4th Health Insurance Conference - Investments in Healthcare - Insurance Implications


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4th Health Insurance Conference - Investments in Healthcare - Insurance Implications

  1. 1. Investments in Healthcare – Insurance Implications June 2010 Presented by Simranjit Singh Director Healthcare Healthcare Practice, APAC
  2. 2. Healthcare Spending- Macro perspectives Countries with high investment in healthcare spending: South Korea, Taiwan, Australia, New Zealand & Japan Healthcare expenditure as % of GDP 4.6 3.2 3.8 8.4 4.1 3.7 6.1 6.6 4.9 8.9 5.7 8.5 0 1 2 3 4 5 6 7 8 9 10 Japan China Australia India South Korea Taiwan Thailand Malaysia New Zealand Singapore Philippines Hong Kong
  3. 3. Aging and Asia <ul><li>Asian countries are just beginning to experience population aging. As it can be seen on the graph on the left, the aging process is occurring much more quickly in East and South East Asia as opposed to the West </li></ul><ul><li>By 2025, East Asia will see approx 30% of their population in the 65 age bracket and above. Similarly SEA will see about 15% in the same age segment </li></ul><ul><li>One reason that can be attributed to this speed in aging is the rapid economic growth that has happened in this continent over the last 20 to 30 years </li></ul>
  4. 4. APAC - Growing Older………………… % of population over 60 More than 25% of the population over 60! More than 30% of the population over 60! More than 40% of the population over 60! ‘ Greying’ populations go hand-in-hand with increase medical expenditure associated with old age.
  5. 5. APAC - Growing Wealthier………………… GDP Growth of Selected APAC Countries Source: Frost & Sullivan DSD, 2007
  6. 6. Healthcare Spending- Micro perspectives-1 *: Frost & Sullivan Estimates from WHO figures for 2002 Countries with high proportion of government expenditure Countries with high proportion of private expenditure ** Latest Population figures as at July 2004-Source: CIA-the World Factbook Country Total Population (Mn)** Healthcare Expenditure (bn USD)* % *of Government Expenditure* %* of Private Expenditure* Healthcare Expenditure as %* of GDP Japan 127.3 337.2 80 20 8.5 Hong Kong 6.8 29.0 55 45 4.6 Australia 19.9 29.8 70 30 8.9 China 1298.8 29.1 20 80 5.7 India 1065.0 22.4 10 90 4.9 Malaysia 23.5 2.2 70 30 4.1 New Zealand 3.9 3.9 70 30 8.4 Singapore 4.4 2.9 40 60 3.8 Philippines 86.2 2.6 50 50 3.2
  7. 7. Healthcare Spending- Micro perspectives-2 High proportion of population under managed care High proportion of population under private managed care insurance coverage ** Latest Population figures as at July 2004-Source: CIA-the World Factbook *: Frost & Sullivan Estimates from WHO figures for 2002 Country Total Population (Mn)** %* of Managed Care Coverage Population under managed care %* Private Managed Care Insurance Coverage Population under private managed care Japan 127.3 75.0 95.5 65.0 82.7 Hong Kong 6.8 China 1298.8 2.8 36.4 1.0 12.9 Australia 19.9 63.0 12.5 45.0 8.9 India 1065.0 0.2 2.1 0.15 1.6 Malaysia 23.5 2.0 0.5 0.5 0.1 New Zealand 3.9 63.0 2.5 30.0 1.2 Singapore 4.4 90.0 3.9 75.0 3.3 Philippines 86.2 10.0 8.6 2.0 1.7
  8. 8. What is fuelling this growth? The healthcare industry Ageing population requiring greater medical attention Strong economic growth in the region Development of combination products Fall in device prices due higher competition Increase in the healthcare facilities and physician skills Developments in the interventional techniques Lifestyle and diet changes
  9. 9. What are the challenges ? The healthcare industry Low purchasing power of consumers Undeveloped distribution channels High cost of devices and procedures Lack of skilled physicians Delay in market entry of new products due to regulatory approvals Low reimbursements and insurance coverage Shortage of advanced diagnostics and treatment facilities
  10. 10. Regulatory Environment Mature markets of the Region Emerging Markets of the region Markets with good potential but lacking adequate payor infrastructure particularly India and China
