Topics New Trends in Domestic Private Health Insurance on Access to Health Care Services

Printable PDF

Ryuiku Masuda, Senior Researcher, Pharmaceutical and Industrial Policy Research Institute (PIIPRI)

Introduction

Research on the relationship between the public health care security system and private medical insurance in Japan, or the role that private medical insurance could play in relation to the public health care security system, has not been conducted openly, especially in the pharmaceutical industry. This may be influenced by the consideration that, as Kasagi states, discussing the role of private insurance would, as a precondition, allow the social security system to ^regress1). It goes without saying that the debate on the scope of insured medical benefits is closely related to fundamental themes such as the purpose of Japan's social security system and basic human ^rights2), and that we should not draw easy conclusions about the role of private medical insurance. However, with the government and the Japan Medical Association ^{making clear reference3)} to the need to discuss the benefits and burdens of medical care, it has become necessary to conduct research on matters that could have a significant impact on Japan's pharmaceutical industry and spill over into the benefits and burdens debate. Based on this recognition, this paper looks over previous studies on the function of private medical insurance in the field of healthcare in Japan and analyzes recent trends in private medical insurance.

1. Previous studies on the role of private medical insurance in Japan

There have been several previous studies on the role of private medical insurance in Japan's medical security system, and certain conclusions have been ^reached4). 4) The following is an overview of these studies.

First of all, the terms "public health care security system" and "private health care insurance" are generally defined by the ^{OECD5) , which} focuses on the main source of funds. In other words, the definition of a public health care system is "a system in which the main source of revenue is taxes or income-proportional premiums (taxes)," while the definition of private health insurance is "a system in which the main source of revenue is premiums from private insurance. Based on this definition, the role of private medical insurance can be divided into the five categories shown in the table below, depending on the existence of a public medical security system and the coverage of private medical insurance.

When private medical insurance covers the same coverage as the public medical insurance system, it is considered to be fulfilling a duplicate function. When private medical insurance covers the co-payment portion of the public medical insurance system, it is considered to be complementary, and when it covers additional services not covered by the public medical insurance system, it is considered to be supplemental. In the absence of a public health care coverage system, private medical insurance is positioned as the principal function, and in the absence of access to a public health care coverage system, it is positioned as a substitute function. In each of these cases, private health insurance is positioned to perform the primary function.

The private medical insurance market in Japan is small compared to the U.S. and European countries. Kasagi (2012) attributes this to the structure and design of Japan's social security system. Specifically, he argues that (1) Japan's public medical insurance covers a relatively broad range of benefits, and in principle, public medical insurance has aimed to cover medical procedures and drugs that are deemed necessary and appropriate. (2) In principle, mixed medical treatment is prohibited and the use of free medical treatment is limited to a very narrow range, (3) The price of medical care, including doctors' fees and the price of pharmaceuticals, is uniformly determined by the legislative administration, and it is not assumed in principle that patients will be charged fees in excess of these prices, and (4) A certain amount of partial payment is required to cover the cost of medical treatment. (4) If the partial payment exceeds a certain amount, another monetary benefit is paid (high-cost medical care benefit system), and other measures are taken to prevent the burden from becoming too high. We do not disagree with this analysis. We believe that one of the reasons is that insurance companies handling private medical insurance in Japan do not have, or have never had, the ability to examine individual medical treatment by medical institutions based on their own medical judgment.

In Japan, insurance business is conducted under either a life insurance business license or a non-life insurance business license from the Prime Minister, but so-called medical insurance and cancer insurance are positioned as a "third field" under the Insurance Business Law, and insurance can be underwritten under either ^license6). Insurance products can be broadly classified into two types according to the method of payment of insurance claims: fixed amount payment and actual loss payment, with fixed amount payment being the basic method for third-sector insurance products. Specifically, products that provide benefits for hospitalization and surgery due to cancer or disease, and benefits for diagnosis of cancer and hospital visits due to cancer are generally provided at a fixed amount. In addition, rider for three major diseases (cancer, heart disease, and cerebrovascular disease), rider for advanced medical care, etc., as special clauses, also generally provide fixed ^benefits7). In other words, private medical insurance in Japan mainly serves as a "complementary function to the public medical insurance system through fixed payments.

