Introduction and Episode Overview
[00:00:00] Stacey Richter: Episode 482. “3 Surprising Ways Carriers Make Lots of Money. What Do Plan Sponsors and Clinical Organizations Really Need to Know." Today I am speaking with Preston Alexander.
The Big Money in Healthcare: Analyzing Financial Reports
[00:00:31] Stacey Richter: If you want to save the most money, look where the most money is. You lot listening are like, no kidding Sherlock.
If you want to figure out how to cut down the GDP being sucked into healthcare, or the spend for any given plan sponsor on healthcare, look at how much money is being made by Fortune 10 companies like carriers.
Or big, huge consolidated provider organizations their billions and billions of dollars in margin or profit or quarterly earnings or redonkulous C-suite bonuses.
To listen to this episode or read the show notes with the mentioned links, visit the episode page.
Let me misquote Jeff Bezos right now. Excess healthcare industry margin is my mission for us to take back for members and patients. And there's trillions of dollars on big healthcare company balance sheets that we can eye up here. Just pull up these big guys financial reports, which is something that my guest today, Preston Alexander does on the regular.
And all of what we're talking about today is very actionable if you consider it strategically. Now. Before we get into this episode, I'm going to quote Robert Sundelius and he said on LinkedIn. I will link to it, "Profits are not evil and for-profit companies are not evil. Many organizations that create profits also provide societal benefits. However, when we exploit established insurance or medical care systems to maximize problems at the expense of public health, we are treading a fine line between business and ethics".
If you are interested in more along these same lines, I definitely would recommend going back and listening to the episode from a few weeks ago with Dr. Ben Schwartz.
Three Surprising Ways Carriers Make Money
[00:02:42] Stacey Richter: Okay, back to the topic at hand, surprising ways carriers make money. Today I am speaking with as aforementioned Preston Alexander. And we're gonna talk about, as I just said, not the normal boring ways like underwriting profit. Today we're gonna talk about the surprising ways, and this is important, these three surprising ways.
They're important if you're a plan sponsor or if you're a taxpayer or a policymaker, because these surprising ways carriers make money are news you can use. They drive carrier behavior in ways that impact you, the plan, sponsored member or taxpayer. There's probably some lessons in there for some indie physician groups as well.
And if you're a policymaker, these are the flags on the top of the hill that carriers are gonna try to protect. There's a lot of extremely relevant details that Preston Alexander reveals, but, oh wow, I can't stop with the spoilers.
Surprising Way #1: Playing the Float
[00:03:36] Stacey Richter: So let me tell you the big kahuna of surprising ways they make money off of taking taxpayer or plan, sponsor, or member dollars, and then playing the float, as they say. As much as 20% of some carrier's revenue can come from taking member premium dollars or some kind of capitated payment, and then trying to not pay bills for as long as possible.
Dr. Eric Bricker made a point on a video the other day that is adjacent to all of this, so I will link to it. But Dr. Bricker was talking about some of these rev cycle AI, augmented, tech the crap out of it promises made to some provider organizations to like increase the speed carriers will pay bills. And Dr. Bricker pointed out slow paying bills is a feature, not a bug.
The slower the carrier pays bills, the more interest they make off the money in the meantime. Like so much in healthcare, getting paid faster is not a technical problem, it's a, they don't actually want to pay you problem. A carrier, I just read in 2024 made something like $4.8 billion in investment income, $4.8 billion.
Surprising Way #2: Intercompany Eliminations
[00:04:41] Stacey Richter: I wish I had that money. I'd use it for Medicaid patients. But a carrier with 4.8 billion lying around can use it to for one thing, buy companies. And then they get even more vertically integrated and consolidated, which allows them more of the second surprising way to make money, which is intercompany eliminations.
If you don't know what I'm talking about when I say intercompany eliminations, well you're in the right place. Listen to the episode, and you will. But if you're up on this general concept already, consider 48.86% of United Healthcare premiums went to Optum, UHC. UnitedHealthcare paid their sister company almost half of their premium dollars. Things that make you go, Hmm.
I will link to an interesting post written by Joshua Brooker and referencing something that Chris Deacon had written earlier.
Surprising Way #3: Upcoding in Medicare Advantage
[00:05:36] Stacey Richter: But using these intercompany eliminations for the purposes of, I don't know, potentially obscuring profits, it allows any so inclined carrier to get even more saucey with the third surprising way many consolidated carriers can make money, which is upcoding in Medicare advantage for excessive risk-based payments.
And those capitated payments are oh, right, made upfront. So more float to be had. Nice little flywheel there where the big get bigger.