  11. 11. Payor Scenario & Opportunities in Healthcare Insurance 95.5 36.4 8.6 82.7 12.9 8.9 1.7 3.9 2.5 0.5 12.5 2.1 3.3 1.2 0.1 1.6 0 20 40 60 80 100 120 Japan China Australia India South Korea Taiwan Thailand Malaysia New Zealand Singapore Philippines Population under Managed Care Coverage Population under Private Managed Care Million Population Countries with a relatively higher population under managed care Japan: Mature market Philippines: Emerging market China: Good potential but lacking payor facilities Australia: Mature Market
  12. 12. <ul><li>Healthcare Overviews and Role of TPAs </li></ul>
  13. 13. Healthcare Drivers Medical Tourism Changing Disease Pattern Extended Health Insurance Coverage Better affordability enhances the accessibility of healthcare, thus boosting the demand. Increased Life Expectancy Boost demand for nursing care & medical treatment of chronic diseases Demand on Medical Care Boost in-patient & out-patient visits in private hospitals Increase of Chronic Disease Prevalence spurning the demand of Preventive Therapeutic Services Impact Assessment of Impact to Healthcare Industry Malaysia - Impact of Market Dynamics and Trends Public Sector Private Sector Overall Healthcare Market
  14. 14. <ul><li>Heavy Involvement of MCOs in TPA functions </li></ul><ul><li>Managed care organizations (MCO) have gained momentum since gaining legal legitimacy in 1994, and are currently covering an estimated 1.5 million enrollees, provided through personal or group insurance coverage. </li></ul><ul><li>Over 22 insurers have engaged MCOs to administer their Medical and Health Insurance claims. </li></ul><ul><li>As of 2008, there are 56 MCOs operating in Malaysia. However, only 6 have been registered under the new MOH requirement enforced through the Private Healthcare Facilities and Services Act (1998), Act 586, which is due by March 31 2008. </li></ul><ul><li>Key MCO players in Malaysia include MediExpress, Medilink Global, MHC Asia Group, and IHM Group, which are mainly involved in third party administrative roles, such as claim administration, provider network management, and information and data management. </li></ul><ul><li>Issues Ahead </li></ul><ul><li>Despite the proposition of cash-less hospitalization benefits by the TPAs, some of the issues that need to be resolved are: </li></ul><ul><ul><li>Lack of regulatory framework for MCOs’ operations to protect consumers’ interests </li></ul></ul><ul><ul><li>Fee splitting controversy due to discount requests from the MCOs </li></ul></ul><ul><ul><li>Delay in reimbursement payout from MCOs to hospitals or practitioners </li></ul></ul><ul><ul><li>Selective empanelled hospital listing limits the access of policy holders seeking treatments </li></ul></ul>Source : Medilink-Global UK Limited: Placing & Admission to AIM Report, TheStar, PIKOM, Frost & Sullivan Analysis Malaysia - Role of Third Party Insurance Administrators Healthcare Landscape : Presence of MCOs (Malaysia), (1990 & 2008)
  15. 15. Healthcare Drivers Medical Tourism Private Health Insurance Changing Disease Pattern Increasing headcounts and capacities of specialty medical centers Aging Population Increase demand for Long term and subsidies care facilities Demand on Medical Care Attainment of Medical Hub status boosts both the public and private hospital segments Broadened Insurance Coverage Increases Patients’ Eligibilities to the more costly Private Hospitals More informed patients has consistently drive medical institutions for higher quality standards Greater Healthcare Awareness Impact Assessment of Impact to Healthcare Industry Singapore - Impact of Market Dynamics & Trends Public Sector Private Sector Overall Healthcare Market
