Even with passing on the tax savings, there's also things like health insurance and some form of retirement matching.
An employer paying a group rate for health insurance will pay less per person than an individual paying an individual rate.
Even if the employer were to pass on the savings of not having the person in the group health insurance, the 1099 contractor would need to pay more to get the same coverage.
And beyond that there are things like a 401k matching or a pension that a full time employee has that a contractor doesn't have access to.
Health insurance is a big one and a lot of people just aren't going to take a job that doesn't come with a good health insurance plan. Many companies also offer things like dental insurance, short term disability, and long term disability. Individuals (may) be able to obtain some of those things on their own but, as you say, the cost may be prohibitive.
You can at least get health insurance with pre-existing conditions now but it can be very expensive. You may not be able to get disability insurance.
Being a 1099 contractor is mostly not a good deal for someone who actually wants a stable long-term full-time job.
I used to do contracting all over EU.... and it was pure bliss. Even with VAT "complexities", it's still about a million times easier to do taxes as a contractor in EU/UK, than it is to do your own taxes in US.
The final thing about contracting in US is that average employer cost of health insurance is over $20k per employee. If you don't fall under someone else's employer sponsored healthcare plan, your self employment income will be greatly diminished. (In US freelancers don't get huge bumps in hourly rates, just because they're not full time benefited employees)
I looked up 1099 calculator. For Arizona total self employed tax is about 20%. That seems quite fair.
In EU I prefer self-employment. I can put car, home office and even babysitting into expenses and save on taxes.