Commercial health insurance is a component of China's multi-level healthcare security system. The differentiated and coordinated development between commercial health insurance and basic medical insurance are of great significance for improving China's multi-level healthcare security system. This paper firstly compares the differences between commercial health insurance and basic medical insurance, and expounds the fundamental differences between the two at the institutional level. Secondly, the paper analyzes the main challenges in the differentiated and coordinated development at present from three aspects of market positioning, information barriers, and policy coordination. Finally, it proposes strategies to clarify the market positioning of commercial health insurance, break down information barriers, and enhance policy coherence, so as to promote more effective differentiation and collaborative development between commercial health insurance and basic medical insurance.