Better known for its panda sanctuary and spicy local cuisine, Chengdu could be the first Chinese city to offer mutual health insurance. Eric Bouteiller examines French firm VYV’s first steps into China and the potential impact of mutual insurance – whereby the insurance company is owned entirely by its policyholders – on the world’s second largest healthcare market.
What is at stake is the supplemental financing of the healthcare system in the world’s second-largest healthcare market
The French mutual insurer VYV recently delivered a feasibility report to Chengdu Municipality for the application of a pilot license for mutual insurance. It would be the first real mutual insurance in China. What is at stake is the supplemental financing of the healthcare system in the world’s second-largest healthcare market. Currently, the financing of healthcare in China is extremely tight (while still having a surplus, unlike most Western markets).
This project closes a first cycle of VYV promoting mutuality in China. VYV describes itself as an “entrepreneur of well-being” and is the second-largest European private actor in health insurance and the largest in France. It has built up a high level of expertise on almost two centuries of social protection in Europe. VYV has EUR ten billion in revenue, covers roughly ten million patients and manages 1,000 health centres and clinics with over 40,000 employees.
As it does elsewhere in the healthcare field, China tries to innovate and create solidarity among social classes and between generations. The extraordinary economic development of the country has stretched social relationships and institutions to their limit. Financing healthcare around private insurance has been tried but this has not been fully successful as it is limited to very narrow needs and wealthy people. It keeps the bulk of the Chinese population without any practical solution beyond state-sponsored schemes.
The model used in continental Europe could help Chengdu to find a much-needed solution, thanks to three major factors.
- Mutual insurance providers are strong negotiators with healthcare suppliers and can keep costs under control, sometimes in a more efficient way than state institutions.
- More importantly, due to their ownership structure and governance, mutuals are very responsible organizations as they directly represent users with a “life-long commitment to healthy life”. They focus more on anticipating needs (in order to manage costs before they happen) and have practical experience in delivering care as they manage hospitals by themselves.
- Their actions go beyond healthcare as they are looking at root causes of bad health and may decide to support programs like awareness or social housing in order to create a healthier environment. They are a major actor in the healthcare ecosystem and can be a reliable player in the modernization of social protection.
From the perspective of their initiators, the objective of this partnership is to share the DNA of mutual insurance and help Chengdu to develop his own model of mutual insurance. In a very smart way, VYV is financing this by selling consulting services to Chinese operators. It started in 2010 when the CEO Jean-Louis Davet, who has been personally conducting VYV operations in China since the very beginning, shared concepts and experiences with Chinese authorities. Bilateral cooperation between China and France and the EU has also been a key channel to explore various approaches and models. In 2016 a representative office was opened in Beijing in order to deliver support on the ground.
The process has been extremely lengthy but is an exemplary case of what is needed to succeed in China. Action is required at all levels.
- First, at the national level. Ageing is a major challenge for China and although President Xi and President Macron have recently made public declarations on their willingness to find sustainable solutions, changes at a “real level” are as yet very limited. Concretely there is no legal framework for supplemental insurance. Also, regulations for non-profit organizations are insufficient. A lot of time was spent shaping the environment and creating the conditions to experiment with a pilot.
- Second, at the provincial level. The issue is then to get the concrete support from a municipality that has the vision to build an operational model that improves the situations of their patients. This can only be done by understanding the real local situation and resources.
- Third, at the local level. Such a project needs to be designed and developed with future members of the mutual insurance. This is not the easiest part as Chinese patients tend to be very sceptical of private insurance (which is very expensive and only targets limited needs) and state action (which is often de-connected from real needs and does not encourage the direct involvement of members). A mutual requires direct involvement of potential members which will be associated with the future governance of the mutual. The momentum has been created by a mix of surveys and local consultations that have unleashed real interests from potential members.
All this work has been done in a dynamic environment, where insurance regulations, financing of healthcare and the organization of social protection were being revamped at the national level. It is one more example that successful innovative projects in China require the direct personal commitment of global leadership of the company (Jean-Louis Davet in this case), persistence and resilience!