Private markets for health insurance pose a structural problem, and Obamacare cant fix it.

In the short term, Obamacare can be patched up by enlarging government subsidies for purchasing insurance, and ensuring that healthy Americans buy insurance, as the law requires. But these are band aids.

This story first appeared atRoberReich.org

The best argument for a single-payer health plan is the recent decision by giant health insurer Aetna to bail out next year from 11 of the 15 states where it sells Obamacare plans. Aetnas decision follows similar moves by UnitedHealth Group, the nations largest health insurer, and by Humana, another one of the giants.

All claim theyre not making enough money because too many people with serious health problems are using the Obamacare exchanges, and not enough healthy people are signing up.

The problem isnt Obamacare_per se_. It lies in the structure of private markets for health insurancewhich creates powerful incentives to avoid sick people and attract healthy ones. Obamacare is just making this structural problem more obvious.

In a nutshell, the more sick people and the fewer healthy people a private for-profit insurer attracts, the less competitive that insurer becomes relative to other insurers that dont attract as high a percentage of the sick but a higher percentage of the healthy.

Eventually, insurers that take in too many sick and too few healthy people are driven out of business.

If insurers had no idea whod be sick and whod be healthy when they sign up for insurance (and keep them insured at the same price even after they become sick), this wouldnt be a problem. But they do knowand theyre developing more and more sophisticated ways of finding out.

Health insurers spend lots of time, effort, and money trying to attract people who have high odds of staying healthy (the young and the fit) while doing whatever they can to fend off those who have high odds of getting sick (the older, infirm, and the unfit).

As a result we end up with the most bizarre health-insurance system imaginable: one ever better designed to avoid sick people.

If this werent enough to convince rational people to do what most other advanced nations have donecreate a single-payer system that insures everyone, funded by taxpayersconsider that Americas giant health insurers are now busily consolidating into ever-larger behemoths.

UnitedHealth is already humongous.

Aetna, meanwhile, is trying to buy Humana in a deal that will create thesecond-largesthealth insurer in the nation, with33 millionmembers. The Justice Department has so far blocked the deal.

Insurers say theyre consolidating in order to reap economies of scale. But theres little evidence that large size generates cost savings.

In reality, theyre becoming huge to get more bargaining leverage over everyone they do business withhospitals, doctors, employers, the government, and consumers. That way they make even bigger profits.

But these bigger profits come at the expense of hospitals, doctors, employers, the government, and, ultimately, taxpayers and consumers.

Theres abundant evidence, for example, that when health insurers merge, premiums rise. Researchersfound, for example, that after Aetna merged with Prudential HealthCare in 1999, premiums rose 7 percent higher than had the merger not occurred.

What to do? In the short term, Obamacare can be patched up by enlarging government subsidies for purchasing insurance, and ensuring that healthy Americans buy insurance, as the law requires.

But these are band aids. The real choice in the future is either a hugely expensive for-profit oligopoly with the market power to charge high prices even to healthy people and stop insuring sick people.

Or else a government-run single payer systemsuch as is in place in almost every other advanced economydedicated to lower premiums and better care for everyone.

Were going to have to choose eventually.

ROBERT REICH

Robert B. Reich, Chancellors Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration._Time_magazine named him one of the ten most effective cabinet secretaries of the 20th century. He has written thirteen books, including the bestsellers_Aftershock_and_The Work of Nations._His latest,Beyond Outrage, is now out in paperback. He is also a founding editor of the_American Prospect_and chairman of Common Cause. His new film,Inequality for All, is now available on Netflix, iTunes, DVD and On Demand.