The Impact of COVID-19 on China’s Insurance Risks: Life, Critical Illness and Medical Reimbursement Products

Summary

• The mortality impact of the latest Omicron variant could be milder than earlier coronavirus variants, such as the Alpha, Delta and early Omicron strains.
• COVID sequelae could drive up incidence rates of lung cancer, cardiovascular diseases, and kidney and neurological diseases that fall under the scope of both short and long-term critical illness products.
• While strict social-distancing rules, frequent lockdowns and COVID testing before being admitted to hospitals have limited healthcare utilisation in China in the past three years, we expect a significant surge in medical reimbursement costs in 2023.

Introduction

On 12 December 2022, the Chinese government updated the country’s COVID-19 prevention and control policy, effectively ending the “Zero-COVID” policy. The ensuing exit wave saw widespread infections with the Omicron variant. According to the weekly national COVID pandemic situation published by Chinese Center for Disease Control and Prevention on March 18, 2023, the COVID tested positive rate from sentinel hospitals peaked at the end of December 2022 (see Figure 1). This “fast-peaking” approach caused a shortage in antipyretics and overwhelmed clinics and hospitals in a short period of time.

Figure 1: Trend of COVID positive rate from selected sentinel hospitals in China

Source: National COVID Pandemic Situation published on March 18, 2023

Over the past three years, China had imposed one of the strictest and most extended social-distancing rules globally and was among the last to “co-exist” with COVID. This, to some extent, affords Chinese insurers and reinsurers opportunities to learn from the experience overseas, where extensive research has been conducted on healthcare utilisation before, during and after the pandemic, also including the impact of long COVID and COVID sequelae from earlier variants, such as Alpha, Delta and Omicron. , and actuarial institutes from the US, UK and Australia, etc., also published insured experience studies.

As of mid-March 2023, the exit wave has largely faded. Socio-economic activities, as well as healthcare utilisation, are returning to normal. We have not noticed any signs of another wave of infection in China.

Mortality

A research report published by the SOA Research Institute shows the excess mortality of US Group Term Life from Q2 2020 to Q1 2022 by age band (see Table 1).  It can be observed that the Delta strain that was prevalent in the US during Q3 2021 caused a significant increase in excess mortality.

Table 1: Excess mortality by detailed age band

Source: Group Life COVID-19 Mortality Survey Report, August 2022, SOA Research Institute.

This result echoes observations from other research. For example, a study of the period between April 2020 and June 2022 shows the total US inpatient mortality rate is much higher during the Delta variant period (July-October 2021) and reduced significantly towards the Later Omicron period (crude mortality rate reduced by 62% compared to the Delta or Early Omicron variant periods).[i]

Figure 2: Crude mortality risk for total COVID-19 hospitalisation, hospitalization primarily for COVID-19, hospitalization not primarily for COVID-19 and non-COVID-19 hospitalisation, US, April 2020-June 2022

Source: Mortality Risk Among patients Hospitalized Primarily for COVID-19 During the Omicron and Delta Variant Pandemic Periods – United States, April 2020 – June 2022. See endnote i.

The reduced fatality of Later Omicron, the principal strain infecting most Chinese during the exit wave, should spell a lesser burden on China. Nonetheless, we are mindful that the healthcare system in China is also less advanced than that in the US regarding the number of healthcare professionals per capita or healthcare infrastructure such as ICU beds per capita.

Regarding vaccinations, most of the Chinese population was vaccinated with inactivated vaccines, while the US relies mainly on mRNA vaccines, which are perceived as more effective in rendering infection protection. It should be noted that the total excess mortality reported in the above study on US group life insurance also covers a period before COVID vaccinations were available (the first COVID-19 vaccine emergency use authorisation was approved in December 2020). Meanwhile, it is believed that around 90% of the Chinese population was vaccinated before the “Zero-COVID” policy was effectively abandoned in December 2022.

Critical Illness

Lung Cancer

Before 8 January 2023, the Chinese government classified COVID-19 as a Class B infectious disease but subject to the preventive and control measures for a Class A infectious disease[ii]. For most of the past three years, mainland Chinese have perceived COVID-19 as a very severe disease with unknown long-term health implications. The latest exit wave saw most patients having mild symptoms like discomfort in the upper respiratory tract, fever, coughing or even pneumonia. Yet, many infected Chinese were concerned about degraded lung functionality and opted to conduct CT scans to ensure their lungs were not impaired. The trend has continued after the exit wave has subsided, with health check facilities promoting post-COVID health check packages to meet the increased demand for lung CT scans.

Before the outbreak of COVID-19, increasing incidence rates of lung cancer (especially among females) were already observed. This was primarily driven by the increasing use of low-dose computed tomography (LDCT) for lung cancer screening in China. The situation will be aggravated with additional post-COVID demands, and we expect female lung cancer incidence rates to continue rising in 2023.

A study covering 22,351 asymptomatic patients from April 2015 to April 2018 shows the population’s lung cancer incidence rate at 100% LDCT screening, by age and gender. By testing different increment levels in screening ratio, we could reasonably estimate the additional cost of lung cancer claims.[iii]

Table 2: Lung nodule detection rates by age and gender

Source: see endnote iii.

