The real world scenario is that a combination of better startistics/ML, and access to a lot more data moves us increasingly closer to that world where medical insurance doesn't make any sense. Insurance works for unknown/unknowable situations.
Spontaneous combustion insurance is cheap because it could happen to anyone.
I disagree. The “the lucky should share in the costs of the unlucky” aspect of insurance still is there; the difference is that, in a perfect information world with self-serving individuals, the need still is there for the unlucky, but the lucky won’t be willing to take part.
In that system everyone who pays the insurance would be better off putting the money aside as they wouldn't have to pay for the admin overhead.
Even if the catastrophic event happens early in the timeline it would probably be better to take out a loan than to pay the insurance.
The pricing game is between the insurance companies and the providers; the end recipients of services have no involvement in the decision making process.
Its kind of like cattle, veterinarians, and ranchers. The cattle don't have much of a say in the finances or what treatments they get. The ranchers want them to feel good to make them easier to control, but ...
Call me cynical but in practice I think that kind of asymmetric information is only going to serve the insurer to rake in bigger benefits.