[_delirium]

More or less because reasonably-priced health insurance requires a risk pool in which membership isn't voluntary, and large companies provide such a pool by requiring that all their employees enroll in the company health insurance as a condition of employment (and pay their portion of the coverage fee with no opt-out allowed). The insurers assume that the number of people who'll turn down the job solely due to disagreeing with the mandatory-insurance aspect is small, so the coverage pool is in effect a large, mandatory-coverage pool selected for mostly-health-unrelated reasons, which is the kind that works as a risk pool.

Entrepreneurs don't have anything similar unless there is a way to aggregate themselves into a pool where the opt-ins don't correlate with health condition too strongly, which currently there isn't. Insurers for good reason don't give good terms to non-mandatory-coverage risk pools, because of the strong bias towards high-risk people in such pools. And good luck if you have any congenital health issues; my friend who has a from-birth heart defect is essentially banned from ever doing a startup due to the employment-tied nature of the U.S. healthcare system and the preexisting-condition rules that make the health-insurance-via-corporate-job approach the only one open to him.

[rphlx]

The insurance company inherently pools everyone that it insures, whether they work in 10 large companies, or 1000 small ones.

So I fail to see a legit statistical/risk-model reason why health insurers MUST gouge small companies/entrepreneurs.

I think it's mostly due to small companies having less negotiating leverage.

[_delirium]

The issue is whether opting in is correlated with worse health. When one large company opts in, it's usually not because the company's CEO is himself sick: it's just a general policy decision to offer employees health insurance, and then thousands of people with overall "average" levels of health are non-voluntarily enrolled (the only way to opt out is to quit their job). But the decisions of individuals and small companies to choose or not choose to buy health insurance are much more strongly driven by their own personal health, with less-healthy people and people who suspect they're likely to have health problems soon more likely to buy in, and healthy entrepreneurs more likely to opt out / self-insure.

[jaredmck]

Large employer insurance plans are often self-funded, meaning that the insurance company charges administration fees but does not truly insure the plan financially.

Certainly small employers are worse at negotiating health care plans, but I'm not sure how much leverage they could possibly have in negotiations given economies of scale and switching costs.

(in a past life, I worked for a benefits consulting firm which specialized in union plans - one positive of how these plans operated was that they disclosed their benefits costs as $/hr rate per member.)

[cma]

Google adverse selection