On 26 February 2020, China's Banking & Insurance Regulatory Commission (CBIRC) published and made effective its 'Notice Concerning the Standardisation of Health-Cover Captives - Entrusted TPA Administration' (Notice).
Key elements of the Notice are:
The regulatory definition of 'Health-Cover Captives - Entrusted TPA Administration Business' (Captive TPA Business) is changed and expanded to become '...the appointment of insurance companies (acting as third party administrators, 'TPA') by any government department; quango; corporation; or other public entity (collectively 'Entrustors') whereby those insurance companies (acting as TPAs) administer the Health-Cover Captives of Entrustors for the purposes of health-cover plan designs; health management; claims management; case review; claims settlement; and risk management'.
Insurance companies, acting as TPAs for the benefit of Entrustors' Health-Cover Captives, must comply at all times with all terms of the 'Health Insurance Regulations', including as necessary the establishment of regional branch offices or regional partnerships.
The earlier regulatory requirement for all Captive TPA Business plans and products to be registered with CBIRC has been rescinded - insurance companies (acting as TPAs) no longer need to register Captive TPA Business plans and products with CBIRC.
Insurance companies (acting as TPAs) must at all times ensure a complete separation of Captive TPA Business from those insurance companies' standard health insurance (underwriting) programmes and plans, including without limitation those circumstances where one insurance company acts as both TPA administrator and insuring underwriter for one and the same Entrustor.
In circumstances where, as part of a Captive TPA Business arrangement, an Entrustor also entrusts funds with the insurance company (acting as TPA) for the insurance company to manage, the insurance company is prohibited from using such entrusted funds for any purpose other than the making and maintaining of dedicated, separate, cash bank accounts holding such funds. Any form of 'value-add' investing or management of such funds is strictly prohibited.