Annie Sun - 2016 China’s Healthcare Trends - Health Insurance Strategist Interview
Ms. Annie Sun is a professional Healthcare analyst, and author of 3 books about healthcare, namely "Mobile Health: the Next Golden Mine of the Internet", "Digital Health: a Big Chess Game" and “Healthcare Transformation by Digital Health”. She is currently a partner of Latitude Health, a management consultancy firm that specializes in healthcare in China. She has also worked as a health strategy manager for Cigna, and a Business Strategy Consultant for Anthem.
Ms. Sun is an industry expert in Chinese healthcare, and she shared her research and findings about the healthcare industry changes in China, as well as the possible changes and trends to expect this year.
Read more about her thoughts on China’s local healthcare industry and market in her full interview below.
Q: Can you give us your insights about the developments and changes in health care in China in recent months?
There are two big issues we observed in recent months:
1) For health insurance specifically, China’s CIRC has released the notice for starting market testing in 31 cities for individual insurance product with tax benefits. Several key players have been preparing to launch related new products in Jan. Despite the opening from the regulatory side, we think there are still two challenges ahead. 1) Requirements on product design mean the profitability will be low for this type of product 2) tax refund procedure is still unclear. Besides, due to profitability concerns, the benefit level will not be very high, still insufficient for individuals in front of chronic conditions or severe sickness.
2) China is taking stronger efforts on cost control on the provider side through 1) continuing efforts to decrease drug prices 2) restricting large hospitals from enlarging in size 3) regional market testing efforts in developing a multi-layer health service system and driving people to primary care to lower health expenses. We think these efforts will continue and become tighter in 2016.
Q: Can you tell us more about your work and what came out of your recent studies about health care developments in China?
I have worked 5 years in strategy for health insurance industry, focusing on provider strategy, pricing, product strategy and overall health service development. Now I have founded my own strategy consulting firm Latitude Health focusing on the healthcare industry in China. We serve clients in health insurance, health delivery, pharma, medical device and investment, and we are a market leader in the health industry, with a strong influence on decision-making of the players. I co-authored 3 books on digital health with the other founder of Latitude Health.
Q: What are the pros and cons of the Chinese health care reform?
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Pros |
Cons |
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Cost control has become the main theme of health care reform as China’s BMI (the main payer) is facing crisis ahead due to shrinking work population, and rapid aging |
Cost control efforts started from cutting drug prices. Health service fees still severely underpriced, giving doctors the incentives to increase revenue from overtreatment (write more prescriptions, ask for more lab tests) |
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Gov supports the development of primary care, trying to lower medical expenses in a long run |
Severely underpriced service fees, lack of talents, under-developed medical capabilities led to survival challenges of primary care facilities. Will need large sum of investment to drive the development of the sector |
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Gov gradually opens to the private side for investment on hospitals and clinics |
Social benefits for employees are different between public providers and private ones, a big challenge for private investors when making investment on public side |
Q: What do you think about the international private medical insurance market in China?
For both group PMI and individual PMI sectors, we think the growth rate will slow down due to 2 reasons. 1) slowdown in growth of expatriates to China 2)affordability is still a bottleneck for growth 3) strong anti-selection on individual market leading bad loss ratios for some insurers
Q: Do you have any insights about the IPMI industry in the country?
Anti-selection is still a big challenge for IPMI industry in China, leading to uncertainties on profitability. The players tend to go in two directions based on their strategy. One group, mainly international players or jointly owned players, tend to stick to the very high-end, offering products with international coverage. The premiums are very high, targeting senior executives and local rich. The growth potential is quite limited though due to affordability and market saturation.
The other group, including some jointly owned players and local ones, started to go downward to the mid-end market by launching products with mainland China only coverage. Some lowered premiums by not including the private hospitals. The control on provider behaviour and medical costs are still challenges on whether the plans could work out.
Q: Do you think there will be more changes in health care next year in China?
Cost control efforts will continue to be tighter from the government side, leading to pressure for pharma and hospitals.
Health insurance will continue with rapid growth but mainly with lump-sum products and corporate BMI + plans. Protection-focused products are still in infancy. Hospitals will see more financial pressure after several years’ rapid expansion. The tightening strategy on drug sales, growing operation costs, and uncertainties in patient volume growth means that hospitals will need to think more about cost control rather than expansion in size.
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