Abstract
The design of health insurance programs and plans is determined by important trade-offs. Designers of health insurance programs need to consider the trade-off between risk spreading and appropriate incentives and the trade-off between competition and selection. Adverse selection makes it extremely difficult to obtain market solutions for the spreading of risks. It can be avoided by introducing mandatory coverage, standardizing benefits, and abolishing risk-related premiums. However, the trade-off between competition and selection remains an important issue in these health insurance programs as well, because some kind of risk adjustment system needs to neutralize incentives for risk selection by health plans. For low- and middle-income countries, specific chances but also challenges occur in implementing health insurance.
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