However, Hu said that the residents's share in the premiums should be kept low at the beginning, and the participation should be based on their free will.
Hu also said local governments are encouraged to set different contribution rates for adults and children, and to link the rates with the income of policy holders.
Both the central and local governments will fund the subsidies, and the country has the capability to finance the project which aims to cover all residents by 2010, with its rising fiscal revenue on the back of a fast-growing economy, Hu said.
The project will mainly cover expenses of residents for hospitalization and major illnesses, said Hu.
Urban residents with only temporary jobs could also participate in the program, he said.
Beijing, Tianjin and Shanghai, where similar practices have already been adopted, are not among the pilot cities, according to Hu.
Answering a question about the medicare of migrant workers in cities, Hu said migrant workers from the countryside should also be covered by the insurance for urban employees, as the relatively low reimbursement rate under the rural cooperative insurance system would not be able to cover the high hospital expenses in cities.
Hu said employers of migrant workers are obliged to cover their employees' medical insurance.
According to Hu, China has about 200 million migrant workers, among whom 120 or 130 million work in cities.
Hu said the Chinese government invites public supervision from media and non-governmental organizations over the insurance fund, apart from administrative supervision by auditing officials and relevant supervisors, adding that "the money is used to save people's lives."