Health Insurance: Suggestions Toward a Free Market

What solution to the “problem” of health insurance would an advocate of the the principles of individual rights, look like? First, we should probably be clear on what exactly we mean by insurance.

Insurance: Act of insuring, or assuring, against loss or damage by a contingent event.
Insure: to secure against a loss by a contingent event, on certain stipulated conditions, or at a given rate or premium.
Contingent: liable, but not certain, to occur

So taken together we get the fact that insurance is a means of protecting against a loss from some event which is not certain to occur. In the area of health care this means that insurance is a means to protect against financial loss due to unforeseen events such as illness or accident but not to costs of events that are predictable, regular office visits for example. This is obviously not what we have today under the concept of insurance.


Perhaps the government could remove regulations which would allow out of state health insurance companies, not just in regional states but from all states, to offer policies. (Vermont currently only permits two companies to offer policies.) At the same time they can remove the regulations that mandate coverage. This would certainly result in health insurance rates going down for most people between being able to choose what coverage they actually need, as opposed to what some bureaucrat decides they need, and the simple pressure of competition to keep rates low. Perhaps it would even become like automobile insurance where insurance agents call their customers and inform them when they have found better coverage at a lower price, as recently happened with my car insurance.

While competition would go a long ways to lowering rates, there would also develop something like an “insurance union,” a group formed on the credit union model, or “insurance clubs,” formed on something like a Sam’s Club model, which would allow members to get better rates on insurance by bargaining with insurers as a group. As long as the government, other than protecting citizens from force and fraud, stays out of the marketplace, who knows what innovations would be developed which would lead to better, more affordable care.

Health Insurance and Employment

To separate health insurance from employment, perhaps a rights respecting government would look at the root reason why insurance became attached to employment. It was government intervention in the 1940s which led to the entwining of employment and insurance in the first place. By first freezing wages due to the war but allowing businesses to freely offer fringe benefits, such as insurance, to attract workers and then giving such benefits special tax consideration, the government provided significant incentives for insurance to become linked to employment. A good place to begin to reverse this would be giving the same tax benefits to those who pay for their own insurance as those who get it via their employer. (A better place would be to remove the tax break altogether and simply lower tax rates for everyone.)

Universal Coverage

The “goal” of universal coverage would be abandoned by an advocate of individual rights. The real meaning of universal coverage is that the government will use its force either to compel people to buy insurance or to collect taxes to provide insurance for everyone. Whether it makes sense for a person to have insurance or that they would choose a different level of coverage, or no coverage at all, would be irrelevant under such a system. People need to be left alone to make their own choices, based on their own rational (hopefully) evaluation of their situation, and they need to be left free to buy the health insurance that best meets their needs in light of these choices. Or not buy it.

For those who claim that the people who choose to be uninsured would be a burden on everyone else when they get ill, I would simply ask “Why?” Why should a debt incurred for medical treatment be treated differently than another type of debt? The person who incurs the debt is responsible for working towards repaying it.


For the minority of people in a free society who truly cannot afford to pay for their health care there would a multitude of charitable organizations to offer financial assistance in paying for insurance and/or care, and charitable hospitals that would provide care at no cost. Prior to the advent of the welfare state, large cities often had directories listing hundreds and hundreds of such charitable organizations. For those who may claim it is not fair to “force” people to accept charity, it is no less charity if it comes from the government rather than from a private group and it is infinitely more moral when it comes from an organization supported by voluntary donations rather than from a government supported by coercive taxes.

Obviously these suggestions won’t fix everything that is wrong with the current system, but they would point us, not in a new direction, but in a direction we have not faced in over 70 years. There are certainly complicated issues to be resolved such as pre-existing conditions, which strictly speaking would not be an issue of insurance, that would still need to be resolved. These suggestions would however give us a market system based on the freedom. It would be a system that respects the individual’s right to choose what insurance, if any, best suited their personal context, encouraging them to assume responsibility for their own lives.


On December 30th a piece by Dr. Paul Hsieh appeared in Forbes titled The New Congress Should Propose Free-Market Health Care Reforms which contains a much more detailed list than what I wrote, but it was nice to see many of my suggestions are also in his list.