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Insurance Coverage in China
by Carl-Ludwig Dörwald
Old age pension and health insurance in China have undergone enormous changes in the last few years. The administrative changes in China play a part, but also the new profile of especially non-Chinese employees looking for work in China has been a contributing factor.
With the introduction of commercial health insurance in China, a lot has been accomplished in the last few years. For one thing it supplements the rather poorly kept statutory health insurance. In addition for the first time now in China there is the opportunity to acquire private health insurance with global coverage. As a result of the increased integration of diverse economies with the Chinese one, Germany, among others, has signed a social security agreement with China which affects every single German in the country.
The profile of the foreign employee working in China has changed considerably. Whereas it used to be only the so-called expats in executive positions who you would meet that had a complete coverage packet, now you will more often come across people who no longer have this coverage and who have to take care of it themselves.
The following should provide some initial help for this lastly mentioned group of people. The following questions come up here:
1. What do I do with my statutory pension insurance, health insurance, etc. in Germany during my time in China?
2. What happens with me in China regarding the local social security program?
3. What would be a good type of medical insurance that would also cover me where applicable during a visit to Germany?
Within the framework of the German-Chinese social security agreement, Germans have the opportunity under certain circumstances to be exempted from parts of Chinese social security. Because this is not an uncomplicated process, I strongly encourage you to find professional support.
Even after exemption from some parts of Chinese social security, payments must be made to, among others, the local pension insurance, by both the employer and the employee. If there are plans to leave the country or return to Germany, the employee can apply for a refund of his payments made, however not those of the employer.
And with that we have arrived at the subject of setting up a pension scheme. Certainly you can remain in China until retirement age, and draw a pension there. However this pension will be minimal and will give rise to a large provision gap. Therefore you should take a look at private pension models – just like in Germany too, by the way! Because the vast majority of all Germans in China eventually return to Germany, it is advisable to not necessarily proceed with setting up such a pension fund in China.
The subject of health insurance is also extremely complex. If you have statutory health insurance in Germany, you can attempt to have the costs incurred in China refunded by your health insurance company in Germany. You should check on this before your departure. If you are privately insured, then before your departure for China, you should ensure that your insurance company extends coverage to China. With both a statutory health insurance company as well as a private one, you have the option of letting the insurance coverage be suspended. This is especially important for older people, who have already built up old age provisions with their private insurer or for people with “pre-existing conditions,” which are illnesses, accidents or similar that happened in the past.
Many companies insure their employees who have been transferred overseas through so-called expat health insurance companies, whereby the dispatching company negotiates the framework agreement with the expat insurer. Individual persons are also accepted. In a recent case presented to me one of the expat insurers raised the premium by 100%, which caused the insured person to cancel their coverage. One possibility that has opened up in recent years is the acquisition of private health insurance directly in China. Besides the so-called additional insurance, that improves the benefits of the statutory health insurance, there are also the so-called top products that covers treatment in all private clinics in China and abroad. Several providers make up this market and offer products at different tariffs. Significant characteristics are the geographical features and the level and extent of the services. The insured person who cancelled with the expat company will now certainly open a policy with an insurer in China at significantly more favorable terms.
You can choose between insurance protection only for China, Greater China, Asia, Worldwide excluding North America, or Worldwide. The scope of services is threefold like in many other countries, inpatient (ambulatory), outpatient (stationary) and dental. An additional feature is the annual overall limit, which restricts the services of the insurer, but is set so high, that it usually causes no problems.
In summary you have three options when it comes to health insurance:
1. Keep your current one, but make sure that it will really pay in the case of a claim.
2. Buy a so-called expat insurance and keep your present health insurance dormant.
3. Buy private health insurance in China and keep your present health insurance dormant.
Another very important subject is legal insurance. If you have a senior position, it is highly recommended that you take out Directors & Officers (D&O) liability insurance, which covers claims against you during fulfillment of your occupational duties as a chairman or board member.