In Depth: Byzantine Billing System Holds Back Chinese Hospitals’ Embrace of Private Insurance

Summary:

In recent years, the landscape of health insurance and hospital funding in China has experienced notable transformation. The expansion of high-end commercial health insurance coverage has been observable at key medical institutions in Beijing, such as Peking Union Medical College Hospital, where an increasing number of patients now use private insurance [para. 1]. Traditionally, commercial insurance targeted higher-income and special needs segments, often remaining operationally separate from the public welfare focus of most state-run hospitals. However, recent policy shifts—especially stringent cost-control measures and reforms in state health insurance reimbursement—have resulted in tighter hospital budgets, declining revenues, and reduced investment capacities, despite persistent demand for premium medical care [para. 2][para. 3].

Hospitals nationwide are adapting by establishing dedicated counters and departments for commercial insurance. At Beijing Children’s Hospital, for instance, a commercial insurance helpdesk is prominently placed to assist patients and display participating insurers [para. 4]. This trend is echoed by data from Peking University Third Hospital, where international medical service volume grew by 12.7% in 2024, with commercial insurance patients receiving tailored assistance throughout their visits [para. 5].

Yet, the reimbursement process remains a bottleneck, marked by delays for patients and operational strain for insurers handling mounting claims. As hospital advances to patients increase, industry stakeholders are searching for technological and procedural breakthroughs to streamline the settlement of claims [para. 6].

Direct integration of commercial insurance settlement models offers potential benefits, such as increasing hospital revenue and reducing doctor-patient disputes. Public hospitals are incentivized to enhance their commercial insurance services, sometimes collaborating with insurers to attract new patients. Regulators, spearheaded by the National Healthcare Security Administration (NHSA), support the development of “one-stop” settlement systems that process state, critical illness, and commercial insurance claims simultaneously. Nonetheless, concerns among stakeholders about payout risks, cost of system upgrades, and data privacy issues persist, constraining more rapid adoption [para. 7][para. 8][para. 9][para. 10][para. 11].

At present, most “one-stop” settlement capability is limited to certain insurance products with simpler claim rules, such as supplementary and group plans; broader, deeper integration across all medical services remains a work in progress [para. 12]. Sharing more granular data between hospitals and insurers could further help insurers audit claims and design products for patients with pre-existing conditions, but still faces challenges [para. 13]. The economic potential is significant: in 2025, commercial health insurance premium income is projected to surpass 1 trillion yuan ($141.4 billion) for the first time, underscoring the need to align private insurance with public hospital networks [para. 14].

While public hospitals—especially in second- and third-tier cities—see participation in commercial insurance as vital for future financial growth amid shrinking state funds, the sector is nascent. For example, in Shanghai, special needs services accounted for less than 3% of public hospital medical services, well below regulatory thresholds [para. 16]. Data from Enze Hospital in Zhejiang show gradual improvement: by September, 8,503 patients engaged commercial insurance services online, and nearly 4.9 million yuan in claims had been processed using a “one-stop” settlement system [para. 21].

Coordination hurdles persist, including non-integrated hospital IT systems, the cost of building insurance interfaces, and ongoing concerns about data security and privacy. Insurance companies fear losing auditing powers, while hospitals are wary of data exposure and added disputes. Presently, one-stop settlements apply mainly to inpatient claims, with complex outpatient claims largely unresolved. Some suggest importing stringent state cost controls into the commercial sector to encourage insurer participation in wider hospital coverage [para. 35][para. 36][para. 37][para. 38][para. 39][para. 40][para. 41][para. 42][para. 43][para. 44].

In summary, China’s journey toward integrated commercial health insurance within its major hospital networks is marked by rapid progress, technological innovation, and policy support, but remains constrained by operational, financial, and regulatory hurdles that need further systemic solutions before full-scale adoption is realized [para. 1][para. 14][para. 16][para. 21][para. 35][para. 44].