First, I think he meant that the out-of-pocket cost (not including the insurance premiums that are already being paid) were higher than the no-insurance cost.

First, I think he meant that the out-of-pocket cost (not including the insurance premiums that are already being paid) were higher than the no-insurance cost. But even if he meant the total cost, the way insurance reduces risk through diversification is analogous to investment in a less risky index fund vs a more risky single company: beyond some minimal operational overhead, the risk reduction should be free.