So we should be clear about one thing. Employer provided health insurance is one of those depression era social programs that was cobbled together in response to a crises, without the benefit of price theory and other tools of modern Economics.

During the depression, doctors and hospitals had a hard time getting paid for their services because people avoided ordinary medical care until they got really sick at which point they usually lost their jobs ran up big bills that they could not pay. Various groups begin to experiment with prepaid group financing of health care.

This idea was eventually picked up by employers who begin to offer various forms of health insurance as an employee benefit. This particular benefit was made tax exempt to encourage people to work together to finance their health care. Because most everybody had a job with benefits in those days and because insurance companies had not yet learned the lessons of accounting and price theory, everything worked out pretty well.

We all paid about the same amount into the fund that provided health care. There wasn't much nuance or choice. Some of us, young folks, healthy folks and the people whose kids were normal, paid in more than they took out. Older folks, people who got into accidents and people whose kids turned out to have cancer or cystic fibrosis or something else nasty, took out more than they paid in.

Wonks Anonymous did not mind this too much. He hoped that he would eventually get old, he had worked in hospitals so he knew that everyone gets sick and he figured that the folks whose kids had deadly and expensive illnesses were not exactly enjoying all the extra money they were getting from health insurance.

Much time has passed and many parts of the arrangement have started to fall apart. Inspired by their economics principles classes executives, have adopted the doctrine of profit while learning that it is more efficient to treat labor as a commodity. Benefits and job security are becoming a thing of the past and more and more of us find ourselves without employer provided health insurance at various points in our lives.

When we do we face health insurers who have become increasingly profit conscious and financially savvy. In these circumstances we are lucky to find an unaffordable policy that will accept us and help to pay for our health care. The situation is not yet a full fledged disaster but it does have all of the elements of a serious crises.

Most of us might see this as a straightforward problem. People are losing their coverage or being forced to take substandard coverage. As more people lose coverage and go on individual markets the financial risk of illness is concentrated among those who the gods have chosen to give poor health.  We had better take steps to make sure that there is a reliable public insurance program that they can participate in.

The disciples of market economics see something entirely different. For this argument see David Leonhardt in the Times.

The real problem is that the folks who still have employer provided health insurance have limited choices. Specifically they are forced to pay into comprehensive health insurance plans that pay far too much. If they could choose less expensive plans, consumers would drive down the cost of health insurance and ultimately of health care. In a world of renewed competition health insurers would provide the market with what it wanted: cheap insurance.

And we all know that cheap insurance will lower the cost of health care.

Except that this is mainly a fantasy. First we should understand quite clearly that health insurers do not manage medical care or come up with innovative treatments or promote health. Health insurers contract with doctors and hospitals to get low rates for services, they try to limit care given by applying various cook book criteria and, more and more frequently, they write policies that do not pay for most medical care.

Insurance companies avoid paying for health care by requiring the consumer to pay a high deductible before the health insurer makes any payments and by requiring that the consumer continues to pay a substantial share of medical costs, and by limiting the amount that they will pay for any illness.

This cuts costs and enables them to offer cheap plans. Cheap in every sense of the word.

If we set up a situation where all consumers are free to choose the insurance plan that suits them best we will destroy health insurance as we know it. Suppose that we create some kind of insurance exchange where employed people with health insurance can choose between their employer's comprehensive, depression era group plan and other plans that have taken the lessons of modern economics to heart.

Then, unlike the bad old days, when the young and those who were lucky enough to be healthy and have healthy kids were forced to pay for the old and the unlucky, everyone will choose the plan that suits them best:

The young and healthy will choose cheap plans that pay little or nothing for health care because they will not expect to need real insurance. Cheap plans will become cheaper because they will draw healthier people.

The old, the unattractive and those who have substandard children will try to keep comprehensive health insurance but this will be difficult and expensive. Comprehensive insurance will cost more as those in the insurance pool get sicker and more expensive. Most people will only be able to afford cheap insurance that will leave them bankrupt in the event of a serious illness.

Which is of course in line with the fundamental principle of free market economics: Luck is the supreme virtue and the rewards for luck should never be diminished.

But before all you young attractive folks get all ready to push for this wonderful reform Wonks Anonymous would ask you these question: Do you really know that you are healthy? Can you guarantee that you will not collide with a drunk on your next bike ride and sustain multiple crippling injuries? Are you sure that you and your partner are not both carrying the gene for sickle cell anemia or cystic fibrosis?

Because, as young and healthy people choose to save money, they will surely destroy the possibility for any but the wealthy to get comprehensive health insurance. You can choose to cut yourself off from the sick and save yourself money right now but when your luck changes there will not be anyone around to cut you some slack.

Enjoy the freedumb.