Maybe a simplified illustration will help. Let's assume Market A has 5,000 people. Annual health-related costs come to $10 million per year (25% is spread equally among the population and 75% falls upon 1% of the population).
If there's no insurance, 1% of the population would wind up paying an average of $150,000 in addition to the $500 costs spread equally among the people. $150,000 would be a catastrophic expense for most people.
Hence, an insurance company is organized. The company charges each person $200 per month for comprehensive coverage or $150 for strictly catastrophic coverage. This is somewhat above the per capita health costs of $167 (and $125 for the catastrophic portion), as a company would incur administrative costs, seek a cushion for fluctuations in health costs, and earn profits.
In the end, the population would be insured against, at a minimum, catastrophic health costs. In no way would this mean that people are "paying nothing." Instead, they would be spreading the costs among one another in exchange for eliminating the risk of facing a catastrophic out-of-pocket expenditure.
How about instead we base national policy on what works for every other developed nation on the planet? That would be guaranteed health coverage for every person as a right of citizenship. Based on their examples, it would cost far less per capita and provide as good or better health care than our disastrous system.
Once again, U.S. has most expensive, least effective health care system in survey - The Washington Post
Does the US gain any points for having US affiliated medical researchers winning 27 out of 47 Nobel Prizes for medicine in a recent 20 year period, from 1993 to 2012? It seems as though US innovation probably adds to lower costs in other countries as they benefit from US research.
Glad that we are not like the UK, with their single payer system that ranks just above the US in 2nd to last place despite ranking first in so many categories.