Today “social insurance” tends to transfer money and other resources to people when they are in relative need, such as when sick, disabled, unemployed, homeless, or too old to work. These policies tend to mix together the functions of redistribution, transferring resources between people, and insurance, for a person transferring resources between different future states of the world.
You don't need the government. Insurance, properly priced, is redistribution from the lucky (who suffer fewer insured losses than expected) to the unlucky (who suffer more insured losses than expected).
In your standard insurance setup, the expected value of the policy is around zero for all who sign up for the policy, everyone who signs up gets a large chance of a small loss plus a small chance of a large payout. The industry has an incentive to balance the equation around zero for every customer, people who have higher chances of payouts will be charged more for the insurance itself.
The redistribution part comes in when the government forbids the balancing of the equation so that it becomes a good deal for people in the redistributed-to category(in the case of health insurance this is often women, children, the old, and the dick) and a bad deal for the redistributed from category.(the young and health) Thus the need to force providers to provide for the former and force the latter to buy policies.
I am referring to transfers between people. Insurance companies use the premiums from people who don't suffer large losses to pay people who do. That's what makes them different from, say, sports betting, where people have no stake in the outcome.
Compare John H. Cochrane, "Time-Consistent Health Insurance, JPE 103 (1995) 445-473. Available ungated here: http://public.econ.duke.edu...
Also:John H. Cochrane, "Health-Status Insurance," Cato Policy Analysis no. 633:https://www.cato.org/public...
Ideally, the choices are based on complexity (i.e. my assessment of my ability to make a satisfactory selection among competing products), the level of risk from making a poor selection, the amount of feedback (if I make a poor selection, will I notice and quickly correct it?), externalities (if nobody else makes this selection, will it still work? If everyone does?), and uniformity (people have very different preferences for food, but rarely in health insurance).
But usually it comes down to experience; we don't have to reinvent the wheel. Markets in shirts haven't given me any problems. Health insurance markets are full of stories like this:
I'm far more interested in what arguments you can muster for such choices than in your raw choices.
If complete understanding of every possible consequence is required, then neither individuals nor governments will suffice. If the question is "do I think my preferences will be met better by the market or the government", then my answers are: for shirts, markets work as-is; for cheeseburgers, markets plus mandatory nutrition disclosures; for insurance policies, government (or some other source of professional quality analysis with interests aligned, or at least not directly opposed, to mine).
The chemicals in your shirt can influence your health, and the image you project can influence how many people think of you. Its not simple.
I'd put cheeseburgers on a spectrum between shirts and insurance. Shirts are also rather complicated if you care to get into the manufacture, but consumers can make effective choices about clothing without really understanding it. Cheeseburgers are more complicated, but we get reasonably good results by having a government-mandated set of disclosures that consumers can understand. Insurance contracts are so complicated that consumer choice generally fails; the disclosures are too voluminous for almost anyone to understand and use.
Cheeseburgers aren't remotely simple. You might know the immediate taste but the long term consequences are hard to see.
Lots of products are fairly simple, like cheeseburgers or shirts. Anyone can tell if a cheeseburger tastes bad.
Insurance products are lengthy contracts that few people read and even fewer understand. You can't tell if your insurance is any good until you've suffered a loss you can't afford. Also, insurance is full of externalities like "death spirals" where the popularity of a product with some consumers affects the costs for everyone. Government might not work in such situations, but consumer choice definitely doesn't. It's case 2 on the Taxonomy of Failure (with elements of 1 and 3 as well).
We are talking about products with low externalities, and most products & services are complex, taking substantial time to see mistakes. So yes, you seem to favor govt running most everything.
Not generic. Consumer choice works well when products are simple enough for consumers to understand, when externalities are minimal, and when the results of choices are seen quickly enough for consumers to correct mistakes before serious damage is done. When none of those circumstances apply, consumer choice doesn't work so well.
Beware of false dichotomies. Government is one tool in our toolkit; markets are another. The societies that work best use each for what they're good for but don't get carried away with either.
Sounds like you have here a generic argument against consumer choice, which if applied to other familiar industries would argue for having government run everything and tell everyone what products and services are best for them.
You might call insurance a "kind" of redistribution, but within the possible future states of one person. More often, we refer to "redistribution" as transfers between people.
Some people would, but most people wouldn't. And insurers would definitely search the space of possible plans to maximize revenues while minimizing costs (which is not exactly equivalent, but is strongly correlated, to plans that are bad for consumers).
Generally, any time you're proposing to make more of the economy look like the U.S. health insurance system, you've failed a basic sanity check.