Aug

29

The Health Insurance Market In China, And The Challenges It Faces.

Filed Under China insurance, Expat Insurance, Health Insurance, Healthcare, International Healthcare, Medical Insurance | 2 Comments

“Since the country’s embrace of the reform and opening-up policy, the development of China’s insurance industry has held the attention of the world,” said the China Insurance Regulatory Commission in 2006. China is indeed a huge and promising market for health insurance. But how does health insurance in China actually work?

The vast majority of Chinese people don’t have health insurance, or for that matter, access to affordable good quality healthcare. If this seems somewhat odd in a nominally socialist state, it is because it was not always the case. Mao Zedong set up a countryside healthcare system after taking power, based around agricultural communes, which brought life-long government subsidized health care to 90% of China’s population, raising life expectancy and reducing infant mortality. However, with the gradual dismantlement of commune-based agriculture under the auspices of Deng Xiaoping, the rural healthcare system which was linked to the communes fell apart, subsidies stopped flowing, and hospitals were privatised. By 1985, only 9.5% of the rural population was still covered by the medical cooperative system. The rapid economic growth of China’s cities has resulted in a situation where, while around 900 million of the population live there, only a third of health professionals work in the countryside. The government’s healthcare spending has risen overall, but has been falling as a percentage of the budget for more than a decade, and in any case, 80% of the healthcare budget is spent on government officials.

This worrying situation looks like it may be set to change, as Premier Wen Jiabao recently announced a new national health-insurance program, to be piloted in cities to start with and scheduled to be extended to the rest of the country by 2010. The government already tried to introduce cooperative medical insurance for people in the countryside in 2003, without huge success. While the situation in cities is naturally better than in the countryside, the World Bank estimated in 2005 that fewer than 60% of China’s urban residents had health insurance (still a lot more than in the countryside). Employed urban residents are the only ones allowed to participate in the national health insurance program, which excludes migrant workers (though there are some schemes theoretically supposed to help this group of people, of whom there are more than 110 million), and the unemployed.

However, of the 400 million people living in Chinese cities, and the 900 million or so in the countryside, the small proportion for whom private medical insurance is even remotely feasible still amounts to a huge number of people, and a huge potential market, and until some sort of comprehensive state health coverage is introduced, private medical insurance is set to become more and more popular with the rising numbers of middle and upper class Chinese.

The opportunities for Chinese and foreign insurance companies in the country have recently been greatly opened up. Insurance in China is still a young industry, only re-emerging, after a long hiatus, in 1984. AIG, founded in Shanghai in 1919, was the first foreign insurer to operate in China after it reopened, returning to Shanghai in 1992. Foreign insurance companies were encouraged to bring money and expertise to China, but were greatly restricted in how they could operate, resulting in mostly joint-ventures, and were not allowed to sell health insurance. Companies usually had to have a representative office in the country for many years before they were actually allowed to do business in their own right, and this is still the first step for a foreign firm setting up in China. It is still technically illegal for companies without a license to operate in China to sell insurance to Chinese clients, and until 2005 companies with a licence were limited to operating only in certain Chinese cities such as Beijing, Shanghai, Guangzhou and Tianjin.

Not until 2005 were geographical restrictions lifted, and companies were allowed to sell health insurance, group insurance, and pensions/annuities, as part of changes to put China in accordance with the conditions of its accession to the WTO. This and other reforms have made the market much more open to foreign insurers, who had a 6.9% share of the overall insurance market in 2005. On the other hand, there are still restrictions in place on entering the market, such as having to have 20 years continuous experience in the insurance business.

Experience is however usually what sets foreign insurers apart from the Chinese companies. Most health insurance policies in China are naturally provided by Chinese companies, but these have also been subject to a great many restrictions, for example on their investment options, though these are gradually being eased, for example allowing them to invest in real estate, and abroad. As many of the big Chinese insurers are still government run or owned, they have some way to go in terms of efficient management, and though companies like Ping An appointed executives experienced with global firms, helping them to take the second largest share of the market, Chinese insurers face a risk that global firms moving to China will headhunt their best people for their understanding of the Chinese market and regulations. Also, foreign insurers, with their greater insurance experience, professional standards, freedom from association with government bureacracy, and usually sounder investment strategies, may appear safer and more reliable to Chinese customers. This has resulted in a significant practice of Chinese people buying (or being sold) life insurance or health insurance policies illegally from foreign companies offering products considered better than those available within China.

