In 2011, the Government of Ethiopia launched a Community Based Health Insurance (CBHI) pilot scheme, with the objective to increase access to health care and to provide financial protection from ill health for the rural poor. We use three rounds of household survey data – collected before and after the introduction of CBHI in pilot and control districts – to assess the impact of the scheme on health care utilization, out-of-pocket health spending, household consumption, income, indebtedness and livestock holdings. We find that enrolment in the CBHI scheme leads to an increase in utilisation of outpatient care, but there is no evidence of an effect on inpatient health care services. The costs per visit are greatly reduced by CBHI, which has led to a decline in overall out-of-pocket health spending. Although we do not observe an effect on overall household consumption, our results do show that CBHI in Ethiopia reduces reliance on potentially harmful coping strategies for smoothing consumption in response to illness, such as borrowing or reallocating resources away from productive activities.