Abstract: In the context of the prominent economic risks of diseases and the lack of basic medical insurance for urban and rural residents, this paper conducts an empirical test of the complementary role of commercial medical insurance for the first time. For families with urban and rural residents’ medical insurance, the incidence of impoverishment health expenditure (IHE) and catastrophic health expenditure (CHE) for households with commercial medical insurance are significantly reduced by 5.22% and 3.36% respectively; in the case of a major illness, IHE and CHE are significantly reduced by 11.96% and 10.49% respectively. The empirical results are still robust considering the different poverty line criteria and adverse selection issues. By empirically testing the poverty alleviation mechanism of commercial medical insurance, it is found that for individuals with commercial medical insurance, the medical expenses in the past two weeks and the hospitalization expenses in the past year are significantly reduced by 4.96% and 5.46% respectively.

Key words: commercial medical insurance; shock of serious illness; poverty caused by disease