Aetna CEO Threatened Obamacare Pullout If Feds Opposed Humana Merger

Can anyone succinctly explain the benefits of having a market for private health insurance companies, rather than a single provider of health insurance (government, aka "public option")? Can a capitalist case be made for their existence? Does the lack of a large private insurance market in countries with government-provided health insurance cause lots of inefficiencies and waste?

The only place I know that actually has a market is Switzerland. Insurers are required to offer "basic insurance." Everyone in the country is required to buy it. If you are below poverty line, it is paid for by the government. What is covered by basic insurance is set by the government, and so independent of insurer. Likewise, what insurers can ask to set rates is set by the government (age, income, sex, and smoking status basically). Insurers are required to sell basic insurance to anyone who wants to purchase. All insurance billing uses the same set of forms, so there's very little office overhead. This actually produces something that looks like a market. You can get on a website, put in a couple of values, and get a lot of quotes instantly, pick one, put in your credit card, and you're insured. Companies also sell further insurance beyond basic, and compete on quality of service for basic.

Swiss healthcare is regarded as decent but far too expensive for what it is compared to the single payer systems in all its neighbors.

Paying for healthcare isn't the place you worry about inefficiencies and waste. It's going to get paid for, and the possible efficiencies of pushing paper around are dwarfed by the cost of actually delivering medical care. So what you actually care about is delivery of health care. Italy does this really well. They have public hospitals and clinics and private ones, too. If you go to a public one, you're covered. If you go to a private one, the government pays the same to the clinic that it would pay to the public clinic. So the public system serves as a reference that the private system has to match in efficiency, performance, and price.

There is no medical or macroeconomic justification for private insurance companies. It's historical accident perpetuated by monied interests.