Six years after establishing a foothold in China, health insurer Cigna will begin offering its first comprehensive health care product in that country as the company seeks to expand its international business amid a backdrop of uncertainty in the U.S. market.
The full health care plan will be offered through Cigna & CMC Life Insurance Company Limited, a joint venture between Cigna and its Asian partner, China Merchants Group.
The Philadelphia-based insurer with major operations in Bloomfield will initially target Chinese employers seeking coverage for members of their work force, including expatriates working in other countries, foreign employees working in China, employees returning to China from assignment in other countries, and senior managers.
“The launch of the health care product is the next phase in the evolution of the strong partnership between Cigna and China Merchants Group,” said David M. Cordani, president and chief operating officer of Cigna and the company’s incoming chief executive officer.
With declining enrollments and increasing medical costs in the U.S., and uncertainties surrounding health care reform on Capitol Hill, health insurance companies like Cigna are looking to international markets for future growth opportunities.
If Congress passes legislation that adopts a public option to compete with private insurers, it’s likely to increase the pursuit of new business beyond United States’ borders by domestic health insurers.
China in particular has been on the radar screen of U.S. health insurers in recent years because of its growing middle class and its initiatives to promote universal health care. In 2008, for example, Aetna opened an office in Shanghai. In January, the Hartford health insurer created a fully owned health benefits service company in the same city.
Going Global
At the company’s annual investor conference last week, Cordani said Cigna sees itself as an international company, rather than just a United States insurer. Offering a full health insurance plan in the People’s Republic in China furthers Cigna’s global initiative, he said.
Cigna officials say that they have offices in 27 countries and a global network of more than 600,000 physicians, medical professionals and hospitals in every country.
“International has been the fastest growing division for a few years and became more relevant even before health care reform initiatives started in the U.S.,” said Mike Ross, chief marketing officer of Cigna International.
Cigna’s international division includes supplemental insurance products to individuals, coverage for expatriate employees of multinational companies, and health care and medical care management services to workplace markets.
Ross said Cigna is looking for international growth in four main countries, including China, Brazil, India and Russia.
Economists at Goldman Sachs have previously predicted those four countries could have the largest economies by 2050.
In India, Cigna is actively searching for a company to partner with so it can begin to develop products for that region as well.
“In the future, those are the four countries that will matter the most,” Ross said. “They all have big economies, which will create huge opportunities.”
Besides looking at new markets, Ross said the company will also go deeper into places that they are already in. Their latest expansion into China represents one of those cases.
Cigna originally entered China in 2003 when it started a joint venture with an affiliate of the China Merchant Group to sell life, personal accident and hospital indemnity insurance.
Regulatory Restraint
Ross said that in order for a foreign insurer to enter the Chinese market, they must partner with a local company in which they get no more than a 50 percent stake in the joint venture.
The process for insurers to expand in China can be lengthy, however, as they have to get a new license for each city they enter. They also have to deal with a strict regulatory environment, including waiting two years after they establish a presence before they can actually start offering policies.
Since 2003, Cigna’s presence in China has grown from 40 employees to 2,400 workers operating in 10 offices, and about 630,000 policies in force, Ross said.
The company sees further growth opportunities in Asia because of the region’s rapidly growing middle class, as well as an effort by the Chinese government to expand health care coverage.
Earlier this year, for example, China unveiled a three-year, $124 million plan on health care reform that aims for universal access to basic health insurance and improved primary health care facilities.
China does already provide government-sponsored health insurance on a province-by-province basis, which covers the majority of its citizens.
But Ross said employers look to the private insurance market to purchase more expansive coverage for their workers, especially since the state-run plan only allows citizens to use state-run hospitals, which are oftentimes overcrowded and “tough.”
Private insurance allows Chinese citizens to use private clinics, or roomier, more comfortable “VIP wards” within the state-run hospitals, Ross said.
The expatriate market that Cigna will initially concentrate on is expansive, and there is little in the way of competition, Ross said.
He estimates that there are 600,000 locally hired foreigners in China, as well as 500,000 people who work for Chinese companies but are actually located in other parts of the world.
