Beware the paperless promise: E-fapiaos not valid for health claims

There’s been much chatter in recent months regarding health insurance claim processing in China going completely paperless, with increasing numbers of clients demanding the convenience of such a service from insurers.

For long-term clients of health insurance, paperless insurance claims processing is something you’ve probably been used to for some time outside mainland China, but here in China the regulators require that all hard copy claim documentation be submitted to your insurance company before you can receive any reimbursement, a rule considered to be a real pain for expats living in China.

The alternative of course is “direct billing”, where the clinic or hospital offers a cashless service upon presentation of your insurance card — but direct billing is not available at all hospitals and clinics in China. Therefore, it would be something of an understatement to say clients of high-end medical insurance would love to be able to submit claims electronically.

So are the rumours true? Will you now be able submit all your health insurance claims through your email or mobile phone, without the need for dealing with Chinese addresses and lost deliveries when sending the hard-copy documents to your insurers?

We are afraid that the answer is no.

While increasingly insurers are making it possible to submit the majority of the claims documentation — the completed claims form and medical reports — through email or by your mobile phone, they cannot get around the issue that no insurer is licensed to release the claim reimbursement payment to your bank account until they have received the fapiao for the treatment you have received. (For those of you new to China, fapiao is an official tax receipt, which you will receive at any hospital or clinic when making payment for treatment).

In China, paperless claims are therefore simply not possible at present due to the need to submit the hard-copy, paper fapiao. Although there is a general move from insurers to put much of the claims handling process online, ultimately, the need for fapiao to be submitted by the claimant to the insurer prevents the process from being fully electronic.

E-fapio

The need to provide fapiao is a legal requirement in China as stipulated by the China Insurance Regulatory Commission (CIRC). Some insurers such as Ping An Health do have an online claim system which allows payouts for smaller claims, but the fapiao should still be submitted at a later date.

At present many clients are asking why e-fapiaos cannot be used in this process – just as they are for online transactions in China’s booming e-commerce sector.

However, this system in China is still in its infancy and is a long way off widespread adoption. As one might expect, it is indeed the e-commerce sector which is pioneering the use of e-fapiao. As such, online retailers already have much of the infrastructure required to implement electronic fapiao due to their businesses being established in the electronic domain.

Hospital bureaucracy

Unfortunately the accountancy systems of Chinese healthcare facilities are deeply rooted in traditional paper-based bureaucracy and to the best of our knowledge no health care facility in China is able to issue e-fapiaos at present. Based on our experience of working with Chinese healthcare facilities billing departments, a move to the e-fapiao system in the near future is extremely unlikely. Such a shift would require a major cultural, bureaucratic, and systematic overhaul, not to mention financial investment to establish such a new fapiao system. So this means that, in the absence of direct billing, claimants still have to collect a paper fapiao from the hospital after paying for treatment and submit the required paperwork to the insurer for claim reimbursement.

We are not aware of any clinic or hospital that can issue e-fapiaos, and and to the best of our knowledge no health care facility in China is able to issue e-fapiaos at present. Many large insurance providers we consulted stated that they will accept a digital picture of a paper hard copy fapiao for the purposes of speeding up the claims reimbursement process. But ultimately every insurer said the original hard copy fapiao, as issued by the treating clinic or hospital, must be submitted before claim reimbursements are paid out (or shortly after payout).

In terms of the law, since fapiao, are legally required to be issued by a seller to a buyer of goods and services in China, the medical sector is no exception and hospitals are legally obliged to issue patients with fapiao on receipt of payment for treatment, medicines or any other bills. Fapiaos issued by health care facilities for medical treatment must state yiliao fei or medical fees in order for the fapiao to be considered as valid for reimbursement by insurance providers in China. Fapiaos issued by non-licensed healthcare facilities in China, or non-medical providers, will not be accepted as proof of medical treatment by insurance providers.

All insurance claims must be accompanied by a medical fee fapiao which was issued at the point of sale. This rule is strictly monitored and enforced by the China Insurance Regulatory Commission (CIRC). If a fapiao is lost, it is possible for an insurer to pay out on an exceptional circumstances. Such payouts are made on a case-by-case basis.

Insurer feedback

During the course of our investigation several major insurers we contacted for this report confirmed that the original fapiao must be submitted before claims of any significant value are paid out.

Ping An Health (PAH): A new web-based platform has been launched by PAH, called Ping An Healthy Living which allows some degree of electronic claim handling.

According to PAH, members can make claim applications simply by taking a picture of their application documents and sending them through Ping An Healthy Living. However, this service is only available for “claims with an accumulated value of less than RMB 3,000 per insurance year. And the original fapiao must still be provided at a later date.

PAH stresses: All health insurance companies require clients to provide the original fapiao when making a claim application as per CIRC regulations. So for Mainland China claims we cannot waive this requirement.

Allianz China General Insurance (Allianz): A new mobile app is now being offered by Allianz which allows members to take a photo of their claim and send to Allianz via their mobile device. However, ultimately the original paper fapiao must be submitted.

Allianz confirmed, Fapiao is something that we need to ensure we are complying with local regulations. Whilst we can accept scanned claims we would need the original fapiao to be sent to us to allow us to release the payment.

Cigna & CMB (Cigna): Cigna’s view is that electronic fapiaos are fine in principle, but hospitals do not currently issue them. We can accept e-fapiao for claim reimbursement if the hospital is authorized to issue e-fapiao to patients, however, Cigna warn: we doubt hospitals are allowed to handle fapiao in that way at this point.

Cigna also stress that in order for payments to be made: at the end of the day customers still need to submit the original fapiao before the claim payment is released.

Recommendations:

1) Work with an insurer with extensive direct billing list. The more hospitals staff can use direct billing at, the greater choice they have. Also consider direct billing facilities in other cities in China where your staff may travel to.

2) Put in place a system within your HR or admin team to support the submission of claims documents, such as weekly sending of claims and keeping claims forms on file, and helping complete the Chinese address.

3) Make sure the direct billing list is readily available on the company server so staff go to direct billing facilities the majority of the time, and make sure it’s up-to-date and accurate – new hospitals may have been built or existing facilities may provide better and more convenient service than staff previously thought.

Final thought: Some health plan administrators may consider removing direct billing altogether in an effort to stop frivolous claims and / or steer staff to lower-cost hospitals. There is some truth to this but the added inconvenience of no direct billing needs to be compared with the potential saving. For many large international schools and MNCs the convenience of direct billing is an absolute must have — put another way: the inconvenience of not having direct billing is simply not an option. Furthermore, if your intention is to keep your insurance plan’s costs down, given the discounts most insurance providers are able to negotiate as part of their direct billing contracts with the medical facilities, removing direct billing can actually increase costs.

We would therefore recommend keeping direct billing in place but using other cost sharing mechanisms such as the introduction of a directed plan with a 20% co-pay within your insurer high-cost hospitals and clinics network (or even removing direct billing at these high-cost clinics and keeping it in place for the more reasonably-priced viable alternatives). It’s all about striking the right balance between cost management and ensuring your staff have easy access to healthcare when they need it most.

Please do contact us on [email protected] for a detailed analysis of your company’s health coverage situation at present so we can identify together any possible optimizations and savings, and offer more detailed advice to help improve the effectiveness of any systems in place.

Further reading:

What is a Fapiao? And why is it so important? Cigna newsletter page 3.
Jingdong Introduces First Electronic “Fapiao” in China’s E-Commerce Industry.
China’s SAT Introduces Online Electronic Invoicing System.
Fapiao Explained: China’s Plan to Tax the E-Commerce Industry.