Before policymakers attempt to fix the individual health insurance market, it's important for them to get a clearer picture of what's actually happening in this sector where an estimated six percent of privately-insured people obtain coverage.

Prevailing wisdom holds that "there is agreement that the market for buying health insurance as an individual doesn't work well," and some argue that this market is hopelessly expensive and dysfunctional.

However, actual research demonstrates otherwise. Mark Pauly and Brad Herring looked last year not just at hypotheticals, as some surveys have done, but at actual people shopping for and purchasing insurance in the individual market. They discovered there is more pooling of risk in the individual market than commonly believed: "Analysis of new data...shows that actual premiums paid for individual insurance are much less than proportional to risk, and risk levels have a small effect on obtaining coverage."

They also found that the premiums that higher-risk people actually paid were only, on average, about 1.6 times those of lower-risk people.