Under these circumstances in Japan, the conclusions of previous studies on the role of private medical insurance in the public medical insurance system can be summarized as follows. First, there are many cautious opinions about the Substitute or Supplementary function of the public health care security system, and the mainstream of the studies argues that the enhancement of the Complementary function should be considered. Next, it is agreed that, as the functions are strengthened, the method of benefits should be switched to a compensatory type, and benefits should be paid in accordance with actual medical expenses incurred. Another point is that appropriate government involvement is necessary when promoting the use of private medical ^insurance8).

Insurance is a system to distribute among its members the economic burden that arises with the various risks in today's society, and its nature may require a "public" role to maintain the system, such as protecting the economically vulnerable and securing a certain amount of subscribers. Therefore, in the classification of the system, one possible classification is public/private insurance from the contractual aspect that takes public nature into consideration, such as "compulsory enrollment by law, etc." and "possibility of choice of insurer by the insured at the time of enrollment," while another is public/private insurance by the attribution of insurance management ^entity9). When considering the state of public health care coverage and the role of private medical insurance, it is also necessary to consider the roles of public/private and public/private with a view to correcting various failures in the medical insurance market in the face of increasing medical costs caused by the aging of society and advances in medical ^{technology10)}. 10) In this context, the scope of insured medical benefits is an indispensable issue to be discussed.

2. New Product Types of Private Medical Insurance in Japan

As mentioned earlier, the type of private medical insurance in Japan is mainly "complementary" to the public medical security system with fixed payments. However, with the development of insurance products based on ^InsurTech11) in Europe, the U.S., and China, new private medical insurance products are beginning to be developed in Japan. The following is a list of private medical insurance products launched in Japan in recent years that are considered to embody the new concept.

(1) So-called health-promotion insurance

So-called health promotion insurance products, in which premiums are increased or decreased, or premiums are refunded, depending on changes in the results of health checkups or on health promotion-related behaviors such as taking health checkups or walking, have been developed and launched in Japan. These products are considered new in that the insurance products are designed in such a way that, as a function, the insurance products are linked to premium payments to motivate subscribers to take actions to maintain and improve their health. Wu et al. also point out that "the strengthening of health care business initiatives by life insurance companies in recent years can be viewed as an effort to shift from the traditional insurance value proposition of "preparation for possible risks" to a value proposition to satisfy customers' more intrinsic desires to "stay healthy in mind and body" and "lead a fulfilling life (improvement of quality of life). ¹²⁾. Some of these insurance products also incorporate products and solutions from the healthcare field into the overall product design. We believe this is noteworthy for providers of products, services or solutions in the healthcare sector. While there are many products and services in the healthcare sector that have not been approved under the Pharmaceutical Affairs Law, the inclusion of such products and services in insurance products by private health insurance companies could help consumers select products and services. In other words, there is no denying the possibility that private insurers could "endorse" products and services in the healthcare field.

For example, the "Vitality" product launched by Sumitomo Life Insurance Company has been used in a cumulative total of 350,000 cases since its launch in July 2018, and the results of changes in customer awareness, behavior, and health status as a result of the expansion of health promotion have been ^disclosed13).

2) So-called Peer-To-Peer insurance

On January 28, 2020, newspapers reported that insurance startup justInCase Inc. launched "Warikan Insurance," the first Peer-To-Peer insurance ("P2P insurance") in ^Japan14). This "Wari-Kan Insurance" has been certified as a "P2P-type insurance" under the New Technology Demonstration System (regulatory sandbox system) ¹⁵⁾. The ^{explanation16)} is that "P2P insurance collects premiums after the fact based on the total amount of insurance claims actually paid divided by the number of policyholders. In general, P2P insurance is a typical application of InsurTech, which is described as the sharing economy applied to insurance. In other words, a group of people who are interested in a particular risk, such as through friends or social networking ^sites17), become insurance subscribers and share the risk. Premiums are paid by the policyholders after an accident occurs. As the role of the insurer is partly assumed by the interconnectedness of the insurance subscribers, the operating costs of the insurance business are lowered, and coverage can be provided at relatively low premiums. Thus, P2P insurance is a new type of insurance in which business is completed on the Internet by applying InsurTech and SNS, and costs are ^lowered18). The "Warikan Insurance" is an insurance product exclusively for online application, with the possibility to join and be insured if you are between 20 and 74 years old and have never been diagnosed with cancer (malignant neoplasm or epithelial cancer), hospitalized for cancer, or operated on for cancer. The insurance period is one year (renewable) and a fixed lump-sum cancer diagnosis payment is ^{guaranteed19)}.

