Asymmetric information is the main justification for mandates, as well as for Medicare. These arguments have been hashed out already many times. The patient knows more about their health than the insurance company. In a voluntary insurance market, the pool of participants will be disproportionately unhealthy. This will raise health insurance costs compared to what they would otherwise be. In extreme cases, higher costs in turn will lead more people, again the relatively healthy, to drop out. And so on and so on, until only the "lemons" (the sickest) are left. Then the insurance companies go bankrupt.
This is referred to as
the Lemon problem, first articulated by
George Akerlof in 1970, and it is Business 101.
