Every year, companies like yours see massive jumps in health insurance costs. One client saw a $360,000 increase in a single year—and it had nothing to do with claims.

The cause? Hidden incentives baked into the system.

You’ve probably been told the same excuses:

“The market’s tough.”
“It’s inflation.”
“You’re a high-risk group.”
“It’s just healthcare trends.”

But here’s the truth no one’s showing you:
Your health plan isn’t just expensive—it’s designed to be.

Let’s break down how the money actually flows.

The Problem: A System Built on Misaligned Incentives

Your health plan is more than a benefit—it’s a business. And that business has been built to reward rising costs.

• The more you spend, the more your vendors earn.
• Brokers, carriers, PBMs, and stop-loss vendors all benefit when premiums rise.
• You’re footing the bill—but getting none of the upside.

This isn’t about bad people. It’s about bad structure.

Follow the Money: How Premiums Are Really Used

Let’s trace how your premiums get spent and who profits.

1. The Broker

Most brokers are paid a percentage of your premium.
Example: A 5% commission on a $1M plan = $50,000.
Next year, if your premium rises to $1.2M, that same broker earns $60,000.

💡 Fix this:
Switch to a flat fee. It can be per employee per month (PEPM), like $40–$60 depending on complexity. This keeps the broker focused on saving you money—not earning more from your overspend.

Watch out for:

• Overrides (bonuses from carriers for steering more business their way)
• Retention Bonuses (extra pay to keep you with the same carrier)

These hidden payouts can total tens of thousands, and they all come out of your premium dollars.

2. The Carrier

Carriers hold your money, make the rules, and stack margins across every piece of your plan.

Here’s how they profit:

• Admin fees (not always disclosed)
• Underwriting profits (when your claims come in under budget)
• Rebate retention (keeping your pharmacy rebates)
• Vertical integration (owning the TPA, PBM, and network—triple dipping)

💡 Fix this:
Avoid fully insured or bundled carrier plans where you can’t see fees or share in savings. Move to transparent, unbundled setups where YOU keep the surplus.

3. The TPA (Third Party Administrator)

TPAs run your plan and charge an admin fee—which is fine. But some sneak in hidden costs.

Watch for:

• Add-on fees for things like reporting, COBRA, or compliance
• Bundled PBM relationships that include hidden payments from the PBM to the TPA
• “Percentage of savings” models that sound good but are based on inflated starting prices

💡 Fix this:
Read contracts carefully. Ask what’s included. Ask how your TPA is paid—and by whom.

4. Stop-Loss Insurance

If you’re self-funded or level-funded, you buy stop-loss insurance to protect against big claims.

But some traps include:

• Stop-loss commissions (more hidden broker pay)
• Lasers (where the carrier refuses to cover high-risk members next year)
• Contract loopholes (like 12/15 contracts with no runout coverage)

💡 Fix this:
Choose advisors who don’t take stop-loss commissions. Push for contracts with clear runout terms and no lasers.

5. Pharmacy Benefit Managers (PBMs)

PBMs handle your drug spend—and they do it with serious markups.

Here’s how they profit:

• Spread pricing (they charge you more than they pay the pharmacy)
• Rebates (they keep money drug makers give for using their meds)
• Fill & dispensing fees (some are fine, others are inflated)

💡 Fix this:
Use a pass-through PBM. Demand 100% of rebates back to you. Pay a flat fill or dispense fee—nothing else.

A Real-Life Example: $360,000 Gone

Let’s go back to that $360,000 renewal increase. We mapped the dollars:

• $94,000 in broker comp (including hidden bonuses)
• $173,000 in retained drug rebates
• $300,000+ in unpaid claims due to a bad stop-loss contract

This wasn’t unusual. It was the standard setup. And it’s happening every day.

How to Fix It

Here’s your 4-step action plan:

Step 1: Audit Your Incentives

Get clear on how each vendor is paid. If you don’t know where the money’s going, you can’t control it.

Step 2: Restructure Broker Compensation

Move to flat fee or performance-based pay. Tie it to outcomes, not premium size.

Step 3: Renegotiate Vendor Contracts

Push for:

• Full rebate pass-through
• Transparent stop-loss terms (no lasers, broad claims definition, proper runout)
• Independent PBMs and TPAs

Step 4: Build a Smarter Plan Structure

• Use captives to lower stop-loss costs.
• Add direct contracts or reference-based pricing to control variable costs.
• Include DPC (Direct Primary Care) for better care at lower cost.

Your Plan Isn’t Broken. It’s Built This Way.

The system was designed to keep you in the dark. But with the right strategy, you can flip the script.

Want to see where your money’s going?

📍 Get your custom Incentive Map
We’ll break down your plan and uncover hidden costs—so you can take back control.

💬 DM me the words “Incentive Map” or book your free cost containment consult today.

Let’s fix the structure—together.

Want to see the 9 steps that smart companies are using to slash health costs?
Watch the  video overview and don’t forget to download our free Mid-Year Health Plan Review Checklist to get started.

Ready to take back control of your health plan? Book a call with us today to learn how our Benefit Cost Containment Blueprint can help you uncover hidden savings and put you back in the driver’s seat.