ABSTRACT
In this chapter we examine the effects of uncertainty on the market for health care, and a possible solution to this problem, namely, the introduction of health insurance. A basic framework for the formation of a health insurance market is established which lays the foundation for the discussion of the following chapters. The analysis concentrates on the demand and supply of health insurance and the derivation of the insurance premium at which health insurance may be bought and sold. Problems generated by health insurance are discussed.
