What do you consider a "properly functioning market"? People who espouse free market views of health insurance believe that it can work like other insurances (such as car and home insurance). But this ignores the fact that health insurance is fundamentally different. With other types of insurance, the max value of the insured is fixed (to basically its replacement cost). However, since we can't replace ourselves, we have to resort to fixing the problem with medicine, and the cost of this is dependent on the type and severity of the illness. The free market approach is exactly what you see with today's dysfunctional system. Health insurance companies charge healthy people and drop them when they get sick. Or healthy people decide not to insure themselves, and so the rolls are left with sick people who have higher insurance premiums. Of course, sometimes the healthy people get sick, go to the ER, and raise everybody's costs.

Health insurance companies would love to purge their rolls of all unhealthy people, and only charge premiums to healthy people. The free market cannot fix this.