Are health insurance companies like all other for-profit ventures?

Nate Silver at 538 (He called the 2008 election with the most accurate breakdown of electoral votes) parses the difference between your standard profit-making business and how health insurance works.

I’m a big believer in the profit motive in 99 percent of all cases. If the government decided to open a non-profit hamburger stand, I doubt that it would compete successfully against Five Guys. If it tried to open a non-profit airline, I doubt that it could offer the same value as JetBlue. Insert joke about General Motors and/or the Post Office here. The point is, I think the profit motive is generally well worth it in terms of the incentives it creates to cut costs, develop new products, improve customer service, and so forth.

But health insurance is not like those things.

He breaks it all down (really, go read it all). How insurance works. How the free market doesn’t work, if you get insurance through your employer.

Insurance, in other words, is a volume business, the main requirements for which are that (1) you have a lot of money pooled together and that (2) you’ve been around for awhile.

CIGNA and Aetna have a lot of money pooled together and they’ve been around for awhile — but they don’t have as much money, nor have they been around as long, as the federal government. It’s possible, certainly, that the profit motive in the insurance industry has driven more innovation than we’re giving it credit for.