Health insurance plays a crucial role in protecting individuals and families from the financial shock of medical expenses. Without adequate coverage, even routine treatments or hospitalisation can lead to significant out-of-pocket spending and push households into poverty.

Across the world, countries design health insurance systems differently. Some rely on government-funded universal healthcare, others on social insurance contributions, and some depend largely on private insurance markets.

Recently, China has drawn global attention after achieving about 95% population coverage under its basic medical insurance system making it one of the largest health insurance programs in the world.

The milestone

According to data released by China’s National Healthcare Security Administration (NHSA) in March 2026, over 1.33 billion people were covered under China’s basic medical insurance schemes by the end of 2025, representing approximately 95% of the country’s population.

Key highlights:

• The insurance system recorded 3.59 trillion yuan in revenue and 3 trillion yuan in expenditure in 2025.
• Coverage included 7.2 billion outpatient visits and 278 million inpatient treatments.
• Around 260 million people were covered under maternity insurance.

Coverage in rural areas has been particularly strong, with more than 99% of low-income rural populations enrolled in medical insurance.

China’s Health Insurance model

China’s system operates under a three-tier basic medical insurance framework.

1. Urban Employee Basic Medical Insurance (UEBMI) for salaried workers in urban areas.
2. Urban and Rural Resident Medical Insurance (URRMI) for people not formally employed, including farmers, students, and the self-employed.
3. Government medical insurance schemes for public sector employees

This structure attempts to balance two principles:

• Contribution-based benefits for employed individuals
• Subsidised coverage for low-income or rural populations

Funding typically comes from a mix of individual contributions, employer payments, and government subsidies.

Health insurance & poverty reduction

China’s health insurance expansion has been widely studied for its impact on poverty reduction.

A research study (The poverty prevention effects of health insurance: evidence from China’s basic medical insurance program) using data from the China Family Panel Studies (CFPS) between 2010 and 2018 found that enrollment in basic medical insurance significantly reduced the probability of households falling into poverty due to illness.

The study found that:

• Insurance increased healthcare utilisation.
• Health outcomes improved, especially in rural populations.
• Financial risk from medical shocks was partially reduced.

However, researchers also observed that out-of-pocket expenses remain significant, and higher-income groups sometimes benefit more from the system.

Limitations of the Chinese model

Despite its broad coverage, China’s health insurance system faces several challenges.

One major issue is that benefit packages differ across the three insurance schemes, leading to variations in reimbursement levels and drug coverage.

This creates disparities between Urban employees, Rural residents and Government workers

As a result, while enrollment is high, the system does not fully eliminate the financial burden of healthcare for middle and low-income groups.

Comparison with the UK, Germany and the US

Different countries organise health insurance systems in very different ways. China’s approach sits somewhere between government-funded systems and social insurance models.

• China (Hybrid Social Health Insurance Model)
  China’s system combines government subsidies, employer contributions, and individual payments. Coverage is achieved through multiple schemes for urban workers, residents, and rural populations. The system prioritises wide coverage but reimbursement levels can vary.

• Germany (Social Health Insurance Model)
  Germany operates one of the oldest health insurance systems in the world. Most citizens are covered through statutory health insurance funds funded by payroll contributions from employers and employees. Coverage is mandatory and benefits are standardised.

• United Kingdom (National Health Service (NHS))
  The UK follows a tax-funded national health insurance model, where healthcare services are primarily financed through general taxation. Public hospitals provide most services, and care is generally free at the point of use.

• United States (Commercial Health Insurance Model)
  The US relies heavily on private health insurance, typically linked to employment. Government programs like Medicare and Medicaid cover specific groups, but coverage is not universal.

China’s system resembles a social insurance framework, but with stronger government subsidies and broader population pooling to achieve near-universal enrollment.

What about India…?

India’s health insurance coverage has expanded significantly in the last decade, but it still falls well short of China’s near-universal coverage.

Estimates suggest that around 40–50% of India’s population has some form of health coverage when government schemes, employer-provided insurance, and private policies are combined.

Major sources of coverage include:

• Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (PM-JAY)
  Covers around 500 million economically vulnerable citizens for hospitalisation expenses.
• State government health insurance schemes
  Several states operate their own health coverage programs.
• Employer-sponsored health insurance
  Provided to workers in organised sectors.
• Private retail health insurance policies

Despite these initiatives, a large portion of the population still lacks adequate health insurance, and many treatments continue to be financed directly by households.

This is reflected in India’s high out-of-pocket healthcare spending which, despite gradually falling over recent years, remains among the highest globally.

What India can learn from China’s health insurance expansion

China’s experience offers several policy lessons for expanding health coverage.

1. Mass enrollment drives: China achieved high coverage through large-scale enrollment campaigns supported by local governments.
2. Rural inclusion: Special subsidies ensured that rural and low-income populations were enrolled in the system, helping reduce the risk of illness-induced poverty.
3. Unified Drug Reimbursement Lists: China regularly updates a national drug list, which now includes over 3,200 medicines, helping reduce the cost of treatments for insured individuals.
4. Strong monitoring of insurance Funds: Authorities conduct large-scale audits and inspections of hospitals and pharmacies to prevent fraud and misuse of insurance funds.

These measures helped China expand coverage rapidly, though challenges such as reimbursement disparities still remain.

India’s strengths and limitations

India’s health insurance system is expanding, but it continues to face structural and operational challenges.

Strengths

1. Large Public Health programs: Schemes like Ayushman Bharat aim to cover over 500 million individuals, making it one of the largest government-funded health insurance programs in the world.
2. Growing focus on financial protection: There is increasing recognition of healthcare as a financial risk, leading to policy initiatives aimed at expanding coverage and reducing out-of-pocket expenditure.

Limitations

1. Fragmented System and Limited Coverage: India’s health insurance ecosystem is highly fragmented, involving multiple stakeholders (insurers, hospitals, intermediaries, and government bodies) which creates gaps in coordination and coverage. A significant portion of the population still remains uninsured or underinsured.
2. High Out-of-Pocket expenditure: Out-of-pocket spending continues to account for a large share of healthcare costs, exposing households to financial shocks.
3. Healthcare fraud and weak oversight: The complexity of the system creates multiple points of vulnerability:
   • Weak regulatory oversight and enforcement
   • Heavy reliance on manual processes
   • Limited patient awareness of rights and processes
   • Instances of institutional inefficiencies and profit-driven practices

• Sophisticated fraud: With increasing digitisation, new forms of fraud are emerging, such as manipulation of electronic health records (EHRs), identity theft, telemedicine-related fraud and insurance claim manipulation. While some private insurers are adopting AI, machine learning, and biometric verification, these efforts remain uneven across the ecosystem.
• Gaps in Regulatory and Technological Integration: Compared to countries like the US, UK, Germany and China, where fraud detection systems use real-time data tracking and predictive analytics, India still lacks a unified regulatory frameworks, widespread adoption of advanced fraud detection systems, and coordinated enforcement mechanisms.

China’s achievement of 95% health insurance coverage highlights how large-scale public policy can dramatically expand access to healthcare protection.

As healthcare costs continue to rise globally, ensuring wider and more effective coverage will remain one of the most important policy priorities for governments and insurers alike.

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