As the numbers enrolled in China’s basic state governed health insurance scheme continue to drop, the reforms initiated in the Huiminbao supplementary health cover appear to be a measure to stop the rot so that the dwindling numbers don’t impact this scheme as well. Asia Insurance Review takes a look at progress to date.
In January, China’s Life Insurance Supervision Department of the National Administration of Financial Regulation (NAFR) released its Notice on the Stable and Orderly Development of Huiminbao (Benefit the People Insurance) (Draft for Solicitation of Comment) for public consultation.
Huiminbao, which is a low-cost inclusive supplementary health insurance plan, was launched in Shenzhen in 2015 and over the last eight years it has seen explosive growth across the country particularly since early 2020 because of the COVID-19 pandemic and government encouragement.
The 2023 Huiminbao Knowledge Map shows that as of November 2023, a total of 622 Huiminbao products and iterative plans have been launched. Of this total, 284 plans were launched in 2023. Of the 284 plans, 211 are operating normally, accounting for 74.3% of the scheme’s business, whereas 73 have been withdrawn.
Estimates are that the total number of people with Huiminbao at present has exceeded 300m, three times more than the 101m covered to the end of 2021.
The party, however, may not last for long. Huiminbao is marketed as supplementary cover to the country’s government-run basic health insurance scheme and generally offers critical illness covers. It has only one condition, only those who are subscribers of the latter scheme are eligible to buy Huiminbao.
There are no restrictions on age, occupation or past medical history for a customer to buy the plan. The Huiminbao plans, supported by municipal governments, vary from city to city in terms of premiums and coverage limits.
Rate of growth slowing
A report by the Health Economics and Medical Security Research Centre of Nankai University and Beijing-headquartered medical insurance services company Yuanxin Huibao released in early 2023 said that the figure of almost 300m Huiminbao policyholders belies the fact that the growth in the total number of Huiminbao subscribers is gradually slowing.
The report Research Report on the Development Model of Huiminbao said in 2020, the total number of people who participated in such plans exceeded 40m. In 2021, the number jumped to 101.2m, representing a year-on-year increase of nearly 150%; while the number of insureds in 2022 was about 158m, with the year-on-year growth rate dropping to 56%.
The main problems with Huiminbao at present include adverse selection, low participation rates, limited sense of gain for insured persons and insufficient publicity. The average insurance participation rate for all Huiminbao products is 19.3%.
The Huiminbao reforms draft issued in January 2024 stipulates that the low-cost inclusive supplementary health insurance plan should be upheld as a voluntary form of insurance and should not be marketed as compulsory coverage or disguised as compulsory.
The NHSA draft also clarifies that Huiminbao should not be bundled or forced to be sold with basic medical insurance, nor should unreasonable operating constraints be imposed.
China’s basic state health insurance system is also gradually losing its appeal amongst Chinese citizens over the past year, with government bodies stating that rapid urbanisation and a shrinking population are the main causes.
China’s population decline accelerated in 2023 for the second year in succession as births fell to 9m and deaths rose to 11m, seeing the total population fall to 1.4bn. Analysts expect this trend to continue.
According to data released by China National Healthcare Security Administration (NHSA), the number of individuals enrolled in the basic medical insurance fell by over 25m to 983m. As the two, the basic health insurance cover and the Huiminbao cover are at present tied, if the numbers of one decreases, the other one is bound to be impacted.
The NHSA said this decline is due to an improvement in the quality of enrolment. This improvement followed the unification of the national medical insurance information system, leading to the removal of individuals who were enrolled multiple times and the transfer of some enrolees to employee medical insurance upon graduation or employment.
Officials also said with China’s advancing urbanisation and continuous development of an ageing and shrinking population, it is foreseeable that the number of people enrolled in the basic medical insurance will further decrease for a certain period, and even the total number of insured individuals might reduce.
Some policyholders of the basic government health insurance scheme may have genuinely opted out, perhaps believing medical insurance is unnecessary, too expensive, inadequate, or due to other considerations.
This trend is more common in rural areas where the annual premium has increased from CNY10 ($1.39) to CNY380 ($52.81), becoming a burden for some low-income rural residents. Moreover, the medical facilities and health services in rural areas are often insufficient, with low reimbursement rates and many treatments not covered by insurance.
According to an industry source the premiums for the state healthcare system have surged, with the minimum premium for the main policy more than doubling since 2018. Rural policyholders also face higher co-payment rates, sometimes between 50-70%, for treatments in urban hospitals equipped to handle severe illnesses.
The draft proposes that Huiminbao be market-oriented and government-guided, adhering to the principles of commercial insurance, with insurance companies responsible for their profits and losses from this branch of business.
The draft also states that Huiminbao should provide coverage for reasonable medical expenses outside the scope of the basic medical insurance scheme and include the elderly, customers with pre-existing conditions and new residents.
The draft says that all localities should strengthen overall planning and control over Huiminbao, which is generally established in cities. The number of Huiminbao plans in each city or region should not exceed one.
Huiminbao products should be designed for purchase by individuals and groups. They should be structured based on data from local basic medical insurance and critical illness insurance plans. The insurance period should be reasonably determined based on the protection needs of the people. Insurers are encouraged to design Huiminbao as long-term medical insurance plans with adjustable premium rates.
Amidst such rapid developments, the NAFR’s intention to improve regulations governing Huiminbao is seen as timely. The draft clarifies the functional positioning of Huiminbao, requiring providers to pay attention to overall planning for Huiminbao, standardise operations, improve supporting measures and working mechanisms, and strengthen supervision and management and Huiminbao should be promoted as a market-oriented and government-guided supplementary health insurance plan. A