Introduction Community-based health insurance schemes are becoming increasingly recognized as a potential strategy to achieve universal health coverage in developing countries. Ethiopia has implemented community-based health insurance in piloted regions of the country. The scheme aims to improve the utilization of healthcare services by removing financial barriers. There is a dearth of literature regarding the effect of the insurance scheme on the utilization of healthcare services. Methods A community-based comparative cross-sectional study was conducted in the south Gondar Zone. Six hundred fifty-eight participants were selected using a systematic random sampling method. Data were entered into EPI data version 4.4.1 and exported to SPSS version 25 for analysis. Binary logistic regression was used to measure the association of factors with the outcome variable. The result of the final model was expressed in terms of Adjusted Odd Ratios (AOR) and 95% CI. Result Two hundred twenty-three (67.8%) and 111 (33.7%) of the respondents reported that their family members went to health institutions within three months among CBHI users and non-users respectively. The presence of under-five children (AOR = 2, 95% CI = 1.6–2.4), CBHI scheme membership times (AOR = 3, 95% CI = 2.6–3.4), household wealth index rich (AOR = 4, 95% CI = 2.3–6.3), household wealth index medium (AOR = 3, 95% CI = 1.8–5.8) and presence of chronic illness (AOR = 0.5, 95% CI = 0.2–0.8) was associated with health care service utilization. Households who were enrolled in CBHI were more likely to use healthcare services than households who were not enrolled. Conclusion and recommendation Households who were enrolled in CBHI were more likely to use healthcare services than households who were not enrolled. Therefore, health sector leaders and managers in the study area should strengthen their efforts for increasing the enrollment of the community into CBHI.