Health insurance and subjective well-being: evidence from integrating medical insurance across urban and rural areas in China

Abstract Health insurance coverage and the risk protection it provides may improve enrollees’ subjective well-being (SWB), as demonstrated, e.g. by Oregon Medicaid’s randomized expansion significantly improving enrollees’ mental health and happiness. Yet little evidence from low- and middle-income countries documents the link between insurance coverage and SWB. We analyse individual-level data on a large natural experiment in China: the integration of the rural and urban resident health insurance programmes. This reform, expanded nationally since 2016, is recognized as a vital step towards attaining the goal of providing affordable and equitable basic healthcare in China, because integration raises the level of healthcare coverage for rural residents to that enjoyed by their urban counterparts. This study is the first to investigate the impact of urban–rural health insurance integration on the SWB of the Chinese population. Analysing 2011–18 data from the China Health and Retirement Longitudinal Study in a difference-in-difference framework with variation in the treatment timing, we find that the integration policy significantly improved the life satisfaction of rural residents, especially among low-income and elderly individuals. The positive impact of the integration on SWB appears to stem from the improvement of rural residents’ mental health (decrease in depressive symptoms) and associated increases in some health behaviours, as well as a mild increase in outpatient care utilization and financial risk protection. There was no discernible impact of the integration on SWB among urban residents, suggesting that the reform reduced inequality in healthcare access and health outcomes for poorer rural residents without negative spillovers on their urban counterparts.