In the year 2001 the leaders of BPKIHS started a micro social insurance scheme; Social Health Insurance (SHI) for prospective research. It is a method of financing and managing health care using compulsory contributions from employers, employees and may be from the government. Household members from organized groups in catchment areas enrolled voluntarily. Photographed service cards were issued entitled for free IPD/OPD consultations, investigations and bed charges excluding CT scans and specialty treatment. Institute bore operation and medicine costs up to 10000 and 3500 respectively for IPD yearly. Premium was fixed after a research through focus group discussion in villages of Morang, Sunsari and Biratnagar. A flat rate premium of 15 and 50 NRS/adult/month for villagers, city dwellers and half for children was fixed. Marginalized community and handicapped paid 33% of premium, 33% by Institute and 33% by concerned VDC. As the client number increased from 2383 to 7392 in second and to 15779 in third year, Premium: Expenditure ratio moved from 225:222 to 198:391. Average cost sharing of premium to expenditure came to 226:332 showing a negative 3alance. This scheme completed its fourth year till this research in 2005 A.D. But it was closed due to deficit. As reinsured population occasionally concealed information by not incorporating all family members. They defaulted in subsequent year after utilizing the benefits of SHI and misused the card for uninsured ones. It may, in its optimized form, become a model to be widely adopted to bridge the gap between the cost of treatment and the ability to pay in developing countries.