  16. 16. <ul><li>Overview of Singapore’s MCO Market </li></ul><ul><li>In 1994, Singapore’s National Trades Union Congress (NTUC) launched a pilot-scale managed care plan, the Managed Healthcare System (MHS), a non-profit organization that serves a social goal of providing quality healthcare at affordable rates to citizen- known widely as NTUC MHS. </li></ul><ul><li>Drug costs are decided by either a fixed drug list or an exclusion list, e.g. vitamins. The prices paid by the MCO for the drugs used depend on the agreement with the healthcare provider. These arrangements vary from pegging it to DIMS pricing, or prices that the providers claim for, or prices that the MCOs dictate. </li></ul><ul><li>There are a few MCOs in Singapore, namely Balestier Medical Group, AIA-HMO Medical Group, Managed Health Care Group (MHC), and the list goes on. </li></ul><ul><li>Major insurers (e.g. QBE, NG Insurance, Aviva, AXA Insurance, Great Eastern and NTUC) contract with HMOs such as MIB (formerly MHC), Healthway and Medinet to provide outpatient service. </li></ul>% of respondents Healthcare Landscape: Payment Period After Invoicing (Singapore), 2006 Source : SMA Managed Care Survey 2006; Understanding Managed Care by the Department of COFM, NUS Singapore - Role of Third Party Insurance Administrators Healthcare Landscape: Fee Caps System (Singapore), 2007
  17. 17. <ul><li> Issues Ahead </li></ul><ul><ul><li>With the complex schemes, there may be some difficulties with excessive claims for medications that skews the pooled premiums, thus resulting in low consultation rates </li></ul></ul><ul><ul><li>Some patients are dissatisfied with exclusions (non-coverage of certain illnesses) whilst some providers unhappy with patients who visit frequently, or who want additional medications </li></ul></ul><ul><ul><li>MCOs unhappy with some providers on the routine use of more expensive medicines </li></ul></ul><ul><ul><li>Low consultation rates set by managed care players in order to build market share. In the long run, these low rates might lead to under-servicing and a host of other problems </li></ul></ul><ul><ul><li>Scarcity of transparency on how the managed healthcare players conduct their business </li></ul></ul><ul><ul><li>The Singapore Medical Association Private Practice Committee (2003) indicated that physicians were generally unhappy with managed care plans, reasons being late payments, or capitation that may be too low to cover the cost of treating patients with multiple problems </li></ul></ul>Key Driving Factors on Proliferation of Managed Care Schemes in Singapore <ul><li>Future Trend </li></ul><ul><ul><li>Managed care and insurance market will grow </li></ul></ul><ul><ul><li>Managed care is currently regulated by Monetary Authority of Singapore (MAS), but Ministry of Health (MOH) may enter the picture </li></ul></ul><ul><ul><li>Life insurance companies have advantage of size and being able to cross-subsidize products </li></ul></ul><ul><ul><li>Doctors will be divided and conquered </li></ul></ul>Singapore - Role of Third Party Insurance Administrators (Cont. ) Potential of managed care schemes to be a channel to higher-yield procedures The GP (General Practitioner) groups were trying to increase market share and hold on to big corporate customers Apart from highly profitable inpatient schemes, insurance companies want to provide better service by offering outpatient schemes Commercial outfits that were not involved in healthcare came into the picture to try to capitalize on the situation, thinking that there was money to be made off ownership of patient pools and cash flow
  18. 18. Assessment of Impact to Healthcare Industry Healthcare Drivers Development of National Health Policies and Strategies High Prevalence of Communicable Diseases Growing number of lifestyle-related and chronic diseases Healthcare providers shifting their focus towards curative medicine Increased Life Expectancy Creates demand for services and infrastructure catered for geriatric care Demand on Medical Care Consistent review of the existing healthcare, thus improving the quality of the existing healthcare industry Urgent need for effective communicable and infectious disease management Impact Indonesia - Impact of Market Dynamics and Trends Public Sector Private Sector Overall Healthcare Market
