This chapter discusses insurance as a central player in the purchasing of health goods and services. It points out the flaws and quirks in the insurance market that lead to an absence of perfect competition and the potential for skewed bargaining power between providers and insurers. Managed care is then outlined as an attempt by insurance companies to curtail health spending through utilization controls and narrow networks. Additional tools such as paying for wellness programs, bundling payments for episodes of care, and cost-effectiveness measures are also discussed as possibilities to improve the efficiency of payouts by insurers. The chapter concludes by reminding us that insurance companies make more money the less they pay out and that making it more difficult for beneficiaries to access care will allow them to accomplish that.