Globally, medical insurance premium rates are rising. This is forcing employers to take a greater strategic role in shaping the healthcare market. This is particularly true in China, which has the largest population ever to have universal health insurance.
China’s remarkable achievement is made even more remarkable by the rarity of universal coverage for health insurance in emerging economies. While health insurance for foreigners in China success is an example for other nations looking to emulate it, studies show that the limitations of public care in a world with rising medical costs cannot be overlooked.
China saw increases in both outpatient and inpatient medical trend rates in just one year. The average annual increase in medical costs is 10 percent, which is more than four times that of inflation at local consumer prices (2.4%). These changing needs are not being met by the Chinese government’s medical insurance. Employees have to look for supplemental insurance to protect themselves from the risks of copayments, deductibles, and coverage limits.
Chinese employers are increasing their investment in employee commercial insurance to offset the increased operating costs and employee purchasing power, as well as gaps in public care. China’s market for commercial healthcare insurance has grown at a rate of 25 percent annually since 2000. China now has more than 100 insurance companies that offer commercial healthcare products. This number is increasing. Employers can take advantage of cost-saving opportunities and influence the healthcare market through commercial insurance.
Mercer’s 2017 Medical Trends Around the World Survey and our client partnerships in China in the cities Beijing, Dalian Guangzhou Shanghai and Shenzhen indicate that there are three key elements driving the rise in the cost of healthcare in China. These factors also influence commercial insurance strategies.
A Changing Workforce
China is the fourth fastest-aging country in the world. According to the United Nations, more than 27 percent of the world’s population will be 65 years old or older by 2050. Employers in China are looking for ways to reduce the health risks associated with aging populations. These include centers of excellence, evidence-based benefits design and second medical opinions. Employers are also analysing their workforce and offering targeted healthcare plans based on the health profile of their employees. Chinese employers have created a culture of health and incentives to improve the health and well-being of their workers and reduce the demand for medical care from aging people.
The World Economic Forum predicts that by 2022, health spending in growth economies will reach $4 trillion. This is an estimated 10.7 percent increase in health expenditures per year, compared to 3.7 percent in developed countries. This projection is combined with China’s inefficient healthcare system, and you have the perfect recipe to create new opportunities throughout the healthcare value chain. China is seeing the rise of digital healthcare services such as online doctor consultations and prescription delivery. Two important things are being achieved by this digital transformation. It’s giving Chinese employers the opportunity to offer more “higher-end” benefits to their employees. It’s also creating multi-billion-dollar business opportunities for technology companies.
Although new technologies may offer better treatment options, many Chinese employers face difficulties in assessing their value given the higher price. Many Chinese employers now turn to commercial insurances to help them leverage data and technology to improve design and integration of resources.
Increased Medical Claims
Cancer is the most expensive inpatient claim across Asia. Outpatient data shows that gastrointestinal conditions are second most expensive claims, closely followed by respiratory diseases. Mercer’s survey shows that employers are purchasing commercial medical insurance to ensure employees have access to second opinions, and centers of excellence to provide better outcomes.