Wendell Potter, a former senior executive at Cigna and Humana, has released a comprehensive indictment of the U.S. private health insurance industry, characterizing the current system as a nearly perfect case of “market failure.”
In a recently published article titled “How Private, For-Profit Health Insurance Fails the Most Basic Test of Economics,” Potter, who served as a health insurance communications director for nearly two decades before becoming a whistleblower in 2008, argues that the industry is driven by a “slavish devotion” to shareholder value rather than patient care. He notes that at the height of his corporate career at Cigna, the primary objective for every employee was increasing value for shareholders.
“I know of no industry that has embraced [Milton] Friedman’s doctrine more than the executives of big health insurance companies,” Potter writes, referring to the economist’s theory that a company’s sole purpose is to maximize returns for investors. “At the very top of those [major job objectives] was ‘enhancing shareholder value.’ And that wasn’t just my top objective. It was everybody’s top objective.”
According to Potter, the U.S. health insurance system fails the most basic tests of economic efficiency. He explains that for a market to function, buyers and sellers need equal information, and consumers must be able to choose freely or walk away.
Private health insurance, he argues, fails every one of these criteria.
He highlights “information asymmetry” as a core structural flaw. He writes that insurers possess vastly more information about policy coverage and claim adjudication than consumers, who often only discover the true limitations of their plan when they become ill.
“You find out what you actually bought only when you get sick — precisely when you’re least able to shop around or switch,” Potter writes. “That’s not a market. That’s a trap with a welcome packet.”
The critique further points to the “inelastic demand” inherent in healthcare. Unlike typical consumer goods, patients cannot “walk away” from necessary services like emergency surgeries or heart attack treatments. Potter cites research showing that medical debt is a leading cause of personal bankruptcy in the United States, a phenomenon he claims has no parallel in other wealthy nations.
Potter describes a system where the feedback loop of a traditional market runs backward. In most industries, a company earns more by creating a better product; in health insurance, he argues, a company earns more by collecting premiums and then finding ways to avoid paying claims.
“What’s being sold is the promise of coverage while the profit comes from limiting how much of that promise gets kept,” Potter asserts.
He points to the $70 billion in operating profits reported by the five largest U.S. health insurers—UnitedHealth, Elevance, CVS/Aetna, Cigna, and Humana—in 2023. During the same decade, family premiums for employer-sponsored coverage rose more than 50%, far outpacing wage growth.
This creates what economists call a “principal-agent problem,” where the insurer is nominally the patient’s agent but has financial incentives that run directly against the patient’s interests.
Potter argues that the existence of the Affordable Care Act’s Medical Loss Ratio (MLR) rule—which forces insurers to spend 80–85% of premiums on medical care—is itself proof of market failure. “When regulation has to exist just to make a market approximate its basic function, that market has failed,” he writes.
Hidden Economic Costs
Beyond direct medical costs, Potter addresses the “negative externalities” of the system, such as “job lock.” This occurs when workers remain in suboptimal jobs solely to maintain health coverage, thereby suppressing the labor market mobility that economic theory usually promises.
He also notes that when insurers deny coverage and patients delay treatment, they often end up in emergency rooms at the public’s expense. “Insurers collect the premium. Society absorbs the spillover,” he remarks.
Potter observes that the United States consistently ranks near the bottom among high-income nations on access, equity, and efficiency, despite spending roughly twice as much per capita as comparable countries. He argues that other wealthy countries, all of which remain capitalist, have recognized that healthcare is too essential to be left to “unregulated private profit.”
He adds that the U.S. system is not the result of a different economic calculation, but a different political one, shaped by decades of industry lobbying and sophisticated public relations. Potter himself admits to being a former “practitioner of an industry-wide playbook” designed to shape public opinion in favor of private insurers.
“The market isn’t failing because we haven’t tried hard enough to fix it,” Potter concludes. “It’s failing because it was never designed to serve patients. It was designed to serve shareholders. And by that measure… it has been a spectacular success.”
And the former health insurance PR executive has a stark warning: “The question was never whether we can afford to change the system. The question is how much longer we can afford not to?”
While Potter’s preferred solution is Medicare for All and universal health care, for some individuals looking for an alternative to the traditional private health insurance system described in Potter’s critique, health share ministries may be an option to consider.
These organizations, usually made up of members of Christian ministries, do not offer insurance policies and aren’t regulated as insurance, but allow members to share medical expenses within a community framework, providing a potential path for those seeking to move away from the for-profit insurance model.
Health sharing ministries tend to be a particularly worthwhile option for healthy individuals and families without pre-existing conditions.