This is a case study of an important innovation in providing healthcare for the rural poor: the Yeshasvini Health Insurance Scheme for rural farmers and peasants in Karnataka, India. Arguably the world's largest health insurance scheme for the rural poor, the scheme commenced in 2003. Designed in ways that overcome several obstacles to providing health security for rural populations, the scheme covered, in its second year, about 2.2 million widely dispersed peasant farmers for surgical and outpatient care for a low annual premium of approximately US$2. In this paper, we describe and evaluate the scheme in its first year of operation, and explore its potential to be a model for the developing world generally.