The development and history of health insurance in China, it is not a simple story.For many years, the Chinese medical service has been controlled by state-owned hospitals; private hospitals and pharmacies could not compete with the public medical system. As a result, the majority of citizens received their medical service through the public system and the need for health insurance products was extremely limited. Even many years after the promulgation of the Chinese Insurance Law, China lacked formal health insurance products.
After 2000, health insurance became popularized in the Chinese insurance market. The popularity was due to the reform of the medical system; which required the majority of city residents and those in the countryside to afford medical costs by themselves. Hence a demand and need for health insurance arrived in short time.
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.