The recently proposed serious-illness insurance has drawn national attention. Questions have been raised about its funding because the central government mentioned only that surplus funds from basic medical insurance will be invested in commercial insurance to provide sustainable capital for the badly needed insurance.

As the China becomes an aging society, finding a sustainable source of capital  for the insurance is a difficult task. 

There are two sources of  surplus insurance funds: One is the surplus from individual medical insurance accounts;  the other is the surplus of the medical insurance’s public accounts.

Drawing from the former source is easier because it is more closely regulated and systematic.

If the latter were used, the authority would have to be very careful about how much money was drawn so that the new expenditure would not affect the public’s basic medical insurance.

Instead of turning to commercial insurance, the government should set up a special serious-illness fund managed by professional and efficient agencies that are supervised and organized by the government.

If commercial insurers were to manage this insurance, the security of serious-illness data on the entire nation would be in the hands of business operations, which is dangerous.

Commercial insurers are not expected to profit from this insurance, according to the authorities’ initial statement. But few companies would be eager like to manage such a big and risky business for free.

As China’s medical insurance reform covers more costs and illnesses, authorities should be vigilant about surging medical costs, which have occurred in areas. Otherwise, rising medical costs will offset the benefits of medical insurance and squeeze the space for serious-illness insurance. It would seem that the government is more qualified than commercial insurers manage the special funds while controlling the rise of medical costs.