Ministry of Human Resources and Social Security to Take Full Charge of Integrated Urban-Rural Medical Insurance System

Recently, the Ministry of Human Resources and Social Security (MOHRSS) announced that 11 provincial-level administrative regions across China have explicitly stated that the integrated urban and rural resident basic medical insurance will be centrally administered by the human resources and social security departments. Professor Sun Jie, Deputy Dean of the School of Insurance and Economics at the University of International Business and Economics and a director of the China Association of Social Security, analyzed that the issue of administrative authority had long been regarded as the most significant challenge in integrating urban and rural resident medical insurance. The MOHRSS’s rare and high-profile stance signals that the trajectory of this issue has largely become clear, indicating that ultimate centralized administration is highly likely to rest with the human resources and social security departments.

Sun Jie stated that a unified regulatory authority would play a positive role in advancing the direct settlement of cross-regional medical expenses and mitigating the risk of deficits in relevant medical insurance funds, which would undoubtedly have a significant beneficial impact on safeguarding the rights and interests of insured individuals.

All Regions Must Release Health Insurance Integration Plans Next Month

In 2013, the State Council’s institutional reform plan explicitly called for the merger of the urban and rural medical insurance administration systems. However, regarding the reform of the management system for urban and rural resident basic medical insurance—a topic of significant concern within the industry—the “Opinions on Integrating the Basic Medical Insurance Systems for Urban and Rural Residents” (hereinafter referred to as the “Opinions”) issued by the State Council earlier this year did not specify whether the integrated new system would be overseen by the health and family planning authorities or by the human resources and social security authorities. The document merely stated that “regions with favorable conditions are encouraged to streamline the medical insurance management system, unify the administrative functions for basic medical insurance, fully utilize existing operational resources from the urban resident basic medical insurance and the New Rural Cooperative Medical Scheme, integrate operational agencies, personnel, and information systems for urban and rural resident medical insurance, standardize operational procedures, and provide integrated operational services.” Previously, industry experts had predicted that determining the competent authority would be the greatest challenge in integrating the basic medical insurance systems for urban and rural residents.

Notably, although the "Opinions" issued this year do not specify a competent authority, they establish a clear timeline. The document requires all provinces (autonomous regions and municipalities) to formulate plans and arrangements for the integration of urban and rural resident basic medical insurance by the end of June 2016, defining timelines and roadmaps, improving mechanisms for work promotion and performance evaluation, implementing accountability systems, and ensuring the effective implementation of various policies and measures. Each pooling region is required to issue specific implementation plans by the end of December 2016.

According to the Ministry of Human Resources and Social Security, in accordance with the central government’s requirements, localities across China are accelerating efforts to integrate relevant systems, having clearly outlined work arrangements and urgently drafting comprehensive master plans. Notably, the Hebei Provincial People’s Government issued its implementation guidelines for system integration on May 12. Hubei Province’s plan for system integration was reviewed and approved at the ninth meeting of the Provincial Leading Group for Comprehensively Deepening Reforms in early March this year, and further refined at the first meeting of the Hubei Provincial Leading Group for Integrating Urban and Rural Medical Insurance Systems on May 17; it is scheduled to be issued in the near future.

The aforementioned two provinces advanced the integration of the urban and rural resident basic medical insurance systems following the pathway of “centralizing administration first, then integrating systems.” Their integration plans explicitly stipulated that, in accordance with the requirements of the “Opinions,” the administrative functions for basic medical insurance should be streamlined and uniformly assumed by the human resources and social security departments. The integration of the urban and rural resident basic medical insurance systems was to be accompanied by the completion of institutional consolidation in the first half of the year, with a unified policy for urban and rural resident medical insurance implemented starting in 2017.

On May 20, the Ministry of Human Resources and Social Security (MOHRSS) disclosed for the first time that following the issuance of the State Council’s “Opinions” in January this year, Hebei and Hubei provinces took the lead in clarifying that the integrated urban and rural resident basic medical insurance system would be uniformly administered by the human resources and social security departments. Together with Tianjin, Shanghai, Zhejiang, Shandong, Guangdong, Chongqing, Ningxia, Qinghai (eight provinces, autonomous regions, and municipalities directly under the central government) and the Xinjiang Production and Construction Corps, which had already achieved province-wide unified planning of urban and rural medical insurance prior to the issuance of the “Opinions,” a total of 10 provinces, autonomous regions, municipalities, and the Xinjiang Production and Construction Corps have now realized unified administration of the three major urban and rural medical insurance programs by the human resources and social security departments, thereby eliminating institutional barriers.

