I worked for Blue Cross and Blue Shield for 15 years, half of those as a claims examiner (the rest as a programmer for claims examiners), and you are correct. Individual policies have to be very selective since there is basically no risk pool (if I recall correctly). Group policies can spread the risks around, and thereby can allow higher risk applicants. Those obese nurses in the hospital would likely never have been able to get individual policies.
Your memory is correct. For my business clients I had different group insurance plans/ insurers who had differing numbers of employees required for GI ( guarantee issue). As you also may recall the type of business also determined premiums/bids as white collar office types have less risk for injury then construction etc. I seem to recall that 25 employees was about the lowest with a few 10-15 person groups. As you are aware it depended on the insurer. I even had a medicare supplement in 85-6 that covered pre existing cancer after 90 days. I found that for my father who died in 86.