Three Innovative Cases of Using Health Insurance to Optimize Medical Resources: Breaking Through Data, Product, and Channel Pain Points

China's current healthcare security system features a structure with urban and rural medical assistance mechanisms as the safety net, basic medical insurance as the primary component, and commercial health insurance as supplementary coverage.

Basic medical insurance provides “basic” coverage, reaching over 95% of the population, but its limited scope fails to adequately meet people’s healthcare protection needs. Meanwhile, many individuals are deterred by high medical costs and turn to mutual aid organizations and online crowdfunding for support. Commercial health insurance is still in its early stages, accounting for less than 5% of total medical expenditures, with a long road ahead.

With the establishment of a broadly covering basic medical insurance network, the management of medical insurance funds has entered an era of refined governance. Reforms in payment methods are being explored through diverse approaches, drug price negotiations and centralized procurement are being organized, and commercial insurance companies are participating in the administration of basic medical insurance. Meanwhile, the commercial health insurance sector is flourishing, continuously improving its product and service systems through technological empowerment and close collaboration with healthcare institutions. A multi-tiered and diversified medical security system is taking shape.

The development of commercial health insurance can be summarized by a series of keywords: data, products, channels, scenarios, services, and technology. Behind each keyword lies extensive exploration and practice by relevant companies. In this article, VCBeat (WeChat ID: vcbeat) will provide an overview of the health insurance industry’s development by interpreting these keywords and incorporating innovative case studies.

According to data from the China Banking and Insurance Regulatory Commission (CBIRC), the original insurance premium income from health insurance business reached RMB 544.813 billion in 2018, a year-on-year increase of 24.12%. Claims and benefit payments for health insurance business amounted to RMB 174.434 billion, representing a year-on-year growth of 34.72%.

A comparison of historical data reveals that in 2012, the gross written premiums for domestic health insurance amounted to only RMB 86.277 billion. From 2013 to 2018, the compound annual growth rate (CAGR) of new health insurance premiums reached 35.95%. Based on this calculation, the scale of annual new health insurance premiums in the domestic market is projected to reach one trillion yuan by 2020 at the earliest.

From an industry perspective, the following favorable factors are present:

First, China’s economy is growing steadily, household disposable income is rising, and the willingness to purchase insurance is strengthening. International experience also indicates that when per capita GDP approaches $10,000, spending on healthcare and other related sectors will increase;

Second, demographic shifts, particularly the accelerating aging of the population, have increased the financial burden on families, prompting a growing number of households to purchase protection-oriented insurance and health insurance products.

Third, policy-driven incentives have played a key role. Measures such as encouraging the development of an insurance service sector commensurate with China’s economic development level, continuous improvement of the regulatory and governance framework, and the introduction of policies like “C-ROSS II” (China Risk-Oriented Solvency System Phase II) and “Insurance Should Focus on Protection” have steered the industry back to its core protective function, thereby promoting healthy and sustainable growth in the insurance sector.

From the demand side, the continuous advancement of precision medicine, biopharmaceuticals, and technology-driven healthcare has addressed many unmet clinical needs, while simultaneously raising the level of medical expenditure. Driven by the desire for financial protection, residents have shown a willingness to purchase supplemental medical insurance. More importantly, since the approval of China’s first professional health insurance company in 2005, the health insurance product and service ecosystem has been continuously improved. Furthermore, internet insurance platforms have further contributed to market education, stimulating a growing demand for health insurance products.

Significant progress has been made, yet numerous challenges persist. These include severe product homogenization, with insufficient differentiation among insurance products offered by different companies and targeting diverse insured groups. Long-term critical illness insurance policies, which combine health protection with savings features, have become the flagship products, leading to a pronounced trend of “life insurance-ization.” In terms of distribution channels, there is an overreliance on traditional life and property insurance agents, resulting in a lack of professional expertise. Additionally, the sector faces difficulties in data acquisition, lags in risk control measures, and a low level of intelligence.

Furthermore, the integration between health insurance and medical services remains weak. Within China’s public hospital-dominated system, public medical institutions are overwhelmed with patients and place little emphasis on the customer traffic generated by health insurance products, resulting in an asymmetrical relationship between the two parties. Meanwhile, there is a lack of private medical service systems aligned with commercial health insurance. Although numerous private medical institutions exist, they lag behind in both medical resources and clinical expertise.

