Between 2022 and 2023, care denials rose an average of 20.2 percent for commercial insurance claims and 55.7 percent for Medicare Advantage claims, driven in part by machine learning tools that automatically reject claims without clinical review.¹ Each of those denials followed the same sequence: a person paid their premium, a doctor ordered care, and the insurance company decided not to pay for it. Somewhere in a corporate office, that decision contributed to a quarterly earnings target. The system worked exactly as designed; the company made money by not doing the thing it charged the patient to do.
This article explores a single provocation: what would happen if a state stopped allowing private companies to stand between people and their medical care? We are talking specifically about medical insurance, not property, auto, life, or any other line. We are talking about the companies that decide whether a doctor's orders get paid for. Everything else, every other form of insurance, raises different questions for a different day.
Insurance companies perform exactly one function that matters: pooling risk. A large group of people pays into a common fund, and when someone gets sick, the fund covers the cost. The concept predates the modern insurance industry by centuries; medieval guilds pooled risk, and so did fraternal organizations. The underlying math requires nothing more than a large enough group of people contributing to a shared pot of money, managed by actuaries who calculate how much goes in and how much comes out. Actuaries work for governments, pension funds, and universities, and they do not need a publicly traded corporation to practice their profession.
So the question we should be asking is simple: does pooling risk require a company that answers to shareholders?
The federal government already runs the largest health insurance program in the country. Medicare spent roughly 1.4 percent of its total expenditures on administration in 2016, covering salaries, fraud control, and patient outreach.² Private insurers, by contrast, spend approximately 17 percent of expenditures on overhead, a category that includes marketing, executive compensation, shareholder returns, lobbying, and the elaborate claims-processing infrastructure built to minimize payouts.³ Steffie Woolhandler and David Himmelstein, professors at the City University of New York's Hunter College School of Public Health, have documented this gap for decades. Their research in the Annals of Internal Medicine found average insurer overhead costs of roughly 12.4 percent even before accounting for the administrative burden insurers impose on doctors and hospitals.⁴ A separate simulation model published in the Milbank Quarterly estimated that standardizing insurance contracts alone could reduce billing and insurance-related costs by 27 to 63 percent under various reform scenarios.⁵
The gap between those two numbers, between what Medicare spends on paperwork and what private insurers spend, represents cash taken from patients and handed to people who did not treat them. UnitedHealth Group brought in $400.3 billion in revenue in 2024.⁶ The five largest publicly traded health insurers collected a combined $31.7 billion in net income that year.⁷ UnitedHealth's CEO, Andrew Witty, took home $26 million in personal compensation, including $22 million in stock options.⁸ Every dollar of that came from premiums paid by people who did not receive the full value of those premiums in care.
Now imagine a single change. A state legislature passes one law creating a public insurance authority. It pools risk the same way private insurers do, pays claims, and sets rates using actuarial science. What it does not do is spend money on television advertising, executive stock options, shareholder dividends, lobbying, or denial departments staffed by algorithms built to say no. The doctors do not change, the hospitals do not change, and the nurses, the MRI machines, the operating rooms, the prescription pads all stay exactly where they are. The only thing that changes is who writes the check.
A state already has the legal authority to do this. The McCarran-Ferguson Act of 1945 explicitly delegated insurance regulation to the states, declaring that "the continued regulation and taxation by the several States of the business of insurance is in the public interest."⁹ Congress reaffirmed that delegation in both the Gramm-Leach-Bliley Act of 1999 and the Dodd-Frank Act of 2010. A state does not need federal permission to restructure how medical insurance works within its borders; it already has the power.
And the federal government already operates as an insurer in sectors where private markets failed the public. The Federal Deposit Insurance Corporation has insured bank deposits since 1933, funded entirely by premiums from member banks rather than tax dollars; no depositor has ever lost a penny of insured funds.¹⁰ The Federal Crop Insurance Corporation has insured farmers since 1938, covering hundreds of millions of acres through a government corporation housed inside the Department of Agriculture.¹¹ The National Flood Insurance Program has provided government-backed flood coverage since 1968, with FEMA serving as the underwriter for 4.7 million policyholders and nearly $1.3 trillion in coverage.¹² The Pension Benefit Guaranty Corporation has insured private pensions since 1974, protecting roughly 30 million workers, again funded by premiums rather than general tax revenue.¹³ Four states go further still: Ohio, North Dakota, Washington, and Wyoming ban private insurers from selling workers' compensation insurance entirely, requiring every employer to buy coverage exclusively from a state-run fund.¹⁴ The state sets the rates, classifies employers, processes claims, and collects premiums. Two of those four states are among the most conservative in the country. Nobody calls it socialism. They just call it workers' comp.
