Association between commercial health insurance and out-of-pocket health expenditure: evidence from provincial panel data in China, 2011–2022

In China, despite broad coverage under the universal medical insurance system, the financial burden of healthcare measured by the proportion of out-of-pocket payments in total health expenditure, remains substantial. Commercial health insurance is expected to serve a supplementary role in alleviating this burden; however, rigorous empirical evidence on its effectiveness is limited. This study examines the association between commercial health insurance development and the out-of-pocket payment share in China. We employed provincial panel data from 31 mainland Chinese provinces spanning 2011–2022. Two-way fixed effects models were used to estimate the association between per capita commercial health insurance premium income (deflated to constant prices) and the share of out-of-pocket expenditure. We controlled provincial and year fixed effects, as well as key socioeconomics and healthcare covariates. Robust standard errors were clustered at the province and year levels. In addition, mediation analyses were conducted to explore the role of medical service utilization, and heterogeneity analysis was performed to assess the moderating effect of population ageing. The descriptive analysis indicated a negative correlation between the penetration of commercial health insurance and the share of out-of-pocket expenditure in total health spending. Regression estimates further demonstrated that a 10% increase in per capita premium income from commercial health insurance was associated with a statistically significant reduction of 0.43% points in the out-of-pocket share (β=-0.043, P < 0.01). This inverse association remained robust when the independent variable was lagged by one year. However, no evidence was found for a mediating effect via increased inpatient or outpatient service. In addition, the association between commercial health insurance and the out-of-pocket expenditure did not vary significantly across regions with different ageing rates. The findings indicate that the expansion of commercial health insurance in China is significantly associated with a reduction in the share of out-of-pocket expenditure, underscoring its potential contribution to strengthening household financial protection. The pattern of results is more consistent with a cost-sharing–related pathway than with increased service utilization. In the context of rapid population ageing and escalating healthcare costs, these results highlight the importance of further developing commercial health insurance as a complementary pillar to the universal medical insurance system. Policy efforts should prioritize optimizing benefit design and ensuring equitable access in order to enhance the system’s capacity to mitigate financial risks for households.