Because the upside to these companies has a pretty low ceiling, especially if there is downward price pressure because insurance companies can't differentiate o

Because the upside to these companies has a pretty low ceiling, especially if there is downward price pressure because insurance companies can't differentiate on risk or coverage. This leads to very thin profit margins. However, due to the nature of insurance, even a relatively small number of people developing expensive conditions can be catastrophic. Remember, in your scenario, you are REQUIRED to cover them. If you're going to have only one combined risk pool, you need to be able to guarantee coverage even facing catastrophic insurance costs. The only real way to do this is to be backed by somebody with very, very deep pockets, like, say, the federal government.