The previous two sessions of this Symposium have dealt with incentives for cost-effective provider behaviour. Although incentive-reimbursement, which rewards the providers for delivering medical care in a cost-effective way, can be an important step towards a cost-effective health care system, it is not sufficient. As long as the insured consumers have both comprehensive health insurance coverage and freedom of choice of provider, providers will have great difficulty in resisting consumers' demand for ever more costly medical care, and politicians or other decision-makers will have great difficulty in restricting capacity and in preventing overcapacity. Fear of losing patients or voters might dominate. Therefore, in this session we shall focus on the key role of health insurance in a cost-effective health care system and on consumer incentives and insurer behaviour. If the consumers have a choice between several health plans such that the premiums or the out-of-pocket payments reflect the cost-effectiveness of the provider chosen, this will give the provider incentives for cost-effective behaviour. As a result, competition may arise between different providers, between provider-groups, and between provider-insurer organizations. Although market forces do play an important role in a competitive health-care system, competition should not be confused with a "free market". Besides financial arrangements to protect the poor, procompetitive regulation is needed to guarantee a "fair competition".