Does younger children’s social health insurance alleviate household impoverishment due to illness?

How children’s social health insurance works when the household carries the medical expense burden has not yet been examined. Based on the China Family Panel Studies (CFPS) data from 2016 to 2018, we investigate the relationship between social health insurance and household medical impoverishment (MI) using a unique panel of Chinese younger children aged under 15 years. The results reveal that social health insurance for children can significantly reduce the incidence of household impoverishment due to illness. Under the health shock, the incidence of impoverishing health expenditure (IHE) and catastrophic health expenditure (CHE) in households covered by children’s health insurance are both reduced significantly. From the perspective of relative poverty, the poverty alleviation effect of social health insurance for children is more significant. After using the Propensity Score Matching with difference-in-differences (PSM-DID) method to accommodate endogeneity problems, our findings are still robust. The poverty alleviation mechanism transmitted by children’s enrolling in social health insurance is mainly affected by hospitalization reimbursement and the share of out-of-pocket (OOP) medical payments to total medical expenditure for children. Moreover, the poverty-reducing effect of social medical insurance is mainly significant in rural areas, low-income families, and non-left-behind children.