Advice for Plan Sponsors and Policymakers
[00:06:05] Stacey Richter: What's Preston's advice moving forward, especially for plan sponsors, considering all of this? Critically evaluate relationships with carriers and look for consultants who can offer unbiased expert advice. Every guest lately has been saying the same thing.
Andreas Mang, Jon Camire are probably the latest, but I think it's come up on the show like 90 times in the past year. Find an impartial, you can trust them, expert who understands the intricacies of all of this. This is so wildly important because yeah, regulations slow to change. Policy reform is uncertain. So we all gotta, sadly listen to shows like this one so that we can competently grab a seat at the table and advocate for ourselves.
Because you know what they say, If you aren't at the table, consider yourself on the menu. Also, unfortunately on the menu, are members, and if we're in policy, then all of the taxpayers in our state or district or country are also on the menu. If you aren't at the table.
But hey, you know another way to stay off of the menu? Read The Healthcare Breakdown which is written by my guest today, as I've said multiple times already, Preston Alexander.
What Preston does over there at thehealthcarebreakdown.com, is he pulls back the curtain primarily for clinicians, but frankly, I'm not a clinician and I find these breakdowns ridiculously insightful. But his goal is to use these insights to help bring back independent practice for physicians looking for a different, better way to practice medicine.
And he's also got some really great posts on LinkedIn, so I would certainly follow Preston over on LinkedIn as well.
Conversation with Preston Alexander
[00:07:38] Stacey Richter: My name is Stacey Richter. This podcast is sponsored by Aventria Health Group.
Preston Alexander, welcome to Relentless Health Value.
[00:07:44] Preston Alexander: Thank you so much for having me. It's an honor to be here.
[00:07:46] Stacey Richter: Well, it is an honor to have, the Taylor Swift of LinkedIn Healthcare writing on the pod today.
[00:07:53] Preston Alexander: Thank you very much. We are big Swifties in this household. It helps me aspire to be the best that I can be by trying to be as cool as Taylor Swift.
[00:08:02] Stacey Richter: Well, I learn a lot from The Healthcare Breakdown. Just the analysis that you do. So thank you.
[00:08:09] Preston Alexander: I appreciate it. It means a lot coming from you.
[00:08:11] Stacey Richter: Let's talk today about the three surprising ways that carriers make money. And when we say carriers, this probably means all the service lines, meaning fully insured Medicare Advantage, ASO businesses, Administrative Services Only for plan sponsors such as self-insured employers.
We're not talking about how everybody knows that carriers make money, ie, charging premiums and etc. We're talking about surprising ways that carriers make money. How would you begin our list here?
[00:08:40] Preston Alexander: I think the first one that's surprising is what's called float. Float is a concept and mechanism Warren Buffett kind of brought to the mainstream and loves.
He said that I think it's, “Compounding interest is the eighth wonder of the world and float is the ninth.” It's something carriers use in leverage to their benefit. The easiest way to think about float, I think is if you think about a gift card. So if you bought a gift card to say Starbucks, because we all need our caffeine to get through the day.
You have bought basically the right to buy something later on, and so Starbucks takes the money for the gift card. You've actually paid them, but they know that they're going to have to pay back that value with a beverage at some point. And so what happens is they have the cash, but they put it in their balance sheet as a liability and because they know they're going to have to pay it out later. But they still have the cash that they can do whatever they want with.
Insurance carriers work kind of the same way, so you pay them your premium. They know that they're going to have to pay out either a portion or all of that premium. So instead of just saying, oh good, a premium, here's a bunch of cash that we have, they record part or most of, or all of it as a liability, as typically you would find it under current liabilities as medical costs payable.
And so it looks like they have this huge amount of debt owed these huge liabilities, but often a significant portion of their current liabilities is medical costs payable. So they already have the money.
[00:10:20] Stacey Richter: This is where the world of accounting collides and just how an accountant is gonna record, what's IRL happening out there?
And to your point, we could think about premiums being paid as kind of like a gift card. So like if I'm selling gift cards, I have the money. Somebody just gave me 50 bucks for the gift card, but no one's picked up their beverage yet. Now I got 50 bucks that I can do what I will with, I'm sure somebody's got some model that talks about the average amount of, you know, like how long I have to have this money.
But the bottom line that you're making is premiums function the same way I am paid a premium and then I'm gonna have that money and the longer I can delay paying out the medical costs payable. The more I have money to do with what I will before the expenses come due.
The way that this is gonna get recorded on someone's accounting balance sheet, like the way that the accountants are gonna look at it is they're gonna stick all of the gift card total amount, you know, like all those premium dollars over in the liability section.
