That is achieved by transfer payments by a risk equalization pool usually run by a neutral party, such as a government agency.
In unregulated competitive markets for individual health insurance, risk-rated premiums are observed to differ across subgroups of insured people, which are defined by rating factors such as age, gender, family size, geographic area (because costs of care may be higher or lower in some coverage areas than others) occupation, length of contract period, the level of deductible, health status at time of enrollment, health habits (smoking, drinking, exercising) and, via differentiated bonuses for multiyear no-claim, to prior costs.
Thus, financial transfers are needed in order to prohibit any discriminatory practices against these subgroups without increasing costs on insurers.
In European countries such as the Netherlands, Belgium, Germany, and Switzerland, the Subsidy Fund is run by a government agency, which assesses risks for individual policy holders.
An insurer receives a relatively large sum of subsidies by the REF if the risk profile of their members is relatively unhealthy and vice versa.