Only one American state has tried to apply this model to medical insurance, and the standard talking point is that it failed. Vermont tried in 2011. Governor Peter Shumlin signed legislation creating Green Mountain Care, designed as the nation's first state-level single-payer system. Three separate studies, from Harvard, the University of Massachusetts, and the state itself, all concluded the program would save money. The state's own 2014 analysis projected $378 million in savings over the program's first five years.¹⁵ Shumlin killed the program unilaterally in December 2014 before it ever took effect, citing "potential economic disruption" from the tax increases required to replace premium payments. The program never operated a single day, so it cannot serve as evidence that public insurance fails in practice, because it was never practiced. What it does demonstrate is that the obstacle was political, not economic; every fiscal analysis said the numbers worked, and a governor lost his nerve.¹⁶ Vermont's plan also depended on a federal ERISA waiver that would have required an act of Congress, a permission slip no state using its own employer authority would need to request. But Shumlin's model required replacing every private premium with a public tax, because he tried to absorb employer-sponsored coverage wholesale. A state that competes with private insurers rather than replacing them avoids that problem entirely. The funding comes from the same premiums people already pay, routed to a public authority instead of a private carrier. A full single-payer system may well be the better destination, but no state needs to win that fight before it stops handing public money to private corporations. Every state already has enough employees on its health plan to build its own insurance pool tomorrow morning under existing law, open enrollment to any resident who wants in, and turn the whole operation into a nontax revenue stream that flows back to the public instead of funding yachts and eight-figure bonuses for executives who built their careers on saying no to sick people.
There is one serious legal obstacle, and we should name it plainly. The Employee Retirement Income Security Act of 1974 preempts state laws that "relate to" employer-sponsored health plans, and roughly 155 million Americans get coverage through their employers.¹⁹ ERISA was designed to prevent a patchwork of state regulations from burdening multi-state employers, but its preemption clause has become the single most effective shield the insurance industry holds against state-level reform. Any state that tried to ban private insurers outright would face immediate litigation over the 155 million people in employer-sponsored plans, and the insurance industry's lawyers would have strong ground to stand on.
But a state does not need to ban private insurers to make them irrelevant. ERISA prevents a state from regulating other employers' health plans. It says nothing about what a state does with its own employees. Every state in the country already decides how to cover its own workforce, and many already self-insure, paying medical claims directly rather than routing them through a private carrier. New York City moved its active employees and pre-Medicare retirees to a self-funded health plan in January 2026, cutting out the private insurer's profit margin and projecting approximately $1 billion in annual savings.²⁰ A state that did the same thing at scale, bringing every state and municipal employee under a single publicly owned insurance authority, would instantly create one of the largest risk pools in its market. ERISA does not apply because the state is the employer, not a regulator telling other employers what to do.
The second step requires no federal permission either. A state can open that same public authority to any resident who wants to join, selling coverage on the individual market through the ACA exchange or a state-run marketplace. Individuals buying their own insurance are not covered by ERISA, so the public authority competes alongside private insurers, offering the same coverage without the overhead of shareholder dividends, executive stock options, television advertising, or denial departments. If the authority delivers better value, people switch; if it does not, they stay where they are. Revenue from premiums flows back to the state instead of to Wall Street, and the authority operates the way the FDIC operates, the way the crop insurance program operates, the way workers' comp operates in Ohio and North Dakota: a publicly accountable entity performing an insurance function without a profit motive.
An honest version of this conversation requires addressing the people who work in the industry. The insurance sector employs approximately 3.02 million people across carriers, agencies, and brokerages.¹⁷ A state that replaced private medical insurers with a public authority would still need actuaries, claims processors, customer service representatives, and administrators. The doctors, nurses, and hospital staff would not lose their jobs because the entity writing the check changed its name. The positions that would disappear are the ones that exist only because competing firms need to sell against each other: marketing departments, advertising teams, lobbying operations, and the layers of executive management that earn eight-figure salaries for overseeing a denial apparatus. The industry itself expects to lose roughly 400,000 workers to attrition by 2026 and half its workforce to retirement by 2028.¹⁸ Every one of those positions would carry union representation, collective bargaining rights, and a public pension, because state employees are union employees. The person processing claims at a state authority does the same work they did at UnitedHealth, except now they have a union card in their wallet and no financial incentive to deny the claim on their screen. The transition would accelerate a contraction already underway, but it would not create mass unemployment; it would redirect labor from an industry designed to avoid paying for care into a system designed to deliver it.
