The redistributive effects of a social insurance programme are determined by how the programme is paid for-who pays and how much do they pay?-and how the benefits are distributed. As a result, the redistributive effects of a social health insurance programme should be evaluated on the basis of its net benefit-the difference between benefits and payment. Among the rich body of empirical analysis on equity in health care financing, however, most studies have relied on partial analysis, assessing equity by source of financing while ignoring the benefit side, or looking at equity in benefits but ignoring the funding side. Either approach risks misleading findings. In this study, therefore, the primary objective was to assess the distribution of net benefits across income groups under Taiwan's National Health Insurance (NHI) programme. This study observed a nationally representative sample of 74 012 NHI enrolees from 1996 to 2000. The unique NHI databases in Taiwan provide comprehensive enrolment and utilization information, and allowed linkage to each enrolee's income tax files. In addition to crude estimates, two-part models and ordinary least-square models were used to adjust inpatient and outpatient benefits for health care needs (age, sex, major disease status and physical disability). After adjusting for health care needs, the distribution of net benefits showed an apparent pro-poor pattern, with the lowest income group receiving the highest net benefits (NT$3353) and the top income group receiving the lowest net benefits (-NT$3072) in 1996. Although a clear pro-poor pattern was observed among those enrolees who paid wage-based premiums, this vertically equitable pattern was less evident among the enrolees who paid fixed premiums. Overall, a trend of increasing net benefits was observed in all income groups between 1996 and 2000, and all the NHI enrolees can be considered better off over time. In addition to contributing to the limited literature on equity in net benefits, the study provides an important policy reference to developing countries with large underground economies and relatively small populations of regular wage-earners as it indicates that using fixed premiums as a major financing scheme may pose a serious equity concern and policy challenge.