  19. 19. <ul><li>Industry Outlook </li></ul><ul><li>Third Party Administrators (TPAs) and Health Maintenance Organizations (HMOs) in Indonesia are divided into 2; government linked companies managing overall national social health insurance plan for the lower income citizens, and the private entities consisting of independent insurance claim assistance companies, insurance brokerage companies, and to some extent in last 2 years, subsidiaries to several healthcare groups like Siloam Hospitals and Global Doctors. </li></ul><ul><li>The latter provides claims management and assistance services to insurance companies, and managing employee benefits and life insurance related services for private companies. </li></ul><ul><li>There are currently 24 registered ‘Bapels’ (or commercial HMOs) in Indonesia covering less than 500,000 of the country’s population. Bapels provide comprehensive health benefits through a network of health care providers (government run and private) and to make payment to providers on capitation. </li></ul>Source : WHO – Searo Social Health Insurance in Indonesia (2008) Key TPAs, Commercial HMOs and Their Clients Note: I : insurance company, P : Private company Indonesia - Role of Third Party Insurance Administrators TPA / HMO Clients PT Global Assistance Management Indonesia (TPA) <ul><li>AIG Life (I) </li></ul><ul><li>AIA Life (I) </li></ul><ul><li>William Russell (I) </li></ul><ul><li>Rama Group Health (I) </li></ul><ul><li>Asuransi Syariah Mubarakah (I) </li></ul>PT International SOS (TPA) <ul><li>AXA Life (I) </li></ul>PT Askes Komersil (Commercial Askes) (HMO) <ul><li>PT Gudang Garam (P) </li></ul><ul><li>PT Dexa Medica (P) </li></ul><ul><li>Universitas Trisakti (P) </li></ul>PT Asuransi Jiwa Bringin Sejahtera (HMO) <ul><li>PT HM Sampoerna (P) </li></ul>
  20. 20. Source : World Bank Indonesia Health Expenditure Report (2008) Indonesia - Role of Third Party Insurance Administrators (Cont. ) Healthcare Landscape: Percentage of Indonesians by Type of Health Insurance Providers (Indonesia), 2003-2007 <ul><li>TPA and HMO business penetration rate and future outlook </li></ul><ul><li>The penetration rate of private health insurance is very low in Indonesia compared to its neighboring countries. It was recorded to be at 3% from 2006 to 4 % in 2007 </li></ul><ul><li>Taking the number of people insured through the national health insurance program for the poor (28.5%), those who have been insured by their employers into account (8.6%) as well as those who are covered by private healthcare insurances (4%), there is still an opportunity for further penetration to the remaining 58.1% of the population </li></ul><ul><li>Third party administrators businesses growth is parallel with the increase in private insurance coverage in the country. </li></ul><ul><li>Commercial HMOs and MCOs (managed care organization) which targets corporate entities for the management of employees’ life insurance and other benefits had better luck finding clients </li></ul><ul><li>It is reported that 82% of the employers with more than 20 employees in Indonesia today provides various kinds of health benefits, through the engagement of Jamsostek or private HMOs. This present an opportunity for the existing HMOs to reach out for the remaining 18% of the companies </li></ul>
  21. 21. Healthcare Drivers Health Insurance & Coverage Aging Population Varying Disease Pattern Rising demand for medical treatment of chronic diseases such as Cancer, liver, pancreas, kidney, pneumonia, cerebrovascular, diabetes, hypertensive, blood, eye, respiratory diseases, & disease of female reproductive organ Medical Tourism Rising in-patient & out-patient visits in private hospitals Demand on Medical Care “ 30 Baht” boosts the accessibility of Healthcare Services Improvement on Healthcare system from the preventive perspective, and enhancement of chronic and nursing care facilities Impact Growing Privatized Healthcare Private sector – the dominating force in the future hospital service market Assessment of Impact to Healthcare Industry Thailand - Impact of Market Dynamics and Trends Public Sector Private Sector Overall Healthcare Market
