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The insurance programs for China's rural residents and urban unemployed have been merged into a rural/urban residents' basic health insurance policy to improve equity and the efficiency of the system, said a notice issued by China's cabinet, or State Council, on Tuesday.

The new policy will become China's largest health insurance scheme, covering more than one billion Chinese. Another major new policy is the basic health insurance program for the urban employed.

Under the newly merged policy largely subsidized by the government, all participants pay the same premium and enjoy the same reimbursement rate, regardless of their hukou status.

Currently, China has three different health insurance policies, the urban employed one established in 1998, the rural cooperative medical scheme in 2003, and the urban unemployed scheme set up in 2007.

The latter two are highly subsidized by the government while the policy for urban employed, co-paid by employees and their employer,s has the best reimbursement rates.