The health insurance sector is currently facing two notable trends that, when examined together, reveal a fundamental industry dilemma.

Firstly, application data for the 2026 Commercial Health Insurance Innovative Drug List has been released, showing a significant and visible decline in overall interest.

Official figures indicate that only 17 drug applications were submitted solely for the commercial insurance list, with an additional 44 applications submitted for both the national reimbursement drug list and the commercial insurance list, bringing the total to 61.

This marks a stark contrast to the 141 applications received in 2025, representing a drop of more than half in just one year. This sharp decline signals a clear cooling of industry enthusiasm for the commercial insurance drug list initiative.

Secondly, there is a widespread trend of "Hui Min Bao" (city-based supplemental health insurance) plans systematically scaling back coverage for individuals with pre-existing conditions. The most prominent example is the Shanghai version, which is the largest such program nationwide by funding scale.

The 2026 product shows a notable rollback in benefits compared to the 2025 version. The reimbursement rate for specific out-of-pocket hospitalization expenses for patients with pre-existing conditions has been reduced from 50% to 30%. Similarly, the reimbursement rate for all enrollees for CAR-T and innovative gene therapy drug costs has been slashed from 100% to 30%.

Furthermore, the Shanghai plan has imposed a single-drug claim limit of 200,000 yuan, covering nine specific medications.

On one side, there is a sudden chill in enthusiasm for innovative drug applications, while on the other, there is a contraction in the inclusive coverage offered by city-based insurance plans.

While many may view these as separate industry shifts, they fundamentally point to the same critical question: how should China's commercial health insurance industry balance market principles, government expectations, public sentiment, and the most basic requirement of commercial sustainability?

Surface Trends Versus Underlying Reality

The cooling interest in innovative drugs is not necessarily a reflection of their real-world effectiveness.

The industry has long operated on the consensus that city-based supplemental plans are the primary vehicle for implementing the commercial insurance drug list.

However, in recent years, these plans have faced increasing survival pressure due to rising claim payouts and operational strains. Consequently, the products are shifting from an extreme focus on affordability to a more commercially sustainable model.

This shift has led many industry insiders to question the practical value of the commercial drug list, with some attributing the sharp drop in applications this year to poor past implementation and a lack of motivation for continued investment from the pharmaceutical sector.

Yet, relying solely on market sentiment can lead to misjudgment. The actual implementation data for the commercial drug list is not as poor as perceived.

Authoritative data shows that the market adoption of drugs on the commercial list is steadily increasing.

By the end of March 2026, the listed drugs had been used a cumulative 3,012 times by insured individuals nationwide, with total drug costs reaching 65.9702 million yuan and an average cost per use of 21,902.44 yuan.

The growth momentum is clear: compared to February data, the number of uses increased by 53.44% month-over-month, and drug costs rose by 42.44%, indicating rapidly improving penetration.

Distribution channels are also being continuously expanded. By the end of April, the 18 drugs included in the 2025 list were available at 1,440 designated medical institutions across the country, comprising 716 hospitals and 724 retail pharmacies, forming a dual-channel distribution network.

An industry expert offered a balanced perspective, noting that the commercial drug list is a new initiative with areas for exploration and improvement, deserving of societal support.

The core issue with the 2026 city-based plans' underwhelming performance in covering these drugs is not the list's uselessness, but a natural timing mismatch.

Since most insurance products operate on a calendar-year cycle, the drug list was released after annual product plans were finalized, preventing mid-year adjustments to coverage terms and creating a policy-implementation gap.

He suggested differentiated approaches: city-based plans should reflect social responsibility by covering all or part of the listed drugs; major medical expense insurance could selectively include them; and high-end or group medical plans, less affected by adverse selection, could incorporate the full list.

Ultimately, including clinically valuable innovative drugs that benefit patients enhances the core competitiveness of insurance products.

