One of the biggest problems in the Chinese healthcare system is the urban-rural divide, with the urban residents enjoying far superior healthcare benefits than the rural population. Consequently, the most serious challenge to the Chinese government is how to provide more effective coverage to the rural population. This project provides the first micro-level evidence on the impact of health insurance integration on health care utilization in China. Using difference-in-difference design and drawing on an original city-level data on social health insurance policy and the China Health and Retirement Longitudinal Study (CHARLS) in 2011, 2013 and 2015, we find that integrating the urban-resident and rural cooperative health insurance programs increased rural population’s utilization of inpatient health care by 9%. Moreover, we provide evidence on two possible mechanisms driving this relationship. First, the urban-rural health insurance integration attracted more rural people to enroll in the integrated health insurance program. Second, the urban-rural health insurance integration increased benefit level (e.g., lower inpatient cost-sharing) compared with the previous rural cooperative health insurance. The results suggest that reducing the fragmentation of health insurance can increase health insurance coverage and combat health-care inequality.