Expert Analysis

Insured individuals' personal rights and interests will remain unaffected.

Currently, China’s three major medical insurance schemes in urban and rural areas consist primarily of the Urban Employee Basic Medical Insurance and the Urban Resident Basic Medical Insurance, both administered by the human resources and social security departments, as well as the New Rural Cooperative Medical Scheme (NRCMS), which is managed by the health and family planning departments. Sun Jie stated that the NRCMS, introduced earlier by the former health authorities, has been well-managed. However, the Ministry of Human Resources and Social Security serves as the primary regulatory body for China’s five major social insurance programs. Sun Jie predicts that the recent high-profile stance taken by the Ministry of Human Resources and Social Security has largely clarified the direction regarding the supervisory authority, namely that unified management will fall under its jurisdiction. She analyzed that, similar to how social insurance premiums are collected by human resources and social security departments in some regions while by tax authorities in others, the competent department overseeing relevant social insurance categories remains the human resources and social security department rather than the tax authority. Therefore, following the integration of urban and rural resident medical insurance across various localities, the supervisory authority should likewise be the human resources and social security department.

Sun Jie further stated that, regardless of how local policies are designed—even with minor variations—they are not expected to affect the overall implementation of the policy or compromise the individual rights and interests of relevant insured persons.

Centralized Management Facilitates Direct Settlement for Cross-Regional Medical Care

Premier Li Keqiang raised the issue of direct settlement for cross-regional medical treatment this year, stating that efforts would be made to achieve cross-regional health insurance settlement within two years. At the first-quarter press conference held by the Ministry of Human Resources and Social Security in April, its spokesperson Li Zhong also acknowledged that since the launch of the new healthcare reform, direct settlement for cross-regional medical treatment has been the issue most strongly voiced by the public and simultaneously the most challenging to resolve.

To facilitate the direct settlement of medical expenses for cross-regional healthcare, the Ministry of Human Resources and Social Security decided to achieve direct settlement of hospitalization costs for retirees residing in different locations by 2016, and to basically realize direct settlement of hospitalization costs for insured individuals receiving cross-regional care under referral conditions by 2017.

To achieve this objective, the Ministry of Human Resources and Social Security is accelerating the development of a national system for the direct settlement of cross-regional medical expenses. Leveraging the Golden Insurance Project’s dedicated business network and using the social security card as the primary medium, the ministry is further refining technical standards to establish a robust national platform for cross-regional medical expense settlement. Meanwhile, it is guiding local authorities in implementing related tasks, with particular emphasis on improving intra-provincial cross-regional settlement systems and ensuring their seamless integration with the national-level system. Finally, in collaboration with relevant departments, the ministry is studying further improvements to the revolving fund mechanism and the tiered diagnosis and treatment system, including policies to strengthen supervision of medical services, thereby facilitating effective cross-regional medical expense settlement.

Sun Jie analyzed that the issue of direct settlement for cross-regional medical treatment inherently involves numerous challenges, including system interoperability, coordination, and authentication across different regions. If the administrative departments overseeing medical insurance remain inconsistent even after regional integration, this would undoubtedly create new technical and administrative barriers to direct settlement for cross-regional care. To facilitate the rapid advancement of direct settlement for cross-regional medical treatment, it is essential to establish unified management under a single department following the integration of the basic medical insurance systems for urban and rural residents.

Raising the Level of Pooling Can Prevent Fund Depletion

In February this year, the Ministry of Human Resources and Social Security published an article on its official website stating that the scale of social insurance financing in China is comprehensively influenced by various factors, including demographic structure, the model of the social security system, coverage scope, and benefit programs. Currently, as population aging intensifies in China, the room for expanding coverage and collecting social insurance premiums is shrinking, while benefit levels across various social insurance schemes continue to rise, placing increasing pressure on the balance between revenue and expenditure of social insurance funds.