Another issue is that the role of insurance payment as a hub for resource allocation has not been fully realized. In foreign countries, health insurance companies have the ability to regulate medical service resources through payment mechanisms and negotiate prices with pharmaceutical and medical device manufacturers. Domestic insurance companies in China have not fully leveraged their capabilities in this regard.

Zheng Rongchang, Vice Chairman of the Chinese Chamber of Commerce in the UK and President of International Business at Zhonghong International Health Industry Co., Ltd., has extensively studied healthcare security systems in regions such as the United Kingdom, the United States, and Taiwan, China. He also told VCBeat that regardless of whether national health insurance serves as the primary coverage, commercial health insurance can play a role in regulating the allocation of medical resources.

Taking the United Kingdom as an example, the country adopts a national health insurance model, with commercial health insurance serving as a supplement. This supplementary coverage can reimburse medical expenses incurred at private healthcare institutions, thereby enhancing service experience. Additionally, it provides critical illness insurance and disability income insurance to safeguard the rights and interests of individuals suffering from severe conditions. The enrollment in commercial health insurance reaches approximately 10% of the total population.

“Some hospitals in the UK are jointly funded by commercial insurance companies and the government. Apart from reserving a portion of beds for insurance clients, the remaining beds are operated by the government to ensure their public service nature,” said Zheng Rongchang.

“Furthermore, health insurance can be integrated with a wide range of broader healthcare products and services, such as medical tourism. With over 500,000 Chinese travelers going abroad annually for medical purposes, insurance plans can be designed to cover this segment, thereby enhancing service experience and strengthening the protection system,” said Zheng Rongchang. He added that future health insurance operations must adopt an “industry-oriented” mindset to fully leverage resources across the broader healthcare industry.

Through ongoing dialogue with health insurance industry professionals, VCBeat has identified a series of key terms shaping the sector’s development, including data, products, distribution channels, scenarios, services, and technology. Some of these keywords reflect current phenomena in the health insurance landscape, while others point to future trends.

Regarding data, industry experts point out that the reason why differentiated products have not yet been developed, or why there are significant concerns about insuring individuals with pre-existing conditions, is the lack of medical data. It is well known that insurance is essentially a financial betting product. If insurance companies lack data support, they will find it difficult to perform effectively in both actuarial calculations and product design, much like "a clever housewife cannot cook without rice."

Medical data originates from healthcare institutions and medical insurance settlement systems. Not only do few commercial health insurers have access to this data, but even when access is granted, the non-standardized and unstructured nature of hospital data poses significant challenges to its application. Furthermore, issues such as insurance fraud and the shared use of medical insurance cards by multiple individuals present additional obstacles to leveraging medical insurance settlement data. Fortunately, the national government is currently promoting a strategy for big data in health and medicine, which will facilitate the governance and application of medical data.

In terms of distribution channels, traditional commercial health insurance relies on the sales networks of life and property insurance. However, since health insurance premiums are generally lower than those of life and property insurance, commission rates are also lower, resulting in weak motivation among agents to promote these products; consequently, health insurance often becomes a "bundled" product attached to life insurance policies. While internet insurance platforms have seen some development, the purchase of health insurance requires professional guidance, and inadequate disclosure practices, along with frequent disputes during the claims assessment process, remain significant issues. The promotion of health insurance products still necessitates the establishment of specialized agent teams and operational staff.

Furthermore, the construction of health insurance scenarios is crucial. Qiu Qingfeng, Chairman of Medvalues Health, noted in an interview with VCBeat that while major insurers currently offer robust insurance plans and can rapidly launch new products—making the product side less of a concern—significant challenges remain in implementation. For instance, in the B2B medical liability insurance sector, hospitals are often reluctant to purchase coverage, insurers incur losses, and claims settlement outcomes are unsatisfactory. Scenarios are therefore vital; they must ensure a balanced distribution of interests among all stakeholders while maintaining full legal and regulatory compliance.

