[dredmorbius]

There's both historical and insurance-business (underwriting) reasons.

The history: wage-price controls implemented during WWII as labour was taken up by the military and companies had to find some basis other than pay on which to differentiate. Benefits, including health care, were excluded from wage consideration.

Insurance itself is the business of assessing, managing, and sharing (or "pooling") risk. In the case of health care, the typical costs that a given population will face are predictable based on age, gender, and various exposures. Given a sufficiently large number of people, a group or policy cost can be assessed. Along with other groups, this results in pooled risk.

I'm not an actuary, but "large pool" risk is fairly low, I suspect it's on the order of 30 or so people. Smaller pools can be formed (or more likely: aggregated to form larger ones), down to a small number of members, as few as a handful or so.

The idea being that in any given pool, what's called "adverse selection" (people specifically looking for insurance due to high risks) are less likely -- you're dealing with the average population.

In individual markets, all of this becomes much less predictable, and/or the transaction and administrative costs of individual insurance simply add up.

Since a large share of the population works, or lives in a household with someone who does, allocating healthcare group insurance through employment has more-or-less stuck in the US.

The fact that it provides yet more leverage and control by employers over employees is another factor, of course.

Source: A long time ago in a galaxy far, far away, I studied this at uni. Plus more recent experiences / exploration.

[tomp]

I don't think the size of the pool is that relevant. The pool from the perspective of insurance company is all insured people, so it doesn't matter whether it's a company of 5 or 5 individuals joining, it's still a huge pool.

Adverse selection is the big reason. An individual signing up for insurance can be used as a signal that means "individual is sick" or "individual is likely to need insurance soon". If a company policy covers all employees (or all employees above a certain level), the signal is "person works" which is orthogonal to "person will need insurance" (in fact, it's probably slightly anti-correlated, a.k.a. "person is fit enough to work").

[dredmorbius]

Adverse selection among groups is an issue, given adverse selection: individuals or small groups with high but non-evident risks may emerge.

"Small-group" coverage is generally 50 or fewer (in some states, 100) members:

https://www.healthinsurance.org/glossary/small-group-health-...

[kmjg88nvf8]

I think people who are already sick should be covered by a kind of charity (or social services). It doesn't make sense to ask insurance companies to insure people who are already sick.

[dredmorbius]

An alternative is to have random-lot assignments, at least so long as you care to preserve a private, for-profit, insurance sector. That is, members of a given population is assigned, at random, to a set of insurance providers, who have minimum performance and obligation standards.

Otherwise, the socialised version already exists, in most industrialised countries, in some form or another. Within the US, Medicare for the elderly, Medicaid for the poor and children, and in many states, "high risk pools" which are state managed.

More generally, a problem is that the bulk of health benefits do _not_ accrue from direct or acute medical treatment, but from public health and preventive measures, _especially_ well-mother, well-baby, early childhood, municipal sanitation and environmental measures, and general (workplace and elsewhere) safety provisions. Insurance companies of and by themselves don't address much of this.

[sokoloff]

Great comment. I’ll agree and add that the pool of people working full-time itself serves as a beneficial selection process for the insurance pool. It includes (expensive) births but excludes a lot of expensive debilitating conditions so long as that condition precludes someone working full-time.