Millions Opt Out of Enrollment in China's State Health Insurance

The Lede: According to a report from the Financial Times citing official data, enrollment in China’s state health insurance system has dropped by tens of millions of people as the country faces pessimistic economic forecasts.

What We Know:

Enrollment in China’s state-subsidized health insurance system fell by 19 million people in 2022 according to official data. Analysts and officials expect that enrollment could fall even more this year as seven of the eight provinces that have reported data for the first nine months of 2023 showed falling enrollment from the prior year.
Health insurance premiums have risen significantly, outpacing slow or even negative income growth, while local governments, that lack funds to contribute to insurance schemes, have passed the increased healthcare costs on to policyholders. According to the National Bureau of Statistics, the minimum premium for the main health insurance policy has increased by more than doubled since 2018. There was also a 24 percent increase in the average wages of migrant workers over the same period.
Rural policyholders have also seen co-payments reach between 50-70 percent at larger city hospitals that have highly-trained staff and more sophisticated equipment needed to treat more serious diseases. Some rural and migrant families have stopped paying for coverage for their teenage children in hopes that they can remain healthy enough to drop regular care. Enrollment in rural Anhui province reported a 3 percent decline in enrollment in local health insurance in the first ten months of 2023 after dropping 4 percent in 2022.

The Background: China has been struggling with economic recovery since the beginning of the year after lifting pandemic-era policies in December. Consumer sentiment has been depressed along with slowdowns in the property sector and weaker exports. At the beginning of December, Moody’s Investors Service downgraded the outlook ratings for China’s government credit and sovereign banks.

Likely Outcomes:

This downtrend in health insurance subscriptions reflects the landscape of depressed household incomes in China, particularly among the poorest segments of the population. If more policyholders forgo health insurance moving forward, this could widen deficits in the health insurance industry and put pressure on the overall healthcare sector in China. Insurance providers may hike prices to cover the gap. Cost of care may also increase if general public health declines. This could be a contributing factor to recent negative forecasts for the country and a sign of wider economic pain to come.
In addition to other financial warning signs in other parts of the economy, the Chinese government is likely going to struggle with this issue, whether or not to intervene and to what magnitude. At a geopolitical scale, the domestic issues facing the country may be the focus of the Chinese state ahead of international issues in the foreseeable future.
Insurance cancellations could particularly set up conditions for serious health risks in China’s under-developed areas, where the population skews older. This could have a knock-on effect on overall productivity for rural industries while also hiking disparities as the cost of healthcare weighs down on segments of the population that opt out of insurance. This is likely to be exacerbated as China’s population ages.

Quotables:

“The insurance hasn’t done much to ease my medical burden. I might as well spend more money on high-quality food to stay healthy. I need to make the best use of my limited savings. Health insurance is not my top priority.” – Li Weihao, 55-year-old former rural construction worker in the central Hubei province

“It is a perfect opportunity for the government to come in and help reduce those costs, which would . . . improve the health of the rural population and also give China some much-needed macroeconomic stimulus.” – Jonathan Gruber, economics professor at the Massachusetts Institute of Technology

Good Reads:

Millions drop out of China’s state health insurance system (FT)

Moody’s cuts China credit outlook to negative as economy slows (The Guardian)