Technology-Enabled Insurance Is an Industry Consensus. First, artificial intelligence can help insurance companies reduce costs. A recent study by Accenture shows that by streamlining administrative processes, insurers can leverage AI technologies to save $7 billion within 18 months. Specifically, for every 100 full-time employees, health insurers can save $15 million simply by automating routine tasks.

Furthermore, artificial intelligence can help insurance companies improve consumers’ overall health. Christer Johnson, Principal for Healthcare Data and Analytics Advisory at Ernst & Young, stated, “We are seeing a growing number of insurers investing in artificial intelligence to deliver better customer experiences and continuously improve patient health outcomes.”

Health insurers have recognized the potential of artificial intelligence (AI) technology and have already taken action. A survey by Accenture found that approximately three-quarters (72%) of health insurance executives stated that investing in AI would be one of their top three strategic priorities for 2019.

From a service perspective, managed care insurance represents the primary direction for future development. Established models already exist in the United States, such as Kaiser Permanente and UnitedHealth Group, while newer entrants like Oscar Health and Clover Health also advocate for a model that reduces disease risk and controls medical expenditure through proactive health management of insured individuals. In China, Ping An Health Insurance and Ping An Good Doctor, as well as PICC Health and the PICC People’s Health App, represent innovative initiatives within large health insurance companies. With the advancement of the Internet of Things (IoT) and wearable devices, the “insurance + health management” model is expected to become increasingly mature.

Innovate where the pain points lie. The health insurance industry is no exception; these keywords represent both challenges and opportunities for breakthrough innovation. Many companies are driving innovation around key segments of health insurance, as illustrated by the following outstanding cases.

Xiao Xiong Bao is a life insurance transaction service provider, dedicated to offering users a closed-loop insurance purchasing experience. Starting with protection-oriented life insurance, it provides carefully selected, high-quality insurance products. Currently, it has introduced more than ten insurance products, including critical illness insurance, medical insurance, accident insurance, life insurance, and travel insurance.

Li Zhishan, Founder and CEO of Xiao Xiong Bao, graduated from the Communication University of China. He previously served as a financial journalist for Phoenix New Media, Sina, and NetEase, and held the position of Head of Brand Public Relations at a major domestic internet insurance platform. Since 2017, he has been dedicated to the popularization of insurance knowledge. He is the operator of the WeChat official account “Shen Ge Du Bao,” a columnist on Xueqiu and Zhihu, a contracted author for Ant Fortune, and the most popular insurance knowledge instructor on Zaihang Yidian. He possesses extensive experience in insurance product operations, promotion, and customer service.

The Xiaoxiong Bao team comprises members from renowned Chinese companies such as NetEase, Sina, and Ping An, bringing extensive experience in the development, operation, and service of internet insurance products. The team currently consists of approximately 10 members.

Li Zhishan told VCBeat that Xiaoxiong Bao primarily targets users born in the 1980s and 1990s, with a majority being female. As digital natives, this demographic exhibits high acceptance of internet-based channels. As they age, start families, and establish their careers, these individuals have growing needs for insurance coverage but lack access to systematic and professional platforms. The emergence of online insurance platforms has effectively met this demand.

Xiaoxiong Bao’s closed-loop service begins with insurance education, featuring text, images, audio, and video content to help potential users better understand insurance products and address their queries. Subsequently, Xiaoxiong Bao “carefully selects” insurance products and designs tailored coverage plans to alleviate users’ decision-making difficulties.

Li Zhishan told VCBeat that the internet insurance sector has already seen the emergence of many mature companies, including Xiao Yusan, Da Te Bao, and Huize.com, all of which have proven operational expertise. Overall, China’s health insurance market is still in a growth phase; while internet insurance currently accounts for a small share of the total market, it holds significant room for expansion and promising future prospects. Throughout the entire insurance lifecycle, service plays a critical role, which is also the key differentiator that Xiaoxiong Bao aims to build.

To date, the Xiaoxiong Bao platform has been operational for over six months. It has established partnerships with multiple domestic insurance companies, offers dozens of life insurance products, and has served thousands of customers. In terms of financing, Xiaoxiong Bao previously secured angel funding from industry insiders, and its latest round of financing is currently underway.

