The apologists for capitalism really are beyond parody.
I will quibble with digby's implication that this has anything to do with a misplaced faith in markets per se; there's nothing inherently absurd about insurance insurance (and it sort of exists in, e.g., auto policies that include coverage for collisions with uninsured drivers), and if there were sufficient demand for those kinds of policies then insurance companies would offer them.
That's not good enough for the likes of Cato, however, who aren't happy unless the very maximum amount of wealth is being extracted from the populace and funneled into corporate coffers. The crisis of the medically at-risk being insufficiently covered by rapacious insurance companies becomes the opportunity for those selfsame insurers to squeeze out one more drop of blood. Such is the nature of capitalism: markets are a means to an end, but it is the end—the continued ascendancy of the capitalist class—that is paramount, and when markets aren't getting the job done they are dropped to the side without a second thought.