Private insurers would not be banned. They would simply have to compete against an alternative that spends its money on care instead of on reasons to deny it. Under the current system, a person pays their premium every month and still faces a one-in-five chance that their claim gets denied.¹ Under a public authority, the denial infrastructure does not exist, because nobody in the building gets a bonus for rejecting claims. The doctor's orders get paid, the hospital gets reimbursed, and the patient gets care. The only thing missing from the equation is the $26 million flowing to a CEO and the $31.7 billion flowing to shareholders. We do not need to ban insurance companies. We just need to give people a door they can walk through to leave them behind.
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Works Cited
¹ American Hospital Association. (2024). Fact sheet: Addressing commercial health plan abuses to improve patient care. American Hospital Association.
² Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. (2017). 2017 annual report. Centers for Medicare & Medicaid Services.
³ Gee, E., & Spiro, T. (2019). Excess administrative costs burden the U.S. health care system. Center for American Progress.
⁴ Woolhandler, S., & Himmelstein, D. U. (2017). The relationship of health insurance and mortality: Is lack of insurance deadly? Annals of Internal Medicine, 167(6), 424-431.
⁵ Tseng, P., Kaplan, R. S., Richman, B. D., Shah, M. A., & Schulman, K. A. (2018). Administrative costs associated with physician billing and insurance-related activities at an academic health care system. JAMA, 319(7), 691-697; Bai, G., Zare, H., Eisenberg, M. D., Polsky, D., & Anderson, G. F. (2021). Reducing administrative costs in US health care. Milbank Quarterly, 99(2), 481-507.
⁶ UnitedHealth Group. (2025). UnitedHealth Group reports 2024 results. UnitedHealth Group Newsroom.
⁷ Compiled from 2024 annual reports: UnitedHealth Group ($14.4B), Elevance Health ($6B), CVS Health ($4.6B), Cigna Group ($3.4B), Centene ($3.3B).
⁸ Grosz, M. (2025, January). These five health insurance giants have raked in $371 billion since Obamacare passed. The Lever.
⁹ McCarran-Ferguson Act, 15 U.S.C. sections 1011-1015 (1945).
¹⁰ Federal Deposit Insurance Corporation. (2024). Annual report. FDIC.
¹¹ Congressional Research Service. (2023). Federal crop insurance: A primer (IF10988). Library of Congress.
¹² Federal Emergency Management Agency. (2024). National Flood Insurance Program. FEMA.
¹³ Pension Benefit Guaranty Corporation. (2024). Annual report. PBGC.
¹⁴ The Hartford. (2024). Monopolistic state funds for workers' comp. The Hartford; Progressive Commercial. (2024). Monopolistic workers' comp insurance states. Progressive.
¹⁵ Vermont Agency of Administration. (2014). Green Mountain Care: A comprehensive model for building Vermont's universal health care system. State of Vermont.
¹⁶ Himmelstein, D. U., & Woolhandler, S. (2015). The current and projected taxpayer shares of US health costs. American Journal of Public Health, 106(3), 449-452; McDonough, J. E. (2015). The demise of Vermont's single-payer plan. New England Journal of Medicine, 372(17), 1584-1585.
¹⁷ U.S. Bureau of Labor Statistics, as cited in AM Best. (2024). Insurance industry employment reaches approximately 3.02 million. Insurance Business Magazine.
¹⁸ RSM US LLP. (2024). Insurance industry workforce outlook. Insurance Business Magazine.
¹⁹ Employee Retirement Income Security Act of 1974, 29 U.S.C. section 1144; Kaiser Family Foundation. (2024). Employer health benefits: 2024 annual survey.
²⁰ Office of the New York City Comptroller. (2025). Health care costs: The hidden risks in the financial plan. Office of the NYC Comptroller; amNewYork. (2025, November 5). NYC workers, retirees sue to block City's shift to self-funded health plan.
Love it.
Might make sense to look at the entire insurance industry. The Requirement by states for consumers to purchase insurance from private companies distorts costs up and down the chain. Public pooling is a much more attractive alternative.
It is hard to read about insurance and since 1980s when I realized what HMOs were already doing to healthcare, I have no appetite for for-profit insurance. It simply does not do what is needed.