This is only true at lower levels of employment. If you are looking to hire a senior director or above, having someone with lots of experience is kind of your goal

I work in healthcare and this never worked like that.

If you got a new job with employer sponsored healthcare, you got it automatically with no exclusions.

The preexisting condition thing applied to individual health insurance that you purchased separately from a job.

The reason is that even with uncompetitive salaries, most people won’t switch.

I know people who know they are underpaid and could get more elsewhere, but don’t switch because they are comfortable and all their friends are at their current job.

So if you pay less money and retain 90% of talent, you can come out ahead financially than if you give everyone raises and retain 98% of talent. Problem is of course that the people who do leave are often the top performers.

There are exceptions. Many high powered consulting firms have an “up or out” type of system where you either get promoted (with a huge raise) or basically get fired. Among large companies, Costco is famous for paying very high salaries and treating people well from the people who stock shelves to the senior executives. But it’s rare!