Medvalues Health is a U.S.-based online platform for medical consultations and prescription purchases. Its primary business model integrates payment channels with over 95% of pharmacies nationwide, enabling users to pay discounted prices online and pick up medications at any participating pharmacy. Additionally, it assists Chinese insurance companies in establishing overseas healthcare provider networks to facilitate coordinated care and direct billing for travelers visiting the United States.

Medvalues Health founder Zhang Shengri graduated from Shandong Medical University, later established a medical education institution in Beijing, and went to the United States in 2006 to complete his MBA, where he was responsible for financial operations at a local bank. Medvalues Health was founded in 2016, with its other two core team members being senior executives with extensive experience in the insurance and pharmaceutical industries.

Zhang Shengri told VCBeat that Medvalues Health secures industry resources by partnering with insurance TPAs (Third-Party Administrators) and PBM organizations, while also aggregating physician resources across the United States. On the front end, the platform primarily targets non-U.S. citizens, non-green card holders, and individuals without commercial health insurance. Users can search for and schedule appointments with doctors via the app. For medication purchases, users who pay online and pick up their prescriptions in-store are eligible for discounts.

Approximately 12% of U.S. residents are not enrolled in commercial health insurance plans. Meanwhile, around 12 million non-U.S. citizens and non-green card holders fall outside the coverage of these insurance plans, thereby missing out on insurer-negotiated discounts. Medvalues Health is fundamentally dedicated to helping this population reduce their healthcare costs.

We can take a comprehensive look at Medvalues and GoodRx, another U.S.-based drug price comparison platform. Founded in 2011, GoodRx primarily helps users compare drug prices and access coupons, and its current valuation is approaching $3 billion. While both Medvalues and GoodRx track drug prices, they differ in that Medvalues also provides healthcare services, offering a more comprehensive suite of services.

The complex drug pricing rules in the United States provide fertile ground for price-comparison applications. The price of the same medication can vary by a hundredfold across different channels, and even insured individuals often face high co-pay costs. Pharmacy Benefit Managers (PBMs) hold drug pricing power and secure substantial rebates from pharmaceutical manufacturers, which constitutes a core component of their business model. Medvalues Health collaborates with PBMs to expand its service coverage to insured populations, particularly those with high-deductible health plans, thereby tapping into incremental market growth.

Additionally, Medvalues has established a branch in Beijing and collaborates with insurance companies. If insured clients require medical treatment in the United States, Medvalues provides end-to-end accompaniment services. Regarding payment, Medvalues partners with select hospitals to build a direct billing network and assists insurance companies with claims adjudication. Its jointly developed product with PICC (People’s Insurance Company of China) has already been launched, while collaborations with several other insurance institutions are currently underway.

Zhisan Technology is committed to introducing advanced international commercial health insurance models to China, providing a accountable care organization (ACO) technology engine for various medical institutions and insurance companies. The company focuses on integrating value-based healthcare with digital technology, deeply cultivating scenario-based channels in the healthcare sector. Leveraging its medical care network and algorithm-centric approach, it aligns the overall interests of healthcare payers and providers, establishing itself as an emerging insurtech enterprise in China driven by medical value.

Zhisuan Technology was co-founded by Cheng Hong and Zheng Jie, both of whom are seasoned veterans in the medical insurance industry. Mr. Cheng graduated early in his career from Shanghai Jiao Tong University School of Medicine. He later earned an MBA from the MIT Sloan School of Management in the United States and a Master’s degree in Health Sciences from Harvard Medical School. Mr. Cheng has held various senior positions, including Director of International Strategic Planning, Vice President, and Managing Director for Greater China at Aetna Inc., as well as Asia-Pacific Managing Director of International Population Health Services.

Zheng Jie is a senior actuary with 20 years of industry experience. Prior to founding Zhisuan Group, Mr. Zheng spent nine years at Aetna Inc., where he held several key positions: Project Leader for Health Reform at Aetna’s headquarters; Regional Actuary and Assistant President overseeing nearly $5 billion in annual premiums for group commercial health insurance in the Western and Central United States; Chief Actuary and Assistant President for Individual Health Insurance at headquarters; and Departmental Actuary in the Corporate Health Management Division, responsible for product development and the establishment of underwriting systems. He also served as Vice President and Chief Actuary of Global Health Insurance at American International Group (AIG), supporting the expansion of AIG’s health insurance business in the United States and other key global markets.

