In many countries, competing health plans receive capitation payments from
a sponsor, whether government or a private employer. All capitation payment
methods are far from perfect and have raised concerns about risk selection
. Paying health pla ns partly on the basis of capitation and partly on the
basis of actual costs ("risk sharing") reduces plans' incentives for select
ion but sacrifices some incentives for efficiency. This paper summarizes ou
r empirical research on Dutch health plans with respect to various forms of
risk sharing. All sponsors can improve their payment systems by either imp
lementing or changing their form of risk sharing.