China Law Vision : China Insurance & Anti-Trust Lawyer : Dr. Zhan Hao : Grandall Legal Group : Anti-Monopoly & Competition Law : China Law Vision Blog

The requirements include: (1) an independent account system in the commercial insurance institutions shall be set up for the management and operation of the basic medical guarantee services; (2) a specific acceptance policy and claim settlement system shall be set up for the management and operation of the basic medical guarantee services; (3) a health care insurance data management system shall be established; (4) such business shall be approved by the parent company in writing and a system of incentive and disincentive shall be set up; (5) branches of this shall spread to areas where the medical guarantee business will operate, and the internal management and control to those branches shall be intensive; (6) professional actuaries, employees, managers and operators who specialize in the acceptance of policies and claim examinations shall be recruited; (7) the information management system in the commercial insurance institutions shall be fully functional, relatively independent, safe and effective, which can be connected to the information system in the appointed hospitals to provide the health care services; and finally (8) there are other conditions which are required by the CIRC.

According to the Opinions, the management model for the basic medical guarantee services shall be entrustment. In regards to this sort of management, the president of the KunLun Health Insurance Co. Ltd., stated that the entrustment model is the principle access for the insurance companies to take part in the pilot medical insurance services which is handled by the government. Further, he believes this is a good way to operate the health care system for the Chinese consumer.

The health care information management system is deemed very important and is emphasized in the Opinion. The data exchange and information system between the insurance companies and the medical institutions are based on the insurance companies’ information maintenance capacities; these are fully functional, and relatively independent.
 

According to the old Chinese Insurance law, insurance products are divided into two parts, life insurance and property insurance. Based on the regulation of business separation inside the insurance sector, a life insurance company should concern itself with only life insurance; the same was true for property insurance companies. Due to the nature of health insurance, hot debates arose because of the uncertainty surrounding its nature. Both life insurance companies and property insurance companies wanted to launch health insurance projects, though the legal landscape lacked the necessary framework. In practice, numerous disputes occurred involving health insurance. For instance, regarding medical insurance, some judges thought medical health belonged to property insurance, and the principle of indemnification would then be applied. Therefore if patients could get indemnification for hospital fees from the public health care plan, insurance companies were not required to pay in order to avoid dual compensation. On the contrary, some judges disagreed with the for the indemnification principle.

Finally, the CIRC (China Insurance Regulatory Commission) issued a specific regulation in 2006, The Measures Health Insurance. This regulation has been the only regulation regarding health insurance in China to date.
 

According to the provisions of this regulation, the term of health insurance refers to the insurance whereby an insurance company compensates the losses caused by grounds of health. Additionally the scope of health insurance is deemed to include numerous products, including sickness insurance, medical insurance, disability income insurance and health care insurance.
Meanwhile, health insurance may be classified into long-term health insurance and short-term insurance according to the insurance period. Long-term health insurance refers to health insurance with a period longer than 1 year, or less than 1 year where a guaranteed renewal insurance clause is present. Short-term health insurance refers to health insurance where the insurance period is 1 year or less and no guaranteed renewal insurance clause is present.
As far as licensing is concerned, life insurance companies and health insurance companies established according to law may, upon the examination and approval of the CIRC, engage in the business of health insurance. Other insurance companies upon the examination and approval of the CIRC, may run short-term health insurance businesses.

Due to policies promoting public medical system reform, the Chinese government continues to encourage the development of health insurance without reservation. The potential returns on such investments have also spurred foreign interest in the fields of health care and health insurance. Taking advantage of global networks in medical services, foreign insurers specializing in heath insurance could provide Chinese clients with medical service abroad and foreign clients with medical service in China.

All and all this is quite attractive; however, foreign insurers will face some legal risks. As the matter is regulated by the Chinese Insurance Law, Consumer Protection Law, Civil Law (torts) and Medicine Law, this insurance market remains complicated and far from reaching maturity.