>That doesn't save money because then you don't have insurance.

The employees are still insured, it just means the employer absorbs the risk instead of the insurance company. At a certain point, this becomes cheaper than paying the insurance company. But then the company might take out a separate catastrophic policy that covers anything over $X million in a year.

>The part of your premium that covers unexpected events can't be saved

This is just wrong. A significant portion of that amount can be saved. Some of it is statistics, and some financial structuring.

The insurance company isn't going to absorb a company's risk for free, but there are savings beyond the profit and (overly conservative) risk margins. Segregating your risk pool allows additional control over it, then you can reduce risk in a number of ways, but especially with wellness programs. (My premium contributions at work were cut 75% for participating in the company wellness program.)

I think" a company is also able to hold it's own reserve assets that are backing their risk, and there are additional tax savings with how money changes hands fewer times, but I'm fuzzy on the details.

Anecdotal, but my last two employers were extremely eager to qualify to self-insure, even while still using the insurance company to manage policies. (There's a multi year process to qualify involving financial stability, risk pool evaluation, and sometimes even reorganizing the company structure or re-incorporating.)

>People always say that insurance is too expensive because it covers routine care, and I've never understood what that is about.

They say that because it's no longer medical insurance, it's pre-paid health care plus medical insurance packaged together.

The biggest problem people have with the pre-paid routine care is that it's basically pooled just like the insurance part, and what's routine for me might not be routine for you.

Nonsmoker's, even if they're priced as tobacco-free, have to pay for a policy with smoking cessation coverage. Nuns and 80 year olds must have coverage for birth control. There's mandatory coverage for prenatal visits and labor/delivery, even if you never want to (or can't) have kids.

Insurance is meant to mitigate high cost risks, not be a bureaucratic middle-man for every routine cost. Affordable "risks" shouldn't be insured. Insurance that covers expected* costs isn't insurance. It's just quasi-socialized healthcare with the word "market" attached for political deniability.

In the non-segregatated pools, there's no incentive to keep costs down. You'll be paying for a portion of the weekly doc visits of the bored little old lady who goes and gets every little bruise and goosebump checked out, because why not? It's a no-cost routine visit for her.

Also, you have to pay for coverage for services you might already have free access to. Like if you work for a clinic and they offer employees free visits. You still have to pay for that coverage. Or I want to see a particular doctor that's out of network. I've got to pay out of pocket for a service that I've already paid for. If you forget to get pre-authorization before going to get a mole removed by the dermatologist? Same thing. They might not pay it, because you did it without their permission.

All of these "routine" costs are built into the price of your policy, and for most people it would be cheaper and much less of a hassle to pay-as-you-go for everything thats not catastrophic.

>It costs essentially zero to transfer money from one account to another

Except your money got thrown into slush fund shared with thousands of strangers, and you'll never get as much out as you put in (Unless you're talking about the case of a self-insured employer paying 100%, which is rare.)

>There can't be any fundamental problem with them providing a payment service.

If that was all they did, and you got rid of the pooled routine costs, and got rid of the billing-code/ coverage roulette, and got rid of the copay/ deductable/ out-of-pocket calculation hassles, and if it would just work as constantly as a debit card, then I think people wouldn't have a problem with it.

But that's sort what an HSA does (which is through the bank, not the insurance company.) In practice they're restricted to certain policy types, and don't really eliminate any of those problems, just reduces them.