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Theoretically possible, but the complexity of the actuarial calculations is stunning.

Remember that insurers make money by creating risk pools, estimating the actuarial risks across those pools, setting premiums at *slightly* above the projected costs to insure and administer those risks, and then investing the revenues until they have to pay out. (I know of one insurer, for instance, that actually for several years in the 1990s priced its disability policies below the market price for the insured risks because it was able to make a profit on investing the premiums).

The pools are important, and this is what Obamacare is trying to get at. The larger the number of people in the pool, and the more standardized the policy, the easier it is to sell those policies at profit. That’s why Obamacare policies for men include coverage against ovarian cancer and for mammographies, and women have to pay for policies that include screening for prostate cancer. With the larger pools, there are more healthy people (who would often otherwise not buy insurance or would buy only catastrophic insurance) in the pool and fewer actuarial variations that have to be priced out.

It also involves a moral hazard issue. Under the a la carte plan, the only people who will buy insurance for diabetes, for instance, are people with a history of diabetes in their families or those who are risk averse. The cost to insure that pool will increase until it equals (1) the actual medical cost, discounted to present value, of treating diabetics plus (2) a profit margin and overhead for the insurer. At the theoretical top end of this, it would be cheaper to simply pay out of pocket for treatment because you don’t have to pay for the insurer to get in the mix.

That’s why insurance for known, necessary expenses is just stupid. Think about hair cuts. Unless you do it yourself or are bald, you need haircuts. We could set up an insurance system to cover those expenses. Assuming the bald and DIYers are permitted to opt out, the only people who will purchase the insurance are those who are likely to need it. So you go to your barber with your hair cut insurance card. The barber used to charge $10 on a cash basis, but now has increased administrative costs to deal with the insurance policies and increased risk of non-collection because insurers suck. The barber will have to increase charges to cover these costs, so your haircut will now cost $15. Additionally, the insurer will have to charge you premiums to cover the expected costs of the haircut ($15) plus its overhead and profit, meaning that your premiums will increase to $20 per haircut that used to cost $10 without insurance.

Additionally, because of the smaller and more specialized risk pools, with fewer healthy people in the mix to balance out the risk and pay premiums that cost more than their actual risk, the cost of insurance will rise across all risk pools.

So the long and short of it is that the insurance market simply cannot make it on an a la carte basis because of the moral hazard and actuarial problems it raises.

The possible responses to this are two-fold. The statist, communitarian response is Obamacare: force everyone into the risk pool. The market solution is self-insurance and catastrophic risk policies. There are actually lots of ways to mix those that may produce a workable market while making sure the stupidest people will still have access to health care. Rezident Zero, of course, chose the absolute worst of all options.