This paper investigates the different sources of variation between US states in self-rated health using multilevel statistical procedures. The different sources that are considered are based on individual- and state-level factors. Data for the analysis comes from the 1993-94 Behavioral Risk Factor Surveillance System and the 1986-90 General Social Surveys. Results show that individual-level factors (such as low income, being black, smoking) are strongly associated with self-rated poor health. Significant variation, however, remain between states after allowing for individual characteristics. Crucially, between-state variation in self-rated health is different for different income groups. State-level contextual effects are found for per-capita median-income and 'social capital'. While not strong, there seems to be a differential impact of state income-inequality on high-income groups, such that the affluent report better health from living in high inequality states. The paper substantiates the need to connect individual health to their macro socioeconomic context. Importantly, it is argued that without adopting an explicitly multilevel approach, the debate on linkages between individual health and income-inequality/social capital cannot be adequately addressed.