China’s Mutual Aid Platforms

It seems that commercial health insurance is missing the mark in China. For a significant portion of the nation’s population, the premiums are simply too high to afford- or difficult to justify to younger, healthy individuals. The gap in coverage caused by this has created an opportunity for a few enterprising startups to meet the needs of those left behind by traditional health insurance. Mutual aid platforms such as Ant Financial’s Xiang Hu Bao (owned by Alibaba) are beginning to prove that they may have what it takes to service this need. But before going into Xiang Hu Bao’s operations, an explanation as to what is a mutual aid platform is due.

Mutual aid platforms are programs where participants pool their wealth through a series of small payments, as little as 20-50 yuan monthly (approximately 3-7 USD) depending on the service. This collective pool is then used to dole out payments to members based on medical needs filed through claims, similar to insurance payouts. The real strength of the system is most evident when considering that, as the total number of users increases, the size of individual payments decreases. In China, the platforms are almost entirely electronic, and users send in payments or make claims via smartphone app. The result is a system that can provide something like lower cost health insurance all packaged in an intuitive system available at the touch of the button or swipe of a finger.

This is not to say that mutual aid platforms are the greatest things since sliced bread. Previously, mutual aid platforms had difficulty gaining credibility comparable to insurers (how could people trust that the platform’s administering company wouldn’t go under, or that they would actually receive payment, or that fraud wouldn’t be rampant?). However, it appears that the unique environment and technology growth in China has made it possible to overcome these hurdles.

With major financial backing from some of China’s largest tech firms and improved security software through blockchain technologies, mutual aid platforms are beginning to gain traction. Additionally, the large population of potential users and the already familiar electronic payment ecosystem in place helps make China such an excellent proving ground for the platforms.

One particularly striking example of the success of the platforms comes from the firm mentioned earlier, Ant Financial. Beginning in October of 2018, Ant Financial launched a mutual aid service that would later be called Xiang Hu Bao (literally, “mutual protection”). The service has skyrocketed to 50 million users as of mid-April, well on its way to its stated goal of 300 million within the next two years. It has already given over several tens of thousands of dollars worth of payouts. Furthermore, 47% of its users are migrant workers, with 31% living in rural areas. In 2019, the monthly payments are capped at 188 yuan (about $28). All told, these figures point to a very successful launch that appears to be making good on the promises of mutual aid platforms.

Finally, it should be noted that despite all of the promise of the Chinese mutual aid platforms there are still some drawbacks. For one, the coverage provided by these services is often nowhere near as comprehensive as that given by commercial health insurance. Also, the platforms are not as regulated (and therefore likely not as safe) as health insurers. Currently, the platforms occupy a legal gray area, so perhaps further government oversight could prove to be their undoing. And yet despite these issues, Chinese mutual aid platforms are shaping up to be inspiring success stories. They certainly deserve our attention. And who knows—maybe in a few years we will be wondering if it's time to enroll in a mutual aid platform here in the US.

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