What are the market failures specific to health insurance?
Each insurance product is a little different. One problem with home insurance, for example, is that a lot of damage occurs in catastrophic events, and such events tend to bring political pressure to socialize the losses. This is moral hazard: getting others to pay the downside when you enjoy the upside. For example, when a hurricane destroys beachfront property, those property owners often seek governmental assistance, even though those same property owners go out of their way to make sure their property is private rather than accessible to the public. No one is saying government shouldn’t help in a flood or tornado or hurricane or earthquake or mudslide or whatever, but the point is that the people who benefit from the private property are the people who should pay for the help. Public dollars should support the public commons, not private property. We even have national insurance – for flooding – and when’s the last time you heard somebody call that socialist? In health insurance, a
