IAAA (I Am An Actuary) and, although I do Property & Casualty instead of Health insurance, I just want to set a few things straight.
While some have said that traditionally insurance is based around spreading risk over groups, that still holds currently, even when some are denied coverage. It's just that the risk is spread over a portfolio of similar people. This is the ideal way to set up insurance for companies because by being able to select the cheaper people to insure and putting them all in a portfolio together, they can sell them insurance at a much lower price than someone who has a broad portfolio and charges everyone the same.
For example, if you just get a life insurance policy that requires practically no info, you'll get a lousy policy since there might be a lot of smokers, morbidly obese people, cancer patients, and so forth in the portfolio so of course premiums will be high. However, if you go through a medical check, answer lots of questions, and are found to be very healthy, you'll get a good rate.
Clearly, companies that offer such highly-differentiated policies will steal all of the healthy people from other companies. The other companies will be left with the expensive people by being adversely selected, will lose tons of money, and will either have to differentiate more or go out of business. Note that more expensive people to insure can usually still get policies, but they'll have to pay something more in line with their expected costs. So the net result is that people are charged fairer rates, but are still protected. So with car insurance, better drivers (both with a good track record and those whose profiles make them less likely to get in accidents, going by age, gender, income and so forth) get lower rates and riskier drivers get higher rates.
Applying this to health insurance, healthy people will be protected against the unexpected (cancer, emergency room treatment, and so forth) but will have to pay little since it's unlikely they'll incur high costs. This is good for both those consumers, who get low rates, and for the insurance companies, who undercut the competition by better identifying the people who are cheaper to insure. The flip side of the coin is that more expensive people are deemed uninsurable, as the article states, by smart insurance companies. But this phenomenon isn't unique to health insurance. If you have terminal cancer, good luck getting life insurance. If you live in a place that gets flooded every year, no way a (non-governmental or non-subsidized) insurance company will cover flood damage for your house.
Of course, this ignores arguments about if such things are fair, right, or how a country's health system should be run (and for the record, I live in Canada and think it's ridiculous how the US still doesn't have proper healthcare). Also, the auto insurance industry here in Ontario has undergone a huge change in the last 5 years. Many companies have closed or had to make significant changes due to staggering losses. The losses were due to both increases in costs from accidents, especially in Toronto, and other companies using much better statistical models to undercut the competition and get all the good drivers. Now, in order to stay competitive, companies have to use predictive models to estimate future trends as opposed to just assuming things will stay roughly constant proportionately.