Despite widespread efforts to expand health insurance in developing countries, there is scant evidence as to whether doing so actually improves people's health. This paper aims to fill this gap by evaluating the impact of Rural Mutual Health Care (RMHC), a community-based health insurance scheme, on enrollees' health outcomes. RMHC is a social experiment that was conducted in one of China's western provinces from 2003 to 2006. The RMHC experiment adopted a pre-post treatment-control study design. This study used panel data collected in 2002, 1 year prior to the intervention, and followed up in 2005, 2 years after the intervention, both in the intervention and control sites. We measured health status using both a 5-point Categorical Rating Scale and the EQ-5D instruments. The estimation method used here is difference-in-difference combined propensity score matching. The results show that RMHC has a positive effect on the health status of participants. Among the five dimensions of EQ-5D, RMHC significantly reduces pain/discomfort and anxiety/depression for the general population, and has a positive impact on mobility and usual activity for those over 55-years old. Our study provides useful policy information on the development of health insurance in developing countries, and also identifies areas where further research is needed.