TREATMENT COSTS CAUSE CONCERNS IN CHINA

A lack of control by private health insurers in China is causing concern that the state’s attempt to promote private provision is being hampered by an inability to make profits from health cover, according to a recent report from management consultancy McKinsey. Although sales of health insurance in China have risen at an average of 43% a year for the past six years, with premiums reaching 31.23bn yuan in 2005, health insurers are finding it hard to make a profit. A major cause is that they have no say in what hospitals patients are treated and few restrictions on the cost of medication provided. McKinsey noted that up to 70% of “health” policies in China were so-called “critical disease” products — effectively life products on which a payment can be paid before the policyholder dies. McKinsey also noted that nearly all products were either lump-sum payments when an illness was contracted, regardless of whether the policyholder sought private treatment, or full indemnity policies, under which the policy seller had little to no control on the cost or type of treatment. Managed care plans are currently not possible in China because insurers cannot invest in non-insurance businesses, which prevents them from backing healthcare operations. However, McKinsey observed that four new dedicated healthcare insurers had started last year, indicating that the market was expanding, if not yet mature.