness of health and mortality due to the pandemic. According to a study by Xianhang Qian, there is a positive correlation between the number of confirmed COVID-19 cases and per capita insurance revenue. The study found that each additional confirmed case resulted in a per capita insurance revenue increase of 0.896 yuan.

However, the pandemic also brought challenges for the insurance industry. A survey of 210 agents across different lines of insurance revealed that two-thirds experienced a decline in business performance during the pandemic. There was also an increase in policy cancellations, with more than 40% of agents reporting an increase, and many agents expressed concerns about achieving their key performance indicators (KPIs) due to the increased time spent on sales and customer contact.

The pandemic accelerated the adoption of digital tools and platforms in the insurance industry, with over 60% of agents interacting more with customers via phone, WeChat, and video calls. This shift towards digitalisation is expected to bring permanent changes to the industry, with agents and customers becoming more comfortable with digital channels.

Overall, while the COVID-19 pandemic had a mixed impact on the insurance industry in China, it highlighted the importance of health insurance and increased awareness among the population, which is expected to have lasting effects on insurance demand and coverage.

The role of the Chinese government in health insurance

The Chinese government has played a significant role in the development and reform of the country's health insurance system. Since the establishment of the People's Republic of China in 1949, the country's health care system has undergone several transformations, with the government often taking the lead.

The Central Planning Era (1949-1978)

During this period, the Chinese economy was governed by a command and control model, and both health insurance and healthcare delivery systems were under direct government control. Health insurance schemes were determined based on people's working status and residence. In urban areas, the Government Insurance Scheme (GIS) covered government officials and staff, while the Labor Insurance Scheme (LIS) covered employees at state-owned enterprises. In rural areas, the Cooperative Medical Scheme (CMS) covered much of the population. All these programs were government-based, and no private insurance was available.

The Market-Based Era (1978-2002)

In 1978, China implemented economic reforms, and the healthcare system shifted to a market-based system. This led to a decline in public expenditures and undermined the public health and healthcare systems. The breakup of communes resulted in a lack of funding, causing an almost total collapse of the CMS in rural areas. Many state-owned enterprises faced financial difficulties, leading to a loss of insurance coverage for their employees. Private health insurance was introduced during this period, but its development was limited.

The Healthcare Reform Era (2003 to the present)

The current era of healthcare reform in China began in 2003, triggered by the severe acute respiratory syndrome (SARS) outbreak and increasing social discontent about the accessibility and affordability of medical care. The Chinese government implemented a series of healthcare reforms with a focus on building an insurance system with universal coverage. As a result, public medical expenditure increased, and several insurance programs were launched, leading to a significant drop in the uninsured rate.

Current Healthcare System

Today, China maintains a multi-level medical security system, with basic medical insurance as the pillar and medical aid as backup. The basic medical insurance system serves two groups: employees and residents. Employees are enrolled in the Employee Basic Medical Insurance (EBMI) program, while non-working residents are covered by the Residents Basic Medical Insurance (RBMI) program. As of September 2020, more than 1.35 billion people (over 95% of China's population) are covered by one of these programs, making it the world's largest healthcare security network.

The Chinese government continues to play an active role in healthcare reform, aiming to improve the system and ensure that all citizens have fair access to basic medical services.

The different types of health insurance in China

China has a multi-level social health insurance system, which includes basic medical insurance, commercial medical insurance, and medical charity aid. The basic medical insurance system is further divided into two systems: employee medical insurance and resident medical insurance.

Employee Medical Insurance

Employee medical insurance covers the urban-employed population, including retirees from state-owned enterprises and current employees of some private-sector businesses. It is considered the better option of the two basic medical insurance systems and is used by about a quarter of the country's population.

Municipal governments typically manage employee medical insurance, forming insurance pools to cover hospitalization and some outpatient expenses. Companies contribute to these pools, usually an amount equal to about 9.8% of an employee's salary, while employees themselves do not contribute.

Resident Medical Insurance

Resident medical insurance covers the urban non-employed population and the rural population. About 75% of those covered by basic medical insurance are on this plan.

Commercial Medical Insurance

Commercial health insurance is also an option in China and has been growing in recent years. In 2020, the country's commercial health insurance premium income amounted to 817.3 billion yuan, with an average annual growth rate of 20%.

Medical Charity Aid

Medical charity aid is also available in China, providing another option for those who cannot afford medical care.

Private Health Insurance for Expats

Expats in China often opt for private health insurance, as public healthcare is generally mediocre and not very comprehensive. Private insurance allows them access to private hospitals, which are generally only found in major metropolitan areas but offer higher standards of treatment and staff who usually speak English.

Public Healthcare for Expats

Public healthcare in China is not commonly used by expats due to long wait times and language barriers. However, some public hospitals in major cities have established international wings, also known as VIP wards, which bridge the gap between public and private healthcare. These wards are more expensive than regular public wards but still cheaper than private hospitals, and they offer treatment that tends to be of a higher standard.

The extent of health insurance coverage in China

Health insurance coverage in China is extensive, with about 95% of the population having at least basic health insurance. This includes both public and private insurance programs. However, there are inconsistencies in the quality of healthcare and insurance coverage between major cities and rural areas, with the former providing exceptional care.

The Chinese healthcare system has two main types of health insurance: employee hospitalization insurance and residents insurance. Employee hospitalization insurance is the more comprehensive of the two and covers a quarter of the population, including urban employees and retirees of state-owned enterprises, as well as current employees of some private-sector businesses. On the other hand, residents insurance covers the remaining three-quarters of the population, including the urban non-employed population and the rural population.

While the majority of Chinese adults have some form of health insurance, the level of coverage varies. A study from 2018 showed that only 15.33% had high-coverage insurance, 16.70% had moderate-coverage insurance, and 64.82% had low-coverage insurance. This indicates that a large proportion of the population may still face financial barriers to accessing healthcare.

The Chinese government has made efforts to improve health insurance coverage and reduce disparities. In 2005, they implemented the New Rural Cooperative Medical Care System (NRCMCS), providing basic medical coverage to about 800 million rural residents. They have also expanded maternity insurance coverage, with 235.67 million people insured under this scheme by the end of 2020.

Despite these improvements, challenges remain. There is an insufficient medical insurance fund, non-uniform insurance reimbursement policies, and a lack of supervision in the management of the medical insurance fund. The distribution of medical resources is uneven, with high-quality resources concentrated in large and medium-sized cities. Additionally, the "hukou" system, China's household registration system, ties people's health insurance policies to their place of birth rather than their current residence, which can leave migrant workers without coverage.

Frequently asked questions