The ball is rolling, and the requirements of WTO membership and the opening up of the Chinese insurance market, both legally and illegally, are causing the government to have to constantly reevaluate its regulations about insurance; the need to allow Chinese insurers to be as competitive as possible, both in the home market, where they have a head-start, and abroad, means that they are likely to be given more leeway in terms of how they invest, how they are run, and what kind of products they can offer, but in the meantime global insurance companies have a window of opportunity, which they are seizing. Hopefully, amid all this excitement, the government will remember to do something for the many millions of people that cannot afford health insurance in China.

Aug

27

A few reasons for the cost of healthcare in the US- and will they be addressed?

Filed Under Health Insurance, Healthcare, Medical Insurance, USA Health Insurance | Leave a Comment

With the US presidential election around the corner, one of the issues getting the most media attention is the candidates’ differing stances on healthcare. Everyone agrees that something needs to be done about the rising costs of healthcare in the US to the federal and state government and to private individuals; the question is: ‘what?’. But to answer this question, we need to know why costs are rising in the first place.

Part of the reason is the large numbers of different groups trying to make money out of the system. Pharmaceutical companies, hospitals, insurers; unfortunately, altruism is not always the primary motivation, and as with any detective investigation, the question we should ask ourselves is ‘cui bono?’- or ‘show me the money!’.

Hospitals in the States and elsewhere, especially with the rise of medical tourism, will often try and sell themselves to prospective patients by advertising their latest equipment or more advanced surgical techniques. Sometimes a hospital will buy a machine, such as a CT scanner, for this very reason, but in any case, once it is bought, the hospital will want to make sure it is used, even if it is expensive, unnecessary for a particular patient, or even dangerous (for example, CT scanners subject patients to radiation equivalent to that of hundreds of x-rays) – not least because of the amounts they can bill. A CT scan often leads to additional precautionary treatment- increasing costs even more. Insured patients will often want the peace of mind that new technology can bring- it may have attracted them to the hospital in the first place- and insurers may end up footing the bill, much as they try to avoid paying for unnecessary treatment. Insurers may sometimes try to avoid such costs, but only at the risk of legal challenges and their reputation in a competitive market, especially when they get it wrong.

State and federal medical programs such as Medicare and Medicaid have more difficulty when they want to exclude certain procedures from their coverage on utilitarian grounds, and are often under pressure to include more procedures. Unlike in many countries, cost-benefit analysis is not so rigorously applied in the US- for example, the The Food & Drug Administration is forbidden by law from taking cost into account when considering the approval of a new device or drug.

Drugs are another reason for the high cost of US healthcare. Other governments which run universal state healthcare systems put limits on how much they will pay for drugs, and some say that this actually pushes up the price of drugs in the States.

On the other hand, Professor Sir Michael Rawlins says that other countries are having to pay for the marketing cost of drugs in the US, which he estimates at about twice the amount spent on actual research and development- the pharmaceutical representatives who make sure their companies’ products are used in hospitals and by doctors, a privilege companies will pay for – and advertising directed at potential patients, which is forbidden in many other countries. If this is the case, it is unlikely that marketing costs will go down any time soon, as big pharmaceuticals see the patents on their money-making drugs expire and face competition from ‘generics’.

Pushing unnecessary, inappropriate and expensive drugs might not happen if cost-benefit analysis was more carefully applied to new products and techniques. As it is, physicians face pressure from drug managers who try and keep costs down for hospitals and on behalf of insurance companies. These competing forces mean a doctor might be under pressure both to promote expensive drugs and procedures and at the same time not to approve these for insurance purposes.

The questions that all this has created about the validity of being able to trust your doctor to make an unbiased prescription of the most appropriate drug, and the direct marketing of many alternative brands of drugs to patients, has created a feeling that for determined individuals the right drug is out there if they are willing to put in independent efforts to find it, and the idea that the cost will primarily devolve upon the individual may create a sense of entitlement to the newest treatments, even if they are untested and have a slim chance of success. There is even debate about whether this atmosphere may prejudice clinical trials.

