Actuarial Volunteers in a Kids Charity Program

Actuaries in China launch a critical illness medical care charity fund Fan Xiao, Jiangang He and Jun (Forest) Wang July 2020

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Photo: iStock.com/Hispanolistic

In recent years, the social medical care in China has increased rapidly. However, the treatment costs for critical diseases are still unaffordable to many low-income families. Especially in rural areas, once children get a serious illness, they are usually not treated in a timely manner and may even be abandoned by their parents in some extreme cases.

Statistics tell the truth:

• 54 percent: The death rate of critically ill children in a poor rural area in China is 54 percent.
• 9 times: The death rate of children with critical illness in poor rural areas is about nine times higher than that in urban areas in China.

Data source: Proposal for Children’s Hope Relief Fund to Establish National Children’s Medical Insurance System on Feb. 28, 2011 (when the program initiated).

After seeing this phenomenon in 2012, Fei Deng, a well-known key opinion leader (KOL) on Weibo, called for news media, public welfare people and the China Charities Aid Foundation for Children (CCAFC) together to launch a critical illness medical care charity fund, aiming to solve the medical problems of children with critical illness in rural areas. They finally decided to cooperate with insurance companies by using the charity fund to purchase insurance, which would cover the extra medical expenses that cannot be reimbursed by the basic social insurance. The plan is expected to save children’s lives in poor areas.

At first, they found several people with an insurance background and then posted the initial insurance proposal on Weibo. It was a standard critical illness (CI) coverage plan. Jiangang, an FSA who was very familiar with CI, happened to read the post. Based on his knowledge, he believed it wasn’t the coverage they need. So he contacted the organizer on Weibo, and they had a long phone call that changed several actuaries’ lives. This charity program was later named Rural Kids Care, which was suggested by a Canadian actuary, because it got the highest votes on Weibo.

Jiangang was then authorized as the actuarial leader by the organizer. He set up a Weibo group with about 80 actuaries to discuss the coverage plan. They agreed that the plan should be different from commercial insurance. Jiangang proposed the insurance plan should be a medical reimbursement plan based not on diseases but only on the amounts paid with different retentions and copay ratio tying to local economy level and the social insurance plan. Moreover, all of the children should be covered as long as they are within certain ages, regardless of their preexisting conditions. And the plan needs to cover all of the diseases and provide non-differential, off-site reimbursement service. The upper limit of insurance claims was decided to be 200,000 yuan, which has increased to 300,000 recently.

After identifying the first pilot village, Hefeng County, which is one of the poorest counties in China, several active actuarial volunteers, including Jiangang and Forest, began to collect data of local social medical insurance and the New Rural Cooperative Medical Insurance. Starting with data cleaning, they analyzed and calculated the medical cost for that county. After that, they compared their results with reference to commercial insurance plans, modified them again and again, and finally set the most reasonable premium. To select appropriate insurance company partners, they designed a selection plan after considering many facts. As the project progressed, more and more actuarial volunteers joined the team, including Yuzhou Zhang and Fan Xiao. After several years of development, 10 more pilot areas have joined the plan. Premiums are calculated independently for each area according to their depth of engagements, characteristics and cooperation patterns.

The actuarial team created a data collection form containing 25 fields, including age, gender, ICD code, total expenses and so on. All of the data must be submitted in the template. However, data quality was still the biggest problem during the process—missing data and data errors were very common. Such data can only be fed back to the local operators to fill in or modify one by one. The team designed an evaluation process as well. For each pilot area, they conducted data analysis and evaluation and finally formed an actuarial report. At first, the process was done manually by Excel; now, it is an automatic process in Python. The team members gradually mastered a new tool thanks to the job.

The team continuously implements dynamic management and flexible adjustment based on the actual actuarial data to ensure the plan achieves its maximum value and to help the plan operate stably and sustainably. Based on continuous monitoring and research, the deductibles and patterns have been adjusted, and special disease reimbursement funds have been set up in some areas. The out-of-pocket ratio of medical costs in pilot areas have decreased significantly, improving rural families’ ability to fight critical diseases.

For the past five years, the team has written annual actuarial reports and presented these reports at annual meetings for the funders to monitor the business and to provide the funding plans for future years.

The main findings so far are:

• The average hospitalization costs, as well as overall compensation costs, have increased year by year. This is mainly due to the substantial increase in hospitalization rates for those claims that exceed the insurance deductibles. As a result, some areas have increased deductibles.
• There are significant differences in hospitalization costs due to different facts, such as economic levels, local social medical insurance levels and the new rural cooperative medical insurance levels among regions.
• In general, the incidence and average medical expenses increase with age, so under the same deductible, the cost of Rural Kids Care will be less than the cost of local social medical insurance for critical illnesses.
• For several areas, average payment amounts of big claims have increased significantly after the implementation of Rural Kids Care.
• In general, the claim amounts are low at the beginning of the implementation of Rural Kids Care. With the promotion of the project, medical demands grow, and the costs increase gradually. As time goes by, the costs stabilize and may decrease slightly in the third year.

Analysis results also show that the cost is strongly linearly related to the gross domestic product (GDP), per capita GDP and the number of sickbeds in the health institution of the area. It has a secondary correlation with the area’s population and total fiscal revenue. There is no obvious correlation with per capita disposable income and the number of subsistence allowances. Generally speaking, the higher the economic level and the better the social medical security, the higher the medical costs beyond the social medical insurance reimbursement, which would lead to a higher premium for Rural Kids Care. These analyses provide experiences and theoretical basis for the nationwide implementation of the plan.

The actuarial team played a key role in this project: They designed the insurance plan, calculated medical costs, and monitored and analyzed. These efforts lead to a win-win situation. Each child can get sufficient insurance coverage at the lowest cost while the insurance companies mitigate risks efficiently. In addition, the success of Rural Kids Care demonstrates that medical coverage costs are significantly region-related, and the premium can be reduced through regional pricing, which means the rural insurance markets are still waiting for development. More important, this project is successful: It shows that a pattern with no underwriting, universal coverage and lower cost is feasible. This solution could be an alternative to the popular Million Medical Insurance products.

With the operation of Rural Kids Care, the medical problems of children with critical illness in rural areas have been initially solved under the joint efforts of funders, volunteers and commercial insurance companies. To date, the project has covered 300,000 rural children and paid more than 24 million yuan for the medical expenses of about 1,000 children. As the economy, the basic medical system and the level of medical care develop, the Rural Kids Care plan will continue to evolve and upgrade to a more efficient medical insurance plan with broader coverage and greater targeting accuracy.

The project allowed each actuarial volunteer to solve real-world problems. On the one hand, they took charge of diversified insurance product development for different people to bring about a better life. On the other hand, they shouldered great social responsibilities, which means much more. On top of that, this project opened a door to every actuary participating. It gave them a chance to have close contact with celebrities and KOLs, from whom one can learn new ways of thinking. Undoubtedly, it is a valuable experience for actuaries to broaden their horizons, and it let them know that what an actuary can do is beyond their imagination.

Key actuarial volunteers for this project included: Jiangang He, FSA, FCIA; Forest Wang, FSA; Kailan Shang, FSA, ACIA; Maggie Lin, FSA, FCIA; Yiya Chen, FSA, FCIA; Pengcheng Chen; Ziyue Zhang; Yuzhou Zhang, Ph.D., ASA, ACIA; Lili Lin, FCAS, FCIA; and Fan Xiao, ASA.

Copyright © 2020 by the Society of Actuaries, Chicago, Illinois.