Now you probably want to ask, how does a govlet differ from a corporation? They both have officers, employees, products and consumers (citizens), and both are subject to market competition; why can’t we achieve the same objectives by forming corporations instead of govlets?
The fundamental difference between a govlet and a corporation is that govlet has the power to force certain behavior among its citizens, while a corporations generally can’t coerce their customers. Therefore if certain objectives cannot possibly be achieved through people’s willful cooperation, then we need to form a government (or govlet); otherwise a corporation would be sufficient, such as in the broccoli business. An obvious example for coercion is the crime protection and criminal justice. There are less obvious examples of government services that cannot possibly be achieved without coercion, the universal healthcare is one of them.
The universal health care mandates that affordable health insurance to be made available to everyone regardless of their age and pre-existing conditions. These objectives cannot be achieved if everyone acts on his/her own best interests. The health care costs increase significantly with age and pre-existing conditions, the optimal behavior for an individual is to delay the purchase of insurance until he/she is sick or old; therefore if everyone adopt such a strategy the insurance company would not be able find enough healthy people to average down the overall health care costs to an affordable insurance premium. Private insurance works the best for low probability and high cost events, such as car accidents. The uncertainty is the key factor that incentivize people to voluntarily pay for the coverage because any driver could be caught in a car accident. In contrast, the health care cost for the old and the sick are certain to be expensive, thus there is no economic incentive for the young and the healthy to share the costs. Therefore, the government has to force everyone to pay in order to make universal health care financially viable, which is exactly what Obamacare does.
The main criticism against Obamacare is rightfully the violation of individual liberty when a person is coerced to purchase the health insurance. The existing healthcare system, though does not involve any coercion, has its own problems too. Public nonprofit hospitals are required to treat all emergency room patients regardless of whether they have health insurance, this free pass is a lifeline for the poor who cannot afford the insurance, but it also attracts free riders who could afford but choose not to buy any insurance. These free riders take advantage of the free emergency room care and drive up the medical expense for all.
In the govlet system, the health care problem can be solved without forcing anyone into what he/she does not want. People who support Obamacare can form their own govlet offering the same universal care among themselves through mandatory insurance coverage; people who are strong believers of personal choices can form a govlet that does not require mandatory health insurance, but for the latter to be successful, it has to find ways to go after the free riders and force them to pay their own care; people who believe that the litigation threat is the main driver of the health care cost can form a govlet whose citizens can only sue for limited damage for malpractices, hoping to reign in unnecessary exams and treatments. The beauty of the govlet system is that all the ideas can be tested in practice, and the one that works best would eventually win over most citizens. Even though within individual govlets, the coercion may still be required, but the citizens always have the freedom to migrate to other govlets of his own choice, subject to exit penalties.
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