SUMMARYYemen is a low‐middle‐income country where more than half of the population live in rural areas and lack access to the most basic health care. At US$40 per capita, Yemen's annual total health expenditure (THE) is among the lowest worldwide. This study analyses the preconditions and options for implementing basic social health protection in Yemen. It reveals a four‐tiered healthcare system characterised by high geographic and financial access barriers mainly for the poor. Out‐of‐pocket payments constitute 55% of THE, and cost‐sharing exemption schemes are not well organised. Resource‐allocation practices are inequitable because about 30% of THE gets spent on treatment abroad for a small number of patients, mainly from better‐off families. Against the background of a lack of social health protection, a series of small‐scale and often informal solidarity schemes have developed, and a number of public and private companies have set up health benefit schemes for their employees. Employment‐based schemes usually provide reasonable health care at an average annual cost of YR44 000 (US$200) per employee. In contrast, civil servants contribute to a mandatory health‐insurance scheme without receiving any additional health benefits in return. A number of options for initiating a pathway towards a universal health‐insurance system are discussed. Copyright © 2012 John Wiley & Sons, Ltd.