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The effects of public health insurance expansion on private health insurance in urban China

International Journal of Health Economics and Management volume 17, pages 359–375 (2017)Cite this article

Abstract

The public social health insurance coverage has rapidly increased in China in the last decade. The rapid market development and high economic growth also present an immense opportunity for the private insurance market. This paper uses the China Health and Nutrition Survey panel data and the difference-in-difference method to identify the causal effects of public health insurance expansion on private health insurance development in the case of expansion of the China Urban Residential Basic Medical Insurance (URBMI) program. The paper finds private health insurance enrollment is not affected by the introduction and expansion of URBMI. Rather, private health insurance plays supplementary roles. The findings present the challenges and opportunities for public policies to develop and regulate private health insurance to meet the market niches and provide health insurance to the demands of a heterogeneous population. The findings also have broader implications for other developing nations where public health insurance intends to rapidly expand towards the universal health coverage.

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Fig. 1

Data source: Ministry of Health

Fig. 2

Data Source: China Insurance Regulation Commission (CIRC) 2012. http://www.circ.gov

Fig. 3

Notes

  1. The “Decision of the State Council on the Establishment of Urban Employment Basic Medical Insurance System”, promulgated by the State Council in 1998, clearly stated that “all urban employers, including enterprise (state-owned enterprises, collective enterprises, foreign-invested enterprises, private enterprises, etc.), agencies, institutions, social organizations, private non-enterprise units and their employees, must participate in the Urban Employee Basic Medical Insurance” (State Council 1998). In 2003, the Ministry of Labor and Social Security issued “the Coverage Expansion Notice to Further Improve the Basic Medical Insurance for Urban Worker”(Ministry of Labor and Social Security 2003) and in 2010 again, the Article 23 in the Insurance Act further stresses that “employees must participate in the Urban Employee Basic Medical Insurance; The employers and employees must pay premiums according to the state regulations.”(The Insurance Act 2010).

  2. Data from Bureau of Statistics and available upon request.

  3. In 1997 Liaoning was missing and Heilongjiang was initially included as a replacement. In later surveys, both provinces are covered.

  4. Private health insurance and commercial health insurance were used interchangeably in this paper. Commercial health insurance is a more direct translation from Chinese; but private health insurance is used more widely in the literature.

  5. Government (free) health insurance, initially established in 1952, aimed to cover the medical expenses for civil servants, including both outpatient and inpatient services and prescription drugs. Beneficiaries pay fee-for-service up-front at the points of service and then receive reimbursement from the government. Some studies find that this scheme results in a huge waste of medical resources (Dong 2009). As a result, this insurance scheme has gradually been replaced with the UEBMI.

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Acknowledgements

Part of the research is supported by the Fundamental Research Funds for the Central Universities, and the Research Funds of Renmin University of China (13XNJ001).

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Affiliations

  1. World Bank, 1818 H. St. NW, Washington, DC, 20433, USA

    Xiaohui Hou

  2. China Financial Policy Research Center, School of Finance, Renmin University of China, 59 Zhongguancun Street, Beijing, 100872, China

    Jing Zhang

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  1. Xiaohui Hou
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Correspondence to Xiaohui Hou.

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Hou, X., Zhang, J. The effects of public health insurance expansion on private health insurance in urban China. Int J Health Econ Manag. 17, 359–375 (2017). https://doi.org/10.1007/s10754-017-9213-0

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  • DOI: https://doi.org/10.1007/s10754-017-9213-0

Keywords

  • Public health insurance
  • Private health insurance
  • Urban China
  • Crowd-out

JEL Classification

  • I13
  • D1
  • H4