This study analyzes the potential role of health insurance for poverty reduction taking Senegal as an example. The results suggest that health insurance plays a significant role in enhancing health care utilization and in protecting households from catastrophic out-of-pocket health payment. However, most of the population especially the poor and rural households are not covered by any health insurance plans. Given these findings, policy makers and donors should pay more attention to expand the coverage of health insurance, in particular to embrace the poorest section of the population in the country.