Insurance is a large-scale perverter of the market, because it muddies the direct relationship between the cost and the value of the service and makes the pricing all screwy. Creating this opening for pencil-pushing middlemen to profit off a service to which they provide no value is a big problem.

This is blatantly apparent in the health industry, where if you're a cash patient that knows the right magic incantations, you can get 90% of the bill waived, and if you don't know those incantations, you're forced into bankruptcy with hundreds of thousands in medical debt. The American health system is despicable and must be rectified.

In response to the now dead comment about how government-mandated insurance perverts the market, I agree that's a bigger departure from the idealistic free market model. However cookiecaper is referring to moral hazard: where people will make reckless decisions because insurance is essentially paying someone else to absorb uncertainty. When the risk is assumed by another, you take bigger risks. So there's increased uncertainty. And it has negative externalities, so yeah: another warp in the ideal free market model.

But that's all the more reason why insurance companies want (and IMO should have) better insight into who you are: so the risk is more accurately quantifiable.

Do you have any further links or information on these magic incantations ?...

Here's an article about the differences: http://articles.latimes.com/2012/may/27/business/la-fi-medic...

The specific incantations are different for every provider or hospital. Sometimes you can get it just by saying up front "I'm paying cash today." Sometimes you have to go through a complicated Patient Financial Services system to get the bill reduced, and then you have to say the right words to the right people if you want reduction.

A massive bulk of "medical" labor goes into these cat and mouse games between patients, insurers, providers, and facilities. They're all trying to figure out how to maximize their profit and/or savings and it gets very complicated.

If insurers learn that other people, even cash patients, are getting "a better deal", they'll punish the provider and/or facility by removing them from the network, thus cutting the patient traffic. When providers and facilities bill insurers, they expect to get maybe 10%-20% of the billed amount, so they rack the cost of everything up through the roof so that they'll be OK with the pittance they get in return. And that's the tip of the iceberg. There are a lot of people whose jobs are dedicated to nothing more than these billing shenanigans.

Look up "redlining" for one consequence of not being able to get loans.

The next logical step is for credit agencies to bake this into your credit score.

While this particular application mentions loans, credit scores are used for a lot more things than loans. It would be interesting to live in a world where you can't get a roof over your head because your deadbeat brother has a terrible credit score.