  22. 22. <ul><li>Steady rise of Thai TPA market </li></ul><ul><li>Thailand introduced the concept of managed care in 1996, which subsequently opened the gateway for the growth of Managed Care Organizations (MCOs), and Third Party Administrators (TPAs) in the country. </li></ul><ul><li>As of 2008, there are 52 insurance brokerage companies registered under the Thai Insurance Brokers Association, which mostly carry out third party administrative functions for a broad range of insurance products, including, life, general, and health insurance. </li></ul><ul><li>Majority of associated insurance brokers specializes in TPA and insurance consulting functions, such as claim management, benefit management by designing appropriate health plans for the corporate or insurance companies. </li></ul><ul><li>In 2008, a joint venture with Medilink enabled Health Benefits Consultants (HBC) to become the first TPA with electronic eligibility verification healthcard network in Thailand. </li></ul>Source : Thai Insurance Brokers Association Member Listing, Thai PR.net, TPA Players’ websites, Frost & Sullivan Analysis Key TPA Players in Thailand <ul><li>Future Outlook </li></ul><ul><li>The strong growth of medical tourism is likely to boost the TPA industry of Thailand, as foreign patients from US and Europe are more susceptible to TPA form of medical payments. </li></ul><ul><li>The introduction of the E-Healthcard creates the path for more efficient third party administrative activities and offers greater convenience to both the patient and the healthcare providers. Hence, more existing or new TPA market players are likely to follow suit on this service. </li></ul>Thailand - Role of Third Party Insurance Administrators Company Country of Origin Key Expertise Health Benefits Consultant Thailand Benefits management, claims administration, Information & data management MSI Adjusting (Thailand) Japan Claim management on policies issued Sri Muang Insurance and Tokio-Marine Group Independent Consultant (ICC) Thailand Claim Management, Settlement negotiation with insurers and health service providers Ekawit Thailand Benefit Management, personalized insurance solutions, claim administration Medilink Thailand United Kingdom Medical insurance and claim administration, eligibility verification, Electronic Healthcard Network Services (EHNS)
  23. 23. Assessment of Impact to Healthcare Industry Healthcare Drivers National Health Performance Framework Growing Popularity of Private Health Insurance Chronic Disease Burden Strong demand persists for chronic disease care facilities and systems Increased Life Expectancy Creates demand for services and infrastructure catered for geriatric care; Furbishes new business opportunity for private player penetration Demand on Medical Care Consistent review of the existing healthcare, thus improving the quality of the existing healthcare industry Greater accessibility and affordability to private healthcare Impact Australia - Impact of Market Dynamics and Trends Public Sector Private Sector Overall Healthcare Market
  24. 24. <ul><li>Outlook of the TPA market in Australia </li></ul><ul><li>The market trend of increased management expenses and the recommendations from the PHIAC (Private Health Insurance Administration Council) will boost the demand for TPA or health insurance BPO service. </li></ul><ul><li>Furthermore, the introduction of the Prudential Act on Outsourcing for the Insurance sector further outlines the regulatory and operational requirements closely monitored under the Australian Prudential Regulation Authority (APRA) to ensure the quality standards of TPAs. </li></ul><ul><li>The Australian banking, financial services, and insurance industry is estimated to US$1.72 billion by 2010. </li></ul><ul><li>Unlike the USA, TPA or insurance process outsourcing still has a relatively low market penetration rate to date, and may result in a two-folded outcome on its future development. </li></ul><ul><li>Key Opportunities: </li></ul><ul><li>Profit constraint to Private insurers due to escalating management expenses. </li></ul><ul><li>Consistent development of regulatory framework for insurance BPO. </li></ul><ul><li>Relatively untapped Australian market, especially players specializing in medical insurance. </li></ul>Key TPA Players in Australia Source : www.frost.com , TPA’s players’ company websites, Frost & Sullivan Analysis Australia - Role of A Third Party Insurance Administrators Company Country of Origin Key Expertise EDS Australia USA Healthcare payer administrative services – including claim processing and management, error suspense resolution, and enrollment membership and billing management, ITO (Information Technology Outsourcing) Fujitsu Australia Japan Web-based straight through processing (STP) for life insurance market, covering comprehensive operational process of the life insurers Health Source Australia Claim Processing, Management Reporting, Front line sales & services, technological solutions, human resource training Sai BPO Services India Claim Processing, administration of policies, new business administration Life Administration Services Australia New business administration and Policy administration for life insurers