 

Cardiovascular diseases

A paper published in Nature Medicine reports on the long-term cardiovascular outcomes of COVID-19, based on the 12-month follow-up hazard ratio of a COVID-19 positive group against a historical cohort (pre-COVID era population). [iv]The key findings are shown in Table 3 below. A total of 162,690 participants who had a positive COVID-19 test between 1 March 2020 and 15 January 2021 were selected for the COVID-19 group. The historical control group was constructed from 6,461,205 participants in 2017 (the pre-pandemic period). The table shows the relative risk of cardiovascular diseases of COVID-19 positive cohort compared to the control group.

Table 3: Subgroup analyses of the risks of incident post-acute COVID-19 composite cardiovascular outcomes compared to historical control

Source: see endnote iv

It should be noted that the severity of the above cardiovascular diseases is unknown, makes it difficult to assess whether these cardiovascular events satisfy definitions of Major CI products.

Another caveat is that the study covers the pre-Delta variant prevalent window only. The pre-Delta variant appears to be more severe than subsequent variants. In addition, hazard ratios are more pronounced in hospitalised, and ICU-admitted patients, while the non-hospitalised cohort experience closer to a hazard ratio of 1. Therefore, it is reasonable to expect a less significant impact in future as COVID-19 continues into mutate to milder variants.

Medical reimbursement

China is gradually returning to normalcy as the exit wave fades. Based on the experience of the US overall inpatient rate, we expect the hospitalisation rate in China to revert to the pre-COVID level for the insured population. The elderly could experience higher than pre-COVID hospitalization rate because COVID may weaken their overall well-being and worsen co-morbidity conditions after infection.

However, we shall reflect the Long-COVID cost to health care, that is, a higher chance of cardiovascular disease, and lung cancer treatment costs from excess screening of LDCT.

Patients who recovered from COVID are also found to remain in need of medical care. For example, one study shows that there is increased healthcare utilisation for COVID-19 positive cohort (see Figure 3), and the ratio of rate ratios (RRR) is significantly higher for the Asian American population[v].  Note that the study includes all inpatient, outpatient, virtual health care and emergency department utilisation.

Figure 3: Healthcare utilisation associated with positive SARS-CoV-2 test results vs negative results

Source: see endnote v

 

Conclusion

Co-existing with COVID comes with a price, especially for insurers and reinsurers in China. We expect a surge in life benefit claims in Q1 2023 in the range of +30%, as the explosion of infection has overwhelmed China’s medical system over a short period of time. Furthermore, given the elevated risk of cardiovascular diseases, we expect a smaller increment in mortality rate may persist in the next two to three years (the US and UK have not returned to pre-COVID mortality rates as of today, three years after the first COVID-19 infection).

For critical illness products, we expect higher claims in lung cancer, heart attack, stroke, cardiomyopathy, renal failure, and Inferior Vena Cava Filter placement, as research shows COVID causes systemic impairment to the cardiovascular system and drives up lung cancer screening rate.

For medical reimbursement products, the strict social-distancing rules suppressed certain elective healthcare needs in the past three years. Some services were permanently forgone, some deferred and would be recouped after the opening up. Together with Long COVID impacts, we expect medical reimbursement claims to increase by 10-30% compared to 2020-2022.
   

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References

[i] Adjei S, Hong K, Molinari NM, Bull-Otterson L, Ajani UA, Gundlapalli AV, Harris AM, Hsu J, Kadri SS, Starnes J, Yeoman K, Boehmer TK. Mortality Risk Among Patients Hospitalized Primarily for COVID-19 During the Omicron and Delta Variant Pandemic Periods – United States, April 2020-June 2022. MMWR Morb Mortal Wkly Rep. 2022 Sep 16;71(37):1182-1189. doi: 10.15585/mmwr.mm7137a4. PMID: 36107788; PMCID: PMC9484808.

[ii] “China to manage COVID-19 with measures against Class B infectious diseases”, China Daily, 27 December 2022”

[iii] ZHAO Junsong, CUI Li, HE Jiangbo, ZHU Xiaoyun, LIU Lihong, HUANG Wei, XU Xueqin, CHEN Kemin. Lung cancer screening by low-dose CT in asymptomatic population undergoing physical examination: preliminary analysis of 22 351 cases in Shanghai[J]. Journal of Diagnostics Concepts & Practice, 2019, 18(2): 183-188.

[iv] Xie, Y., Xu, E., Bowe, B. et al. Long-term cardiovascular outcomes of COVID-19. Nat Med 28, 583–590 (2022). https://doi.org/10.1038/s41591-022-01689-3

[v] Sara Y. Tartof, Deborah E. Malden, In-Lu Amy Liu, Linda S. Sy, Bruno J. Lewin, Joshu T.B. Williams, Simon J. Hambidge, Jonathan D. Alpern, Matthew F. Daley, Jennifer C. Nelson, David MaClure, Ousseny Zerbo, Michelle L. Henninger, Candace Fuller, Eric Weintraub, Sharon Saydah, Lei Qian. Health Care Utilization in the 6 Months Following SARS-Cov-2 Infection. JAMA Network Open. 2022;5(8):e2225657. doi:10.1001/jamanetworkopen.2022.25657

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