P2P insurance like Warikan Insurance has already been sold outside of Japan, and one of the most famous products is "Mutual Bao" (mutual prosperity) sold by Alibaba Group in China.

Mutual Bao is not an insurance product, but rather an "Internet Mutual Aid Plan" that closely resembles insurance. Mutual Bao" covers about 100 serious illnesses, including cancer and malignant tumors, and provides benefits in the event of illness. Alibaba's payment application, ALIPAY. In other words, the service can be viewed as a platform service of the Alibaba Group's "ZipBao" platform. The cost of the coverage is shared equally among members, and is said to be unbelievably low compared to general private-sector insurance products. The number of Mutual Treasure members is growing, reportedly reaching over 50 million as of April 2019 and over 100 million by December ^201920). Katayama points out that the majority of members are from rural areas, with 30% of rural residents and 50% of migrant workers living in cities, and that "the significance of giving these people, whose incomes are not relatively high, the option of not having to give up treatment for economic reasons, even if they suffer from cancer or a serious disease that is expensive to treat, is great. The significance of this is great," he points ^out21).

In China, "Ziptobao" as well as the e-commerce company "Jingdong" and the insurance company "Ping An Insurance" have also made business by integrating services into their platforms at each stage of medical treatment, such as medical appointments, consultation, payment, obtaining prescriptions, and receiving medicines. Considering how products and services in the healthcare field can be integrated into platforms, it is necessary to keep a close eye on new medical insurance products such as P2P insurance.

Thus, new medical insurance products such as health promotion insurance and P2P insurance are being developed in Japan. In this trend, it is important to point out that private insurance companies can build closer relationships with insured persons and consumers. In the case of health-enhancing insurance, various information on the health of the insured will be accumulated by the insurance company as data. In P2P insurance, insured persons can build a relationship with each other through SNS, etc. Interactive elements are added to the insurance product, which is considered to be a clear departure from conventional products.

Conclusion

In this paper, we have reviewed previous studies on the role that private medical insurance can play in relation to the public medical insurance system in Japan, and presented a new type of private insurance product that can be considered new. Private medical insurance in Japan has developed outside the broad benefit coverage of public medical insurance, based on the idea that, in principle, medical procedures and drugs deemed necessary and appropriate should be covered by public insurance. If we want domestic private medical insurance to play a further role that it can play in relation to the public health care security system, it will be necessary to hold a national debate on how public insurance benefits should be covered.

On the other hand, new insurance products such as health promotion insurance and P2P insurance are being developed given various regulations. These insurance ^products22) may be particularly closely related to the development of the non-prescription drug business, which pharmaceutical companies are developing ^{as Beyond-The-Pill23)}. It is also important for private insurers to establish business models and insurance products for the near future, one type of which is "the provision of ever-uploading state-of-the-art medical and other medical care and related healthcare services on favorable terms (priority access opportunities, fees, information costs, etc.) (conventionally, a fixed amount of insurance coverage) ²⁴⁾. Some pundits have We believe that new private medical insurance products such as those exemplified in this section will explore new roles in the field of healthcare by utilizing various types of health information interactive, a trend that should be closely watched by the pharmaceutical industry. In considering how to secure the access of citizens and patients to future healthcare services (including medical care and pharmaceuticals in a broad sense), it will be necessary for all parties concerned to discuss and devise ways to transcend conventional industries and positions, including the perspective of utilizing private medical insurance.

Return to News List

TOP