Discussing the origins of his entrepreneurial journey, Cheng Hong told VCBeat that as early as mid-2004, he had conceived the idea of developing health insurance business in China. At that time, the first batch of professional health insurance companies in China had just been approved for establishment, and Cheng Hong intended to introduce U.S. health insurance management expertise and capital into the Chinese market. The initial project he engaged with was Ping An Health Insurance, with plans to inject capital; however, the deal fell through because the U.S. management team could not commit to working full-time in China as required by Ping An Group. He then facilitated a partnership between China Life Insurance and Aetna to launch the first global medical insurance product in China, after which he joined Aetna Group on a full-time basis.

In March last year, the establishment of the National Healthcare Security Administration signaled the state’s heightened emphasis on the management of medical insurance funds, while also encouraging private capital to enter the health insurance sector to build a multi-tiered and diversified social medical security system. This development presented an opportunity for Cheng Hong and his team, leading to the founding of Zhisuan Technology. “We have been tracking China’s health insurance industry for over a decade and believe that an unprecedented historical turning point has arrived. Medical insurance requires refined management, and commercial health insurance has reached a critical juncture for leapfrog development,” said Cheng Hong.

Cheng Hong believes that the future operational mechanism of commercial health insurance will be “modular.” Similar to the smartphone industry, ecological collaboration within the health insurance sector will become a prevailing trend. “Traditional health insurance is dominated by life insurance companies, which handle product development, actuarial calculations, underwriting, and claims assessment. However, the design and operation of health insurance products are far more complex than those of life insurance. It is difficult for a single company to manage all aspects effectively, necessitating the construction of an industry ecosystem to collaboratively optimize products and services. Providing ‘empowerment’ across the entire lifecycle of health insurance products presents a significant business opportunity,” said Cheng Hong.

Specifically, at the product and service levels, Zhisuan Technology focuses its efforts on three key areas. First, from the perspective of value-based healthcare, it aligns the interests of healthcare payers and medical institutions, enabling them to share risks and benefits, thereby allowing insurance customers to access higher-value healthcare services at a lower cost.

Cheng Hong stated that Zhishuan Technology has been committed to working with ecosystem partners to actively explore innovative commercial insurance payment models that align with the nation’s latest healthcare reform and social security policies. As a professional insurtech provider, Zhishuan Technology is currently collaborating with a benchmark model of national healthcare reform and a nationwide insurance company to jointly explore the commercialization path for supplemental coverage under this model. The company is dedicated to developing China’s first value-driven, accountable care organization (ACO)-based commercial supplemental health insurance plan, which features deep integration with medical institutions.

The second pillar of Zhisuan Technology’s business is the development of commercial health protection plans that integrate scenario-based channels, data, services, and insurance. The company has collaborated with nearly ten large domestic and international reinsurance and direct insurance groups to co-develop multiple value-driven innovative health protection products, including managed care insurance and managed maternity health insurance.

Furthermore, Zhisuan Technology has secured primary agency rights with a major U.S. healthcare network. It is the only technology company capable of enabling Chinese insurers and Third-Party Administrators (TPAs) to establish real-time data interoperability with 99% of U.S. healthcare institutions via Electronic Data Interchange (EDI), thereby laying the foundation for the globalized management and operation of Chinese health insurance products. “The integration of high-quality medical resources benefits from our team’s years of experience in the U.S. insurance industry. Access to such data helps domestic insurers better design overseas medical insurance products and assists policyholders in obtaining cost-effective overseas medical services,” said Cheng Hong.

Zhijuan Technology currently has a team of nearly 30 full-time and part-time employees, with major costs allocated to building medical networks, developing information systems, and establishing professional teams. The company secured angel investment from well-known industry investors at its inception, and its next round of financing is imminent. Regarding future plans, Cheng Hong stated that Zhijuan Technology will continue to maintain its status as an independent third party, focusing on value-based healthcare to provide a more diversified innovation engine for the development of China’s health insurance industry, encompassing products, medical networks, and population health services.