  25. 25. Source : Private Health Insurance Administration Council, Australia: Operations of the Private Health Insurers 2008 Annual Report, Frost & Sullivan Analysis <ul><li>Cost Impact of the Private Health Insurance Regulatory Reform </li></ul><ul><li>Introduction of the Private Health Insurance Act 2007: </li></ul><ul><ul><li>Purpose to enhance the market’s confidence on private health insurance, through more stringent governance of the private insurers’ operations. </li></ul></ul><ul><ul><li>Contains administrative provisions to increase the range of enforcement mechanisms for monitoring purpose. </li></ul></ul><ul><li>Subsequently, the management expenses and ratio to premium revenue of the private health insurers have increased mainly due to the escalated costs of registration and product approval process required by the legislation, leading to thinner margins. </li></ul><ul><li>Employee costs, in particular, forms the largest cost component at 44.6%, followed by information technology & marketing expenses. </li></ul><ul><li>Despite the increase in management expenses, the cost control capabilities of the private health insurers are considered favorable. </li></ul><ul><li>Nonetheless, with the consistent increase in membership volume and the competition to become more cost competitive, the PHIAC has provided several recommendations in 2008 to mitigate the increasing expenses stemmed from the new legislation. </li></ul><ul><li>Key recommendations includes the encouragement on the utilization of HCIT for administrative processing, and outsourcing of member management systems and back office services. </li></ul>Australia - Role of A Third Party Insurance Administrators (Cont. ) Healthcare Landscape: Australia Private Insurance Management Expenses Trend & Ratio to Premium Revenue (Australia), 2003-2007 Healthcare Landscape: Breakdown of Management Expenses (Australia), 2007-2008, (in AUD$)
  26. 26. Healthcare Drivers Medical Tourism Private Health Insurance Penetration Heavy Disease Burden Increase demand for preventive and curative care, while supported by the development of public health research Changing Demographic Profile Stems demand on primary and geriatric care infrastructure and resources Demand on Medical Care Greater affordability and accessibility to quality private healthcare Enhancement of healthcare facilities & Infrastructure; boost demand in private healthcare Impact Privatization of Indian Healthcare Enhancement of Infrastructure Capacity and streamlining of Healthcare Delivery Standards Assessment of Impact to Healthcare Industry India - Impact of Market Dynamics & Trends Public Sector Private Sector Overall Healthcare Market
  27. 27. <ul><li>Overview of India’s TPA Market </li></ul><ul><li>28 TPAs were registered as of June 2008, up from 23 since its introduction in March 2002 through the IRDA (Third Party Administrators – Health Services) Regulations, 2001. </li></ul><ul><li>A minimum capital requirement of US$ 0.20 million and a capping of 26% foreign equity are mandatory requirements for a TPA as spelt by the IRDA. License is usually granted for a minimum period of three years. </li></ul><ul><li>TPAs function as intermediaries between the insurer and insured and facilitate the cashless service of insurance. TPAs currently charges a fixed 5.6% of the insurance premium to the insurer as a form of commission for the service rendered. </li></ul><ul><li>Key Insurers like Iffco-Tokio Marine General Insurance, ICICI, Lombard General Insurance, Reliance General Insurance and Royal Sundaram General Insurance have already signed up their respective TPAs. </li></ul>Source : Insurance Regulatory & Development Authority India Annual Report 2003 - 2007, Frost & Sullivan Analysis India - Role of Third Party Insurance Administrators Healthcare Landscape: TPA Player Market Share by No. of Claims (India), (2006-2007)
