So called "Market Solutions" will not work with health insurance companies...

[Solon]

because of the very structure in which they are built on. In classical economics, competition does lead to lower prices and sometimes a better quality product, but only when its services or goods that are can be manufactured or are can be delivered in a fashion that is more beneficial to the customer.

Let's give an example, a widget factory opens up in town, producing widgets people want, a competitor opens up down the street, trying to sell a better product at lower prices, so the first factory is now pressured to cut costs and produce a higher quality product. They can do this in numerous ways, from adding more automation to the factory, negotiating better deals on raw materials, etc. The end result is that the customer, when given a choice, will pick the better and/or cheaper product, but not necessarily be denied the product in the first place through the act of competition itself.

The reason for this is because adding competition for these factories doesn't reduce the overall resources these companies use to eliminate the cost cutting measures that are put in place. When run correctly, these companies, both members of the competition, can remain viable in the long run.

This is an oversimplification, but it is also, more or less, true.

Medical Insurance companies operate on a different principle, mostly because they provide a service, paying for medical care, and in addition, the resource they tap into to lower costs isn't nearly as flexible as the raw resources for widgets. A widget factory can ramp up production to reduce overall prices and remain competitive, an Insurance company can't do that, because the resource they use are healthy human beings paying premiums for their service which never, or at least rarely, use it.

The problem is that it takes, from birth, about 18-25 years for a healthy person to stop being an additional cost to an Insurance company, and instead become a way to reduce cost.

Human beings aren't built on an assembly line, so Insurance companies have to reduce costs in other ways, and the only other way to do so is to drop high cost individuals and/or deny care, to keep their profit margins up.

An additional pressure is added when there is competition, because the larger a risk pool an insurance company has, the lower it can reduce premiums and deducts/copays, and the higher its profit margin. Adding competition reduces the size of the risk pool for EVERY insurance company, so costs for all for them go up, in other words, the exact opposite happens with competition in Insurance companies than it does in more mundane factories and services.

This creates a problem for while these companies can reduce their profit margins, there is a point when they will no longer be viable as businesses at all, and yet still cannot provide services to everyone that needs it who pays into their risk pool.

This is the problem with the market, because it really doesn't exist for these companies at all, indeed, the most efficient and cheapest way to have affordable insurance is to have a national monopoly on insurance, one company, one risk pool, no competition. This would lower individual costs for patients, and reduce administration costs for healthcare providers. The only question remaining is should this company be publicly owned or not?