China to Establish Critical Illness Insurance System

The Chinese government announced that the country would establish a critical illness insurance system that covers its rural and non-working urban residents in August 2012. This new insurance system is an important part of China’s 2009 healthcare reform plan to provide more accessible and affordable healthcare for its people.

The State Council office of health reform, together with five other government agencies, approved the Guidance on Extending Serious Disease Insurance to Farmers and Non-Working Urban Residents on August 30, 2012. The Guidance requires the reimbursement rate for critical diseases for rural and unemployed urban residents to be at least 50 percent of the total medical bill. The total medical bill can include drugs, medical devices, and procedural costs. The new insurance system will be implemented starting from late 2012. Participants in the New Rural Cooperative Medical System will not need to pay extra fees for the new insurance coverage.

China’s medical insurance system is composed of separate programs for urban workers, non-working urban residents, and rural residents. For the country’s rural population, the New Rural Cooperative Medical System covers approximately 800 million residents. However, rural medical insurance and reimbursement in China were negligible until this law went into effect. The Chinese government has been emphasizing insurance coverage expansion in rural areas with the 2009 healthcare reform, and this critical illness insurance system is a significant step towards achieving its goal. For more information on China’s healthcare reform and regulatory changes, please see our report: China Pharmaceutical Regulatory Report 2011.

This newly released Guidance also allows private and semi-private insurers to operate a nationwide medical insurance system for the first time. According to the Ministry of Health, qualified insurance carriers will be selected through bidding. In order to be eligible, insurers should meet certain requirements such as having an established network in a related business in China for more than five years. Wider coverage and higher reimbursement will be available with participation of private insurance companies. Local governments are tasked to design fundraising regulations and provide guidance and supervision to the private and semi-private insurance companies.