Oct 2020

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China's health insurance: A blue ocean strategy?

Source: Asia Insurance Review | Oct 2019

China’s health insurance market is highly competitive and the battle for market share is as intense as ever. The good thing is that market participants in China have never stopped looking for answers and trying out new and innovative business models.  
By Vincent Liu Liang
In May this year, the Chinese National Health Commission issued a report stating that there are currently 158 ‘internet hospitals’ nationwide – a system that has been developing well in recent years. 
In China, more and more hospitals have obtained internet medical licenses. Major provinces and cities are actively launching new internet hospital outlets, whereby patients can easily log into the hospital’s WeChat official account or app for a video consultation. 
How it works is that a doctor can issue a prescription immediately, a professional pharmacist audits it online and the pharmacy quickly delivers the drugs to the patient’s home. The patient can also check the screening report and obtain an electronic invoice over the internet.
Nowadays, more and more internet medical companies are seeking breakthroughs in the payment sector and further cooperation with insurance companies. Private insurance is seen as the ultimate goal of the internet hospital business model.
China’s ‘internet medical service-insurance’ concept is largely inspired by the Caesar model in the US. However the US is a country dominated by commercial insurance, and it covers over 40% of the country’s total medical expenditures. In contrast, China’s private health insurance covers for only 1.4% of total medical expenses, and the rest is covered by basic medical insurance (referred to as Yi Bao). 
Why, then, do internet medical companies still have opportunities? In the view of WeDoctor (WeiYi) chairman and CEO Liao Jieyuan, this is mainly because the existing Yi Bao model in China is incomplete. WeDoctor, China’s first internet hospital, was launched in Wuzhen, Zhejiang in 2015 as a response to the government’s call for more sustainable and accessible medical service to the public.
The Caesar model not only works in concert with the hospital, but also signs a contract with the doctor’s group to determine the price of the medical service, and allocates a certain percentage of the premium to doctors. The insured would then receive the service from the contracted doctor. 
“This model represents value for the doctor community”, said Mr Liao. In this sense, internet hospitals can provide a larger role for the doctor community, and the competitive advantage of commercial insurance is also realised.
Insurers get in on the act
At the same time, with the growing popularity of internet medical services, traditional insurance companies have begun to explore a similar route. For example, Taikang Life teamed up with WeDoctor’s (an online medical service platform) to launch a special protection plan. In the future, commercial insurance paying to internet hospitals directly is expected to become a major trend.
China’s first online-only insurance company, ZhongAn obtained an internet hospital license in July this year. The internet hospital will function more like a bridge to connect patients to resources like hospitals, pharmacies and insurance companies. Users will enjoy a more convenient, one-stop service within the ecology stem, the Shanghai-based company said. They have created a win-win situation to encourage doctors to be more active online in serving patients. 
More specifically, ZhongAn will endeavor to pay claims directly to medical institutions and cooperative pharmacies, thus saving policyholders the hassle of making advance payments for their medical treatment, according to Medical Cooperation and Development senior director Zhao Yi.
“We have focused on chronic diseases first, and hope to analyse the customer’s medical health data through the health management system to serve them better. We use this as a breakthrough point, develop a thorough understanding of a certain disease, and then build a model of insuranc-health management-drug management” said Mr. Zhao.
Overcoming challenges
He said there are three major challenges which internet hospitals are facing in China:
  1. Licensed internet hospitals currently cannot be connected to the Yi Bao system. The country is still exploring ways to harmonise the Yi Bao system with internet hospitals, although Mr Zhao believes this problem will be solved sooner or later. 
  2. Internet hospitals still need to cooperate and develop relationships with traditional hospitals. The nature of the medical industry means that it cannot be completely separated from the offline physical medical institutions. As most health screenings still need to be conducted offline, the focus is on improving coordination with offline traditional medical institutions.
  3. There are a lot of internet medical companies established in China, but there are very few models that can achieve sustainable profitability. “We are still seeking a better model that suits us” he said.
Life insurers invests in hospitals
Meanwhile, life insurer Qianhai Life was one of the first insurance companies in China to have invested and built hospitals in China. Some within the industry believe that the trend of establishing hospitals will play a subtle role in promoting the development of the insurance industry, and ultimately achieve competitiveness in the aspects of medical cost control, product development, risk pricing, protection of consumer rights, and enrichment of insurance services. 
A market insider pointed out: “Repetitive treatment and over-treatment not only plague patients, but also insurance companies. With the increasing awareness of insurance among ordinary people, insurers will increasingly bear higher medical expenses. 
“Finding the most suitable experts, and using the most effective way to cure diseases is in the common interest of the insurance company and the patient. It also helps the insurance company to improve its risk management and control capabilities, reduce unreasonable claims, and promote the further development of medical insurance.”
The first nursing home invested by Qianhai Life, called the ‘Happy Home’ opened in August 2018. The nursing home is located in the central area of Baoan, Shenzhen. Qianhai Life has also promoted the construction of hospitals and nursing homes in other cities and provinces such Guangdong, Xi’an, Nanning, Chengdu and Hainan. All of the hospitals are equipped with nursing homes, which is meant to ensure that the elderly can get convenient and professional medical services.
The ‘insurance-medical care-pension’ system has gradually become a working business model for Qianhai Life.
Working with hospitals to launch CI products
On 27 June, China Life launched a new product that ensures cancer patients receive treatment directly from Mayo Clinic (Que Zhen Bao). This is a health insurance product launched in cooperation with a world renowned medical institution.
According to China Life, this is the first medical insurance in China that focuses on accurate diagnosis of cancer. Patients diagnosed will receive a treatment plan by Mayo’s experts, thus ensuring that treatment is administered fast.
During the period, the product will provide patients with a full range of services including remote consultation, Mayo Clinic express appointment making, itinerary arrangement, direct payment, and unlimited follow up sessions at Mayo. 
Four highlights of the Que Zhen Bao innovation:
  1. The first product ever in China, focusing on accurate diagnosis of cancer; 
  2. Get insured for several hundred yuan only, providing full-process support and direct compensation services, no need to pay any advance payment; 
  3. Directly connect with the world’s top experts, explore the advantages of its multidisciplinary diagnosis and treatment model, and provide top-level medical services to Chinese customers.
  4. One-stop all-inclusive service, medical treatment, flight ticket and hotel, family accompanying expenses, etc., are all fully covered.
In a survey conducted in China, 50% of those polled would seek treatment overseas for major diseases should cost not be a factor. Hence, treatment in places like the US still has great appeal to Chinese patients, especially for serious ailments such as cancer.
With overseas medical fraud incidents making the news from time to time, a large number of patients need assistance in completing overseas medical treatment through professional channels. Que Zhen Bao under the cooperation of China Life and Mayo Clinic seeks to address this problem. A 
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