Written by Minhua Chu
Edited by Howard Fields
Benefit-People Insurance (BPI, or “HUI MIN BAO” in Chinese), is the hottest health insurance in China this year. BPI is a type of urban customized supplemental commercial medical insurance for serious diseases based on the government-mandated medical reimbursement system.
With the characteristics of low premiums, low entry barrier, and high coverage, BPI has been rapidly promoted by local governments. By the end of October, more than 70 cities across China had launched the insurance, the number of insured people increasing from hundreds of thousands to more than 26 million in just a few months, with total premium income exceeding 1 billion RMB (about $153 million USD).
On November 20, the draft of the “Notice on Regulating the Urban Customized Commercial Medical Insurance Business of Insurance Companies” was issued to solicit comments by the China Banking and Insurance Regulatory Commission (CBIRC), the agency that supervises establishment and ongoing business activities of banking and insurance institutions. According to several of China’s local media, it is the first regulatory document for the BPI.
First Official Definition
This is the first time that the China government has given an official definition of BPI: a supplemental medical insurance system for serious and very serious diseases based on statutory health insurance, which is government-led, underwritten by commercial insurance companies, voluntary participation, and multi-channel financing.
It differs from traditional commercial insurance and critical-illness insurance in terms of product form and operation model, and can more closely be linked to local medical reimbursement systems (funds, benefits, medical history, etc.) usually costing less than 100 RMB (about $15.30 USD), making it available to average people at a uniform price.
Business Normalization Begins
In the draft issued by CBIRC, the requirements of sustainable operation and professional services are highlighted for BPI. Focusing on that core idea, the draft regulates the operation of the insurance in various aspects, including proposing requirements such as strengthening sustainable operations and professional services, and issuing a red card for violations.
The draft requires the head office of each insurance company to be responsible for management of the plan. The branches must submit their coverage plans and underwriting products to the head office for review and approval, obtain authorization letters, actuarial opinions, and legal opinions from the head office.
In addition, insurance companies are to conduct reasonable risk assessment and clear analysis and judgment for their customized medical insurance services, and have stable, professional, and standardized service capabilities as well as information systems that are compatible with their business to meet the continuing demand for medical insurance services.
With the BPI explosion in many areas, it is already available more than one BPI in some cities. To seize the market, some insurance companies engage in price wars and even use false propaganda in the name of the government.
On the other hand, the participation of the Insurance is polarized. For example, when Shenzhen’s Supplementary Medical Insurance for Serious and Special Diseases enrolled 7.5 million people in 2019, the participation rate was 55.8%. The cumulative number of purchasers of its BPI in 2020, however, is only about 200,000 in Lianyungang, a participation rate of only 4.6%.
Also, BPI has created doubts about whether it is a good business. Because of its universal-benefit nature, many local policies clearly state that the insurance should be offered at a low profit rate. Therefore, its high operating costs and low premiums make it difficult for the business to break even.
The insurance has many drawbacks for citizens. Only those participating in government basic medical reimbursement can enroll, it does not cover existing conditions, and it has high deductibles, low benefit amounts, and small coverage.