It is very likely that this all inclusive approach to drugs and medical techniques has pushed up the cost of healthcare in the US without proportional benefits to life expectancy and child mortality

How can this be changed? The pharmaceutical lobby is likely to use the threat of a drop in profits due to generics taking over many of their markets to try and influence any new health-care system, and it will be hard for any government to limit drug costs unless they are simply brought down by market competition, in which case there is still the possibility that they will have to include newer and more expensive treatments in healthcare cover. The existing systems federal and state medical provision such as Medicare have been leaking money recently, because of the involvement of subsidized private intermediary plans, and well publicized incidences of paying for fraudulent and improper claims. Congress recently overrode a presidential veto which would have reduced Medicare payments for doctors; the president had justified his veto partly on the grounds that bill would “perpetuate wasteful overpayments to medical equipment suppliers.” The existing state provision appears to be wasteful and inefficient, so while everyone agrees it needs to be changed it may be harder to appear to advocate more state spending, even if it would save money. While it would seem that socialized medicine would reduce overall individual insurance costs by virtue of healthy young people’s payments subsidizing risk prone older individuals, there is a good deal of disagreement on the subject, not least because of the element of ‘Socialism’ involved.

There are many myths about the reasons for the cost of American health care- Mark Gimein in Slate points out that too much blame cannot be put on private insurers, whose profits only make up a small percentage of total healthcare costs. The popularity and promotion of expensive medical techniques and drugs must surely play a large role, and will have to be taken into account and checked more aggressively if any more universal system of health care is to be introduced in the US.

Aug

13

Health Insurance Reforms Abound

Filed Under Expat Insurance, Health Insurance, Healthcare, International Healthcare, UAE Insurance | Leave a Comment


It seems that in the current climate of medical inflation many countries around the world are growing increasingly concerned with the ability of visitors to use, and perhaps even abuse, the medical facilities and hospitals in their destination. One of the first places in the world to institute restrictions on visitors receiving medical treatment was Hong Kong when the government created a policy requiring pregnant mainland Chinese women to have a hospital booking before being allowed into the city. Its evolved into such an issue that now the HKSAR government has stated that they are banning Pregnant Mainland women from even booking hospital beds from September through December of this year. Hong Kong is not the only city to impose restrictions on visitors for medical grounds, the City of Dubai in the United Arab Emirates is also instituting visitor reforms; however in this case, Dubai is more concerned about insurance.

Any visitor wishing to enter Dubai must have a visa, even if the length of their stay is less than 24 hours and under current Dubai immigration practices there are 16 categories of visa, ranging from visitor, to resident. However, with new legislation announced on Tuesday August 12th, any individual who obtains a Dubai visa must also obtain health insurance, which will need to provide an ‘adequate’ length of coverage for the entire stay. The Government of Dubai consulted with a number of insurance organizations within the emirate and picked to companies to offer their services through the immigration counters at the airport.

These mandatory plans for visitors will include coverage at medical facilities within the insurer’s network, accidents and emergencies, and the repatriation of mortal remains in the event of death. These policies will not cover, however, any medical treatment occurring outside of the hospital network except in the event of a life threatening situation, maternity related treatment, chronic conditions or illnesses, or any eye or dental treatment.

Essentially this reform could be viewed as an attempt by Dubai to exploit a captive market (any and all visitors to the country) into purchasing a product and stimulating the economy as soon as they arrive in the country. However, looking at the fine print this is not the case at all. Individuals traveling to Dubai who are in possession of an International Health Insurance policy are exempt from the requirement to purchase a local health insurance plan when they arrive in the emirate.  

The obvious question here is why? Its quite simple really. The government of Dubai is very obviously concerned about foreigners entering the country, having an accident, and then – either due to the type of insurance that they possess in their home nation, or the fact that they simply don’t have insurance coverage – not being able to pay for their treatment. Recognizing that International Health Insurance plans offer some of the best medical coverage in the world, and that they allow a policyholder to use the hospital or doctor of their choice, meant that the only foreigners with whom the government didn’t have to worry were those who were in possession of this type of policy.

In an age where medical inflation is becoming a global issue, where hospital overcrowding is not just a ‘poor nation’ problem, and where an inability to afford medical is the number one cause for personal bankruptcy in the USA, we may see this type of ‘automatic’ protection legislation being passed in other nations. Even at a time when places like Thailand, Singapore, and India are relaxing entry requirements on medical tourists other nations are imposing higher restrictions; and quite honestly it may be time to start worrying.

That is, unless you have an international health insurance policy….