In Depth: Commercial Insurance’s Rise Exposes Chokepoints in China’s Medical System

In late 2024, a case involving a breast cancer patient in Jiamusi, Heilongjiang, China, highlighted tensions between China’s public and commercial health insurance systems. The woman, after initial chemotherapy at Harbin Medical University Cancer Hospital, was denied further admission at two Jiamusi hospitals because she tried to use her commercial medical insurance (CMI) instead of the state-run basic medical insurance (BMI). One hospital insisted she return to Harbin for treatment, while another cited unavailability of her prescribed drugs, which could only be obtained through a designated pharmacy using the dual-channel system—a mechanism that allows certain costly medications to be accessed outside hospitals [para. 1][para. 2][para. 3].

This incident reflects broader systemic challenges in China, where hospitals serve as primary centers for both care and prescription drugs, in contrast to the more multi-layered healthcare systems seen in places such as Europe and the U.S. Hospitals, facing budget constraints, often limit access to expensive, innovative treatments. The dual-channel system was created to circumvent such constraints by enabling out-of-hospital access to advanced medicines, typically covered by CMI [para. 4][para. 5]. Nonetheless, poor integration between public and commercial insurance systems hinders patient access to modern therapies, causing financial and operational bottlenecks for all players, including public hospitals, insurers, pharmaceutical manufacturers, and the state itself [para. 6][para. 7].

As the private CMI sector rapidly expands, insurance companies, health providers, and drug manufacturers are pushing for tighter coordination with the public system to streamline prescription and accessibility of innovative drugs. According to Ding Wen, Ping An Health Insurance’s chief actuary, many patients can claim reimbursement from CMI but cannot access the drugs directly through hospitals [para. 8][para. 9]. CMI, aimed at supplementing BMI, now offers mass-market high-deductible, high-limit (HDHL) policies like “million medical insurance,” which provide coverage for costly treatments not reimbursable under BMI—including advanced drugs, hospital stays, and surgeries [para. 10][para. 11].

A 2023 white paper reported that of the 162 billion yuan ($22.7 billion) spent nationally on innovative medical products, patients themselves bore almost 49% of costs, BMI covered 44%, and CMI only handled about 7.7%. As demand for better health care increases, the report forecasts China’s innovative medicine market could reach 1 trillion yuan by 2035, with CMI's share rising to 44%—about 440 billion yuan [para. 12][para. 13][para. 14]. Industry data shows commercial health insurance premiums rose 8.2% year-on-year to 977.3 billion yuan in 2024, yet access to novel treatments remains a stumbling block for CMI’s growth [para. 15][para. 16][para. 17].

Recommendations for improvement include permitting electronic prescriptions to circulate between hospitals and retail pharmacies, exempting eligible novel drugs from Diagnosis-Related Groups (DRG) to encourage hospital stocking, and developing a dedicated commercial insurance drug directory (CIDD). The CIDD, expected soon, would guide coverage for mid- to high-end CMI plans, improving patient choice and enabling pharmaceutical companies to include new medicines not listed on the government’s National Reimbursement Drug List (NRDL) [para. 18][para. 19][para. 20][para. 21][para. 22].

China is developing a multitier medical coverage system: Tier 1 is BMI (covering most citizens), Tier 2 involves supplementary and voluntary insurance (like Huiminbao), Tier 3 is CMI for voluntary advanced coverage, and Tier 4 consists of medical assistance for the vulnerable. The objective is to expand access, improve quality, and control costs amid demographic and economic shifts [para. 26]. Under this evolving system, CMI plays a crucial supplementary role, but integration barriers must be addressed to fully benefit patients [para. 6][para. 26].