Objective: Based on regional practice, the paper analyzes the challenges of city-customized commercial health insurance and puts forward suggestions. Methods: The operation data of city-customized commercial health insurance in 16 cities of Shandong Province were systematically analyzed, and the effectiveness and shortcomings were summarized. Results: The city-customized commercial health insurance has a low participation rate and difficulty in stabilizing the participation rate. The boundary between inclusiveness and commerciality is unclear, and it is difficult to achieve both of them. Also, it is difficult to ensure the deviation of the population structure and risk of the death spiral is high. Conclusion: We should clarify the boundaries of responsibilities and coordinate the government and the market, strengthen policy support and ease restrictions on secondary development of customers, implement a combination of population classification, product stratification, and reimbursement segmentation to achieve precise product design, increase service support and enhance the stickiness of business.