Collective Conscious

Cato reports on the col­lapse of the Wash­ing­ton State child-​​only indi­vid­ual insur­ance mar­ket. It’s easy to fol­low the pre­planned line of attack and “blame” the recent health reform bill for the change. But you have to won­der — is this a bad thing after all? My intu­ition tells me no.

We know that mar­kets grow through a process of cre­ative destruc­tion; mar­kets and prod­ucts must first die before oth­ers fill their place. We know that health insur­ance mar­kets are grossly inef­fi­cient, par­tic­u­larly when run in the pri­vate sec­tor. So it comes as no sur­prise to me that, once fair­ness and effi­ciency is required by law, health insur­ance will cease to be prof­itable for most pri­vate com­pa­nies. The demise of the small­est mar­kets, then, is the first sign that reform is work­ing: that the abuses of the past are being undone.

And that’s the whole point of the health-​​care-​​as-​​social-​​insurance safety net. At the very least, the pre­planned state exchanges will sooner or later come into effect and replace these failed mar­kets with a bet­ter model. If we get really lucky, reg­u­la­tors and leg­is­la­tors will see the mag­ni­tude of the mar­ket fail­ure as more and more mar­ginal mar­kets col­lapse, and we will embark on a grad­ual path of total reform for our sad system.

(photo: David_​Shankbone)