|In our last post “Fintech for Health in China: Growing Needs, Unique Opportunities”, we introduced several innovative solutions in health financing. In this post, we expand on this and dive into the scheme of mutual aid, a medical security model which appeared recently on the market. It has received a lot of attention in recent years, particularly among the underprivileged population. In March 2020, mutual aid was recognized by the government for the first time as part of China’s medical security system, with the promise to further enhance Chinese healthcare affordability and accessibility.
Mutual Aid: An Innovative Fintech for Health Solution
Mutual aid is a risk-sharing product that is based on peer-to-peer support. Each member pays a monthly fee into a neutral fund pool to raise capital which is used when a member needs support to cover his or her medical expenses. This scheme is designed to reduce the financial burden of those inflicted with injury or disease, providing them with financial assistance in order to cover costly healthcare bills.
Resource： Xianghubao, ACCESS Health analysis
Why Mutual Aid, Why Now?
In China’s current medical security system, the out-of-pocket costs that are incurred are very high, particularly for the portion of the population with critical diseases. The percentage of China’s out-of-pocket healthcare costs was 28% in 2018, the proportion of individuals with critical illnesses that paid for their own medical treatments was as high as 45%-55%. Meanwhile, in 2020, 10% of patients do not seek treatment due to an insufficient ability to pay for the care that they need3. Despite the growth of commercial health insurance, people from disadvantaged backgrounds are more likely to be left out due to the high premiums and accessability. According to incomplete statistics, as of 2020, China’s commercial health coverage rate was less than 10%, while the per capita health insurance premium was only approximately 505 Yuan. In response to this gap in healthcare service between those who can afford health insurance and those who cannot, mutual aid is the answer. With the growing availability of internet connectivity, mutual aid provides an online healthcare financing solution that not only fulfills the self-pay gap in basic medical insurance, but also meets the medical needs of the underprivileged population.
A Glimpse into the Development of Mutual Aid
Over time, the development of mutual aid has gone through four stages. The first stage was its rapid development between 2011 and 2015. In July 2015, the People’s Bank of China issued Guiding Opinions on Promoting the Healthy Development of Internet Finance, encouraging the development of an internet mutual aid platform while focusing on specific regulatory risks. Then in 2016, the China Banking and Insurance Regulatory Commission issued the Implementation Plan for the Special Rectification of Internet Insurance Risks, clarifying that a mutual aid platform cannot sell commercial insurance in disguise without an internet insurance license. Following this announcement, mutual aid began a stage of scaling-up between 2016 and 2019. The third stage was the standardized development of mutual aid platforms, beginning in 2020. In March of this year, the government announced mutual aid as part of China’s medical security system for the first time1. Soon afterwards, Ant Group, the top FinTech company in China, issued the first online mutual aid standard with the approval of Zhejiang Internet Finance Federation to further standardize the industry.
The improved regulatory environment sets the stage for mutual aid platform development on a larger scale. According to the Online Mutual Industry White Paper, published by the Research Institute of Ant Group, mutual aid has developed rapidly since 2011. Up until the end of 2019, China’s mutual aid platforms had 150 million registered members in total, accounting for 10.7% of the 1.4 billion total population. Throughout the year, more than 40,000 people received a total amount of mutual assistance exceeding 5 billion Yuan. Mutual aid is estimated to reach 450 million users by 2025, which would account for 32% of the country’s population.
As the mutual aid platform is developing rapidly, it has now entered its fourth stage of development. Due to the large number of members within the mutal aid platform, the characteristics of commercial insurance, and unclear regulatory policies and standards, social risks are increasing. The growth of apportionment amounts and the gradual withdrawal of members have forced the mutual aid industry to be urgently upgraded and transformed. On September 9, 2020, the China Banking and Insurance Regulatory Commission issued the Analysis of Illegal Commercial Insurance Activities and Countermeasures and Suggestions, outling three main characteristics of illegal commercial insurance activities in China: an upward trend of Internetization, a large amount of concealment, and a high degree of hidden risks and social harm. Since January 2021, the three major mutual aid platforms of Meituan, Qingsong, and Shuidi have all been shut down. At present, only “Huhebao” remains in operation.
The Impact of Mutual Aid
The impact of mutual aid is reflected in the following three areas.
In recent years, China has made significant progress towards increasing the accessibility of essential and quality health services, yet there is still a large financial burden on the general public. Despite the growth of basic medical and commercial health insurance, not all health security needs are sufficiently covered. To fill this gap, mutual aid plays a supplementary role among the current security offerings. The closure of the three major mutual aid platforms in 2021 has brought attention to the market which is flooded with illegal commercial insurance. This has further promoted the standardization and legalization of mutual aid. Mutual aid continues to be an indispensable part of China’s multi-level medical security system and enhances the accessibility of medical services across different regions and social classes.
Authors: Xiaoqiao Fan | Program Analyst of the Innovator Alliance｜Social Impact Programs and Alliance, ACCESS Health International China