The Ministry of Human Resources and Social Security stated that, taking medical insurance as an example, against the backdrop of rapidly rising healthcare costs across China, the basic medical insurance fund, like the pension insurance fund, is facing increasing payment pressure. The growth rate of expenditures has surpassed that of revenues, with some provinces even experiencing current-period deficits, thereby heightening the risk of fund insolvency. This situation stems from the relatively low level of pooling in medical insurance, which has only been implemented at the prefecture-level city level, leading to imbalances between revenue and expenditure in certain areas. The causes are multifaceted, including variations in demographic structures across regions—such as a higher proportion of retired employees, particularly in old industrial bases—as well as issues of over-treatment. The Ministry of Human Resources and Social Security will adopt comprehensive measures to address these challenges.

Sun Jie stated that China has been continuously raising the pooling level of social security funds to mitigate the risk of fund deficits. For instance, after upgrading to provincial-level pooling, if a city experiences excessively rapid fund expenditures and faces a shortfall, surplus funds from other cities within the province can be allocated for emergency purposes.

Sun Jie stated that after the integration of the basic medical insurance systems for urban and rural residents, unified management by a single department enables the pooled use of funds from the former Urban Resident Basic Medical Insurance and the New Rural Cooperative Medical Scheme. This approach is undoubtedly more beneficial for preventing fund overdrafts in specific categories or regions and for ensuring the financial security of the funds. Therefore, from this perspective, the unified management of the integrated urban and rural resident medical insurance system by a single department also contributes to fund security and mitigates the risk of excessive fund expenditures.

Beijing Medical Insurance Integration May Include a Transition Period

"Sources familiar with the matter revealed that Beijing’s preliminary intention is to recommend unified administration by the human resources and social security department following the integration of the urban and rural resident basic medical insurance systems."

It is understood that, given Beijing’s specific characteristics, the city has a significantly larger population of urban residents with local household registration (hukou), while the number of farmers is relatively small. With the conversion of the last two counties into districts and the acceleration of urbanization, the number of urban residents in Beijing is expected to continue rising. Meanwhile, the human resources and social security authorities oversee a broader range of social insurance programs and larger fund pools, and have accumulated relatively mature management experience.

Therefore, if the integration of urban and rural resident basic medical insurance systems is placed under the unified administration of the human resources and social security departments, it will help strengthen the management of social security work. Moreover, single-department management can avoid the problem of fragmented oversight by multiple agencies, thereby making the administration of relevant social insurance programs more efficient and policies fairer and more reasonable.

According to the insider, the integration of the basic medical insurance system for urban and rural residents has facilitated the issuance and management of social security cards, particularly in expanding their functionalities. He believes that, currently, the social security card should be considered the most essential citizen card in China, second only to the resident identity card. In May this year, the Ministry of Human Resources and Social Security announced that the national target for social security card issuance had been exceeded, with the number of cardholders across China reaching 909 million. The Ministry had previously issued the “Opinions on Accelerating the Application of Social Security Cards,” proposing the gradual integration of social security cards, medical visit cards, and bank cards into a single card, or at least achieving a “one-card” solution for medical treatment.

Taking Beijing as an example, although the human resources and social security departments issued social security cards for employee basic medical insurance and urban resident basic medical insurance, and the health and family planning departments issued such cards for the New Rural Cooperative Medical Scheme (NRCMS), second-generation social security cards with financial functions remain relatively scarce in the city. The vast majority of existing cards are first-generation ones without financial capabilities. Integrating the urban and rural resident medical insurance systems under the unified management of a single department would facilitate coordinated planning and implementation of functional upgrades during the transition to next-generation social security cards.

However, the insider also revealed that, to ensure no interruptions or pauses in relevant work during the integration of the Urban and Rural Resident Basic Medical Insurance scheme with the New Rural Cooperative Medical Scheme (NRCMS), and to safeguard the rights and interests of insured individuals, the relevant authorities are expected to issue an interim measure. By establishing a transitional period, this measure aims to facilitate a smooth transition for the city’s urban and rural resident medical insurance system in terms of policy alignment and workforce integration.