The Cost of Inclusivity

The current trend of scaling back inclusive coverage and tightening rules for pre-existing conditions in city-based plans is reminiscent of a prominent U.S. healthcare reform example.

This reform, enacted in 2010, aimed to expand insurance coverage, lower costs, and protect consumers. It prohibited insurers from denying coverage based on pre-existing conditions and mandated ten essential health benefits.

Government subsidies were provided to make premiums more affordable for low- and middle-income families.

In the short term, the results were impressive, significantly reducing the uninsured rate and improving healthcare access for vulnerable groups.

However, the long-term commercial cost of this inclusive model was underestimated.

Mandatory coverage without risk selection disrupted actuarial balance, forcing insurers to bear high claim costs. This led to premium hikes, benefit reductions, and stricter claim controls to ensure survival.

By 2026, this system faced challenges, with subsidies nearing expiration and pressure for significant premium increases, threatening a potential rebound in the uninsured rate if subsidies were not extended.

This cycle of rise and challenge seems to mirror the current situation facing city-based supplemental plans in China.

From an actuarial standpoint, these plans function as a city-wide "super group insurance." Their appeal is strong: no age or occupation restrictions, minimal health declarations, and coverage for pre-existing conditions. For families burdened by medical costs, such a product is a significant relief.

However, the fundamental principle of insurance—actuarial fairness—does not change due to inclusivity. When high-risk individuals enroll disproportionately and healthier people opt out, it leads to adverse selection.

This can trigger a "death spiral": worsening risk pools, rising claim ratios, premium increases, customer attrition, and ultimately, product failure.

From this perspective, insurers tightening coverage for pre-existing conditions and raising claim thresholds is not merely profit-seeking but a necessary act of self-preservation—a difficult balance between extreme inclusivity and unsustainable losses.

In recent years, experts have argued that commercial health insurance should supplement, not replace, basic public security.

The ideal division would see basic medical insurance, critical illness insurance, and medical assistance forming the foundational public safety net, while commercial insurance focuses on middle- and high-income groups with differentiated, high-quality supplemental coverage, ensuring "the government handles government responsibilities, the market handles market functions."

A practical problem arises, however: focusing solely on higher-income groups cannot support a trillion-yuan health insurance market and does not align with national strategic objectives.

Policy goals for the industry have been clear, calling for the commercial health insurance market to exceed 2 trillion yuan and to play a more significant role in the national health security system by 2030, developing a multi-layered market that meets diverse needs across all population groups and life stages.

Policy has never demanded that commercial insurance serve only a minority; it requires balancing inclusivity with commercial viability, fulfilling both market and social responsibilities.

Charting a New Path Forward

The regulatory direction for the industry's future is clearly outlined. Key guidance emphasizes building a comprehensive, multi-tiered commercial medical insurance product system and actively incorporating new medical technologies, drugs, and devices into coverage.

It calls for the stable and orderly development of city-based commercial medical insurance, adhering to basic commercial insurance principles.

It also encourages innovation in loss compensation and risk-sharing mechanisms to develop products that benefit groups with illnesses or rare diseases.

Supporting implementation efforts are underway, including inter-departmental coordination to foster a favorable policy environment and research into new product types like floating-benefit health insurance to better meet public demand for high-quality health security.

A recent industry exchange meeting saw leading institutions unanimously sharing focus areas: health insurance product innovation, building commercial drug coverage lists, developing long-term care insurance, and constructing health and wellness service ecosystems. The industry is shifting from competing on scale and policy terms to competing on capabilities, services, and ecosystems.

This is a very clear signal. The cooling interest in innovative drugs and the scaling back of city-based plans do not signify industry regression but a rational correction following a period of rapid expansion.

The trillion-yuan health insurance industry is moving beyond a simple race for scale and is now confronting the ultimate challenge of balancing its inclusive mission with commercial sustainability.

It is too early for definitive conclusions. The industry's transformation and search for solutions have just begun, and it will take time for the new direction to fully emerge.