Health Insurers Challenged amid Medical Reform

Wider coverage of China's basic medical insurance system delivers a strong impact on commercial health insurance companies after implementation of the nation's new medical reform.

The development environment of health insurance, especially the commercial supplementary medical insurance, is changed and health insurance companies across the country thus are challenged in terms of operating ability. According to a report the Chongqing branch of the insurance industry regulator China Insurance Regulatory Commission (CIRC) unveiled on the development condition of supplementary medical insurance, an increasing number of people in the Chinese market are buying commercial supplementary medical insurance now and considering rising operating risk, the local insurance watchdog suggests related companies should conduct innovation.

Statistics show that Chongqing, the biggest municipality in China, integrated urban resident basic medical insurance and new-type rural cooperative medical insurance systems two years ago and as at the end of May 2010, the coverage of the integrated medical insurance system reached up to 92.5 percent.

Amid the fast expansion of commercial supplementary medical insurance, health insurance companies are challenged by operating ability. On the one hand, they lack empirical data. In line with the report, their empirical data is not well saved, which causes them to lack support in core aspects such as actuary and reinsurance. That is to say, their operations are of blindness, more or less. On the other hand, health insurers could not share information with one another, or with medical service providers and social security institutions due to certain regulatory and technical factors. Under such a situation, it is a tough job for health insurance companies to control and manage risk.

In the supplementary medical insurance business, about 50 percent of the premium is from the large-amount supplementary medical insurance and about 40 percent is from group medical insurance. In order to sharpen the competitive edge and capture more market share, some health insurance companies choose to lower the premium ratio or expand the insurance liability. Under such circumstance, social insurance institutions and group clients continue lowering premium ratio of such insurance via multi-party price inquiry, government bidding and so on.

In addition, these insurers are in shortage of professional talents. As for those problems, the CIRC Chongqing branch stressed in the report that health insurance companies should attach more importance to the infrastructure construction of the industry.