Wouldn't we also have to form a "low-risk" pool that would insure 30-year-olds who think they will live forever and would rather party than pay health insurance premiums?
I carry fire insurance on my house despite the low risk of a fire. I do this because I am quite confident that the government would not rush to my rescue if a fire should destroy my house.
We need to stop using the term "insurance" to describe what is supplied by governments. Let's just call that "coverage". Coverage supplied through insurance is the result of a business arrangement between the insured and the insurance company.
Coverage supplied by the government is welfare.
The distribution of health insurance claims exhibits characteristics of power law or Pareto distributions.
For pools which include high cost patients, the expected variance of claim cost is not finite, which means that insurance co’s can’t accurately estimate their average claim cost regardless of how big the insurance pool grows.
That makes writing policies for people with high cost conditions more akin to writing options that pay off in the event of a stock market crash, rather than conventional actuarial based insurance.
You are right that this is insurance welfare for people with pre-existing conditions, but I argue that for the rest of the market to function, the pre-existing need to come out of the private insurance market.