The obvious retort to this is:

"If I focused on my health, ate clean and exercised daily, why should I also be subsidizing Billy "video-games-are-my-exercise" fatass's chronic health conditions?"

This is why there is a hyperfixation on shifting blame away from (failing) individuals. The logic breaks when Billy has to admit he just hates exercising.

And yes, before you comment, I know "maybe Billy has (condition outside all control) so it's not on him". Please, see what I just said in the previous statement.

> Insurance that is maximally responsive to patient health changes in terms of cost (ie making healthier people pay less) ends up being an inefficient way of just having people pay for their healthcare directly.

That's true for predictable costs, but not true for unpredictable ones - which is the point of most insurance (housing, car, etc). The point and use of insurance is to move risk to entities that can bear it.

Utility is non-linear with money, and so you easily have situations where spending X times more on something "costs" you more than X times if measured in how useful the money is to you.

Typically, as you have more money, each further dollar doesn't provide as much benefit as the last (sometimes things are lumpy, the difference between "not quite enough to pay rent" and "just enough to pay rent" is huge, but broadly this is true). Going from $1000 to $10000 is more impactful than $1001000 to $1010000.

That means that moving the other way, each additional dollar spent has a greater personal cost to you.

Therefore, sharing unlikely but high expenses can mean that your expected cost is the same (if there's no profit/middleman) or a bit higher, but your expected personal cost is lower.