Community-based health insurance (CBHI) may be a mechanism for improving the quality of health care available to people outside the formal sector in developing countries. The purpose of this paper is: (1) to identify problems associated with the quality of hysterectomy care accessed by members of SEWA, an Indian CBHI scheme; and (2) to discuss mechanisms that might be put in place by SEWA, and CBHI schemes more generally, to optimize quality of health care. Data on the structure and process of hysterectomy care were collected primarily through review of 63 insurance claims and semi-structured interviews with 12 providers. Quality of hysterectomy care accessed by SEWA's members varies tremendously, from potentially dangerous to excellent. Seemingly dangerous aspects of structure include: operating theatres without separate hand-washing facilities or proper lighting; and the absence of qualified nursing staff. Dangerous aspects of process include: performing hysterectomy on demand; removing both ovaries without consulting or notifying the patient; and failing to send the excised organs for histopathology, even when symptoms and signs are suggestive of disease. Women pay substantial amounts of money even for care of poor, and potentially dangerous, quality. In order to improve the quality of hospital care accessed by its members, a CBHI scheme can: (1) gather data on the costs and complications for each provider, and investigate cases where these are excessive; (2) use incentives to encourage providers to make efficient and equitable resource allocation decisions; (3) select, and contract with, providers who provide a high standard of care or who agree to certain conditions; and (4) inform and advise doctors and the insured about the costs and benefits of different interventions. In the case of SEWA, it is most feasible to identify a limited number of hospitals providing better-quality care and contract directly with them.