Studies have considered a firm’s contribution to employees’ medical insurance as a cost. However, contributing to medical insurance has indirect benefits, such as improved labor productivity or R&D innovations, which increase corporate value. This study estimates the impact of corporate medical insurance contribution on corporate value using data drawn from all listed A-share nonfinancial companies in China from 2007 to 2017. To identify the effects, we exploit the social insurance collection system reform as a natural experiment and a 2-Stage Least-Square estimation procedure. The results show that a 1 percentage point increase in the firm's medical insurance contribution leads to a 5.6 percentage point increase in the firm's corporate (book-to-market) value. The effects also exhibit heterogeneous patterns. Firms from high R&D industries or highly polluted areas have stronger impacts than other firms. The positive effect can be explained by two channels: labor productivity and firm innovation and efficiency. We find that medical insurance contribution increases both labor productivity and firm efficiency.