Their primary function is risk pooling. Secondarily they ration limited resources, attempting to distribute the available resources to effect the greatest good (this is why you often have such a hard time getting them to cover things, and why everyone loves to hate them). They've also traditionally been in the business of managing moral hazard in such a way that people feel it necessary to sign up for insurance while healthy, but the government has dramatically changed that function in the last few years. There's also the basic book-keeping and shuffling money around the system ... and while all of the things I listed are somewhere in between crusted puke and a fresh horse turd in terms of their appeal, they are necessary functions that any system (even a government run one) has to perform. One huge advantage that the government has in the moral hazard department is that they can use guns and jail time to prod people into paying ... but for whatever reason the single-payer folks typically ignore that particular evil when campaigning against the private insurance companies. Personally, I feel that the government's tactic of taking someone's freedom for refusal to participate is much worse than refusing coverage, which is what the private companies do.