  28. 28. <ul><li>Rapid Growth Trend </li></ul><ul><li>Since 2003, the TPA market has marked its significance with the rapid growth in terms of patient claims management, posting CAGR of 57.07% between 2003 to 2007. </li></ul><ul><li>Furthermore, key TPA players (such as Family Health Plan, Paramount, TTK, Medi Assist, and E-Meditek Solutions) are consistently expanding their hospital panel list, each holding affiliated hospital networks of between 3,000 to 6,000 in 2007. </li></ul><ul><li>The steady improvement of the settlement duration also marks significant improvement in the TPAs’ operational efficiencies, whereby 76.44% of the claims were settled within 30 days in 2006-07, up from 53.65% in 2003-04. </li></ul><ul><li>Issues Ahead </li></ul><ul><li>Despite the proposition of cash-less hospitalization benefits by the TPAs, some of the issues have arise following its operations that needs to be resolved: </li></ul><ul><ul><li>Weak Hospital Networking and poor standardization of billing procedures for hospitals </li></ul></ul><ul><ul><li>Delay in issuing of identity cards to policy holders </li></ul></ul><ul><ul><li>Delay in reimbursement payout from TPA to hospitals </li></ul></ul><ul><ul><li>Low awareness among policyholders about the existence of TPA and empanelled hospitals for cashless hospitalization services </li></ul></ul><ul><ul><li>Selective empanelled hospital listing limits the access of policy holders seeking treatments. </li></ul></ul>CAGR % (2003-2007) Revenue : 57.07% Source : Insurance Regulatory & Development Authority India Annual Report 2003 - 2007, Frost & Sullivan Analysis India - Role of Third Party Insurance Administrators (Cont. ) Healthcare Landscape: TPA Claims and Settlement Trend, (India), 2003-2007
  29. 29. Assessment of Impact to Healthcare Industry Healthcare Drivers Expanding Insurance Coverage Chronic Disease Burden Rising Middle & Affluent Class Population Improvement of healthcare services quality; Boosts demand for private healthcare and insurance Aging Population Boosts demand for geriatric care and specialized healthcare for the rising elderly population Demand on Medical Care Increasing access of both private and public healthcare; Reduction of Out-of-pocket payments Drives market demand for curative and preventive products and services Impact China - Impact of Market Dynamics and Trends Public Sector Private Sector Overall Healthcare Market
  30. 30. <ul><li>Overview of China’s TPA Market </li></ul><ul><li>In China, a number of managed care systems were launched in different parts of the country in the 1980s </li></ul><ul><li>It is estimated that China spent more than US$ 143 billion on healthcare in 2007, 52% of which was directly paid by households. Commercial medical insurance covered less than 6% of these costs, implying a market potential of US$ 67 billion </li></ul><ul><li>The Regulatory environment for the insurance market in China has been somewhat relaxed and there is an increasing demand by the “middle-class” for private healthcare </li></ul><ul><li>The current level of TPA market competition in China is relatively low. Most foreign investors choose to run a TPA company first or buy shares in local businesses to gain presence in the sector </li></ul><ul><li>As a result of relationship with the hospitals, clients receive “cashless service” at the hospitals upon presentation of their health insurance card which is attractive and convenient to the patient </li></ul>Source : Chinese Health Statistics Summary 2005; Digimedex; Medilink Report; Frost & Sullivan Analysis Examples of Key Players in China’s TPA Market China - Role of Third Party Insurance Administrators Examples of TPAs in China Examples of Insurers in China <ul><li>Prestige Health (Swiss Re) </li></ul><ul><li>Digimedex </li></ul><ul><li>Sunnylife </li></ul><ul><li>CIGNA Corp. </li></ul><ul><li>UnitedHealth Group </li></ul><ul><li>Aetna Inc. </li></ul><ul><li>MediLink (MidLink) </li></ul><ul><li>Tiecare and GBG </li></ul><ul><li>WellPoint Inc </li></ul><ul><li>Generali China Life Assurance Company </li></ul><ul><li>Ping An Annuity Insurance Company of China Ltd. </li></ul><ul><li>PICC Health Insurance Co Ltd </li></ul><ul><li>Sunshine Insurance Group </li></ul><ul><li>Generali China Life Insurance Co. Ltd. </li></ul>
