When insurance companies deal with individuals, administrative costs are spent for signing up each individual. In a multi-person insurance deal, there is a single transaction for a large number of individuals.

What is likely the more important issue is that in multi-person insurance deals, there usually is an element of underwriting by the multi-person organization. A individual health care defrauder can individually run to Honduras, but a multi-person company would find this tougher.

Mind you, the administrative and underwriting costs have to be borne by someone – either the insurer or the cooperative/company purchasing group insurance.

It might be that the administrative and underwriting costs are less if you personally work with and know the people you are administering & underwriting.

The elephant in the room is that large companies insure themselves (across state lines, OMG!) without state regulation due to ERISA, whereas everyone who depends on an insurance company for actual insurance has 50 state regulations and mandates.

Not surprisingly, most large corporations that have enough assets self-insure under ERISA.