I think the comments are giving some ideas of the possible reasons behind this choice. In particular, it depends a resident of what country you are.
I just tried to get a quote on a car in the US on Avis website and first I picked in the dropdown that I was a USA resident and the second time I picked that I was a UK resident. As you expected, I got the same price but the UK resident automatically had the Loss Damage Waiver and Additional Liability Insurance (same as your LIS, probably the name for Hertz).
I would tend to agree with @Nate that if you are a US resident or a tourist, you are not the same audience. And @Nate's suggestion that USA residents without a car are more accident-prone or under-insured is also backed by the fact that rental agencies usually require their customers to use a credit card (to check they have a good credit history).
But more generally, the prices offered by rental agencies are particularly opaque. Car rental is one of the activities, with flights, priced with these complex rules to optimize the earnings of the rental company. There are always a lot of different pricing policies, depending not only on insurance (including under age fee) but also adding various fees like the airport fees, pollution fees, depending on fuel policies (sometimes you have to prepay fuel), on the distance you are allowed to drive without extra fee, on where you return the car and on the discounts (you might have noticed that Hertz has 5 discount code fields: Discount/CDP/Club Code, Promotional Coupon (PC), Rate Code (RQ), Convention Number (CV), Voucher Number (IT)). I just discovered that Hertz adds a fee if you return the car more than 24 hours in advance, in some agencies!
I have booked cars in North America 5 to 10 times and it is always a mess because I try to get the best deal adding up these codes and once at the counter they do not get the same quote on their screen so they try for sometimes 30 minutes to get the same rate - or something close, because it is rarely the same rate and same conditions.
There are a lot of small prints to look at very precisely in the rental car contracts. The insurance is the most important, and I encourage you to read this protection "summary" from Hertz. It is complicated but in short you should really liability insurance, either provided by the rental company or by your car insurance company (if you have one). The rest is "optional", but like every insurance it is a matter of balance between risks and insurance price.
Still regarding the insurance, you should be careful because in some states, the liability insurance is not mandatory. This means some drivers causing an accident might not have an insurance covering you. If in theory they must pay for your health care in this case, they might not be able to afford it and you will in fact have to pay for it. California is concerned, but apparently at Hertz, in the case of foreign customers(those with an address abroad on their driver's license), there is a primary liability insurance anyway.
The bottom line
In the end what you noticed is probably a hint that pricing is very complex for car rentals. But it is good you paid attention to it, and in particular you should make sure your rental will be covered by at least a liability insurance (depending on the state it is not mandatory), since hospital costs in the US can be particularly expensive.