  31. 31. Source : Chinese Health Statistics Summary 2005; Digimedex; Medilink Report; Asia Times; Frost & Sullivan <ul><li>Challenges in the Chinese Market </li></ul><ul><li>TPA is in its infancy in China with very few operators currently in existence </li></ul><ul><li>To do business in China, a TPA company must first open a representative office and partner with a Chinese company. Finding the right partner is crucial for success </li></ul><ul><li>There is reluctance among international firms to outsource TPA services to local companies </li></ul><ul><li>Opportunities & Future Trend </li></ul><ul><li>The TPA industry in China is still in its infancy, however, it is perceived to have rapid growth in the near future </li></ul><ul><li>China is an attractive market for many international operators due to its membership potential resulting from: </li></ul><ul><ul><li>Rapid growth in income levels and purchasing power </li></ul></ul><ul><ul><li>Increasing awareness of healthcare benefit schemes </li></ul></ul><ul><ul><li>Higher expectation of better healthcare quality </li></ul></ul><ul><li>Key strategies to succeed in China’s TPA market: </li></ul><ul><ul><li>Presence of infrastructure, proven technology and track record of operations in other countries </li></ul></ul><ul><ul><li>Offers fully automated system </li></ul></ul><ul><ul><li>For new entrants- market entry through strategic partnerships </li></ul></ul><ul><ul><li>Joint-market with Chinese banks is an important factor in achieving market penetration and growth </li></ul></ul><ul><li>According to the U.S. Department of Commerce, the Chinese government is interested in developing its health care and pension insurance sector in order to sustain announced reforms and provide for the nation's aging population. </li></ul><ul><li>The potential value of China's health insurance premium market could reach more than US$17 billion by 2015, triple what it is today, in part due to the aging of China's population and an expanding economy </li></ul><ul><li>China's health care spending is expected to account for 6% to 7% of its GDP, and this could further grow the market for insurance products </li></ul>Healthcare Landscape: Health Insurance Premium Market by Expenditure US$ Bn, (China) (2004, 2008 & 2015) China - Role of Third Party Insurance Administrators (Cont. )
  32. 32. <ul><li>Opportunities in APAC </li></ul>
  33. 33. What drives the Asia Pacific Markets? 1 2
  34. 34. Providers in Asia Pacific: Hospital bed count - A driving factor for investment? Dramatic transformation In bed landscape
  35. 35. The paradigm shift of healthcare from provider to patient centric, centralized to decentralized, have pushed the standards of healthcare in terms of quality and efficiency to a higher level. Hence, value added components, such Health Information Technology, Health BPO (Business Processing Outsourcing) and private health insurance are likely to play significant roles in the transition process. Key Focused Market Segments & Geographies High Market Penetration Rate Low Growth Potential Low High Australia, China, Taiwan, India Indonesia India, Australia, Malaysia TPA Taiwan, Thailand Taiwan, Thailand Singapore, Indonesia, China Singapore, Malaysia, India Thailand, Malaysia, Singapore Least Worthy Challenging Competitive High Priority Australia, China Centralized/Traditional Healthcare Management Non-applicable to Countries – Traditional Healthcare management lacks patient care effectiveness, operational efficiency and market attractiveness PHI = Private Health Insurance, TPA = Third Party Administration, HCIT = Healthcare Information Technology Opportunity Assessment on Emerging Market Segments HCIT HCIT TPA PHI TPA PHI HCIT PHI
  36. 36. Thank You Mr Simranjit Singh Director, Healthcare Asia Pacific Frost & Sullivan DID: 65-6890 0954 Mobile : 65 91473750 Fax: 65-6890 0222 Email: simranjit.s@frost.com