So despite the fact that I have the money, and if I'm just thinking about this, like, a normal person, not an accountant, I'd be like, wouldn't that be an asset? You're basically saying, no, it's not gonna be on the asset column. It's actually gonna be in the liability column, which might make a balance sheet look like an insurance company, has a lot of liabilities, but some of those liabilities are actually dollars that they have collected. Which is very counterintuitive, but that's how it works in accounting land.
[00:11:49] Preston Alexander: Yep. That's how it works. I mean, they do owe that money or they're estimating that they owe that money, but they're very good at knowing how to use it in the meantime.
[00:11:59] Stacey Richter: So let's talk about that because we were talking about surprising ways that carriers make money, and what I'm inferring is one of these ways, at least, has to do with how they are using these dollars they have collected, that sooner or later they're gonna owe potentially, but do not yet. So now I've got dollars in my pocket that I can do with what I will. So what's the first surprising way given this backdrop?
[00:12:24] Preston Alexander: Yeah, so, and it's what you, I think alluded to earlier and we've heard a lot about in, you know, current news is delaying care.
Think about you have all this money in your bank account or whatever. You want to turn it into more money, you wanna get a positive return on any investment, and you want the business to grow. In order to do that, it would really benefit you to have as much time as possible.
So in insurance land and carrier land, that means delaying care. That means denials with the hope that they're never fought. That means asking for more information. That means doing all kinds of different things just as a mechanism to delay paying out that money that they have estimated that they're gonna owe or already really should owe. And it impacts physicians and it impacts patients.
And it's certainly, surprising in some ways, but also probably the way that people feel it the most is when they're fighting with insurance to pay for something. And it's because they have all this money that you've already paid, that they have in markets, in investments. They're earmarked for acquisitions and doing all these things because they're using that float mostly and the money you've already paid to make as much profit as possible.
[00:13:40] Stacey Richter: What I'm understanding you say is that the first surprising way carriers are actually making money is, is probably, maybe there's two pieces to this one. One of them is just by delaying the need to actually pay the medical cost payable for as long as possible vis-a-vis delaying care.
The other one here is actually pharma rebates. If you start, Ann Lewandowski was talking about this quite a bit, if you think about the pharma rebates are only paid out at the end of the year. So again, a carrier, vertically integrated PBM is keeping this money, you know, they get the money upfront, they're keeping it for any length of time.
They can use that for, as you said, they could use it for acquisitions. They could use it for just any of the number of things that a carrier might wanna do with those dollars that they basically have. And the longer that they can manage to keep those dollars, then obviously the more they can do with them while they have them in their possession.
So that sounds like number one, like just what can you do with somebody else's money that you happen to have for some period of time? Did I get that right?
[00:14:41] Preston Alexander: Yep. The float is that money that they've gotten and they will eventually have to pay. But the key word is eventually. And so where denials come in and we're delaying payouts and we're putting in contracts that you don't have to pay till later. Having crazy, timely filing rules, it's can I keep as much money that you already paid me as I can, even though I owe it back to you?
And they use that cash that you've paid that they know they'll have to pay out eventually for things like investments or things like acquisitions. Or you know, things they know that they can get a return on.
[00:15:14] Stacey Richter: I can make interest off of, again, somebody else's money. Ann Lewandowski wrote the other day, she said, the payments, like rebates, etc, they're almost like interest free loans also for faster revenue recognition.
I could definitely see that as a financial instrument, just thinking about it in, in that way, like there's companies that this is how they make all their money is by really maximizing the value of dollars and using money to make more money.
[00:15:41] Preston Alexander: Banks do it, right? That's the banking model. You put your money in the bank. It's not in the bank. They are lending it out to other people and making interest on it and on debt instruments, insurance companies took a, maybe like a page out of the bank's book, except that we expect to get care. It's a different kind of element.
And then they say, well you don't really need that. You know, new lung, but it's like, wait, nope. You definitely need that. They just wanna wait as long as possible because that money is making 12% in some private equity hedge fund or something.
[00:16:10] Stacey Richter: Yeah. It's interesting. Phil Harrison wrote the other day, another financial, something that people forgot about with zero interest rates is the float. And then he wrote coming back with a vengeance.
And I think that's exactly the point that you're making, that as interest rates go up, the ability to have somebody else's money for any amount of time can be very meaningful here.
[00:16:30] Preston Alexander: Yep. Absolutely. I think that 0% is a very insightful way to, to put it.
[00:16:35] Stacey Richter: What I'm picking up from what you are talking about, Preston, is that if someone talks about shared savings, that means that they're collecting money upfront and then giving a piece of it back later on, which is kind of another way to say someone's has a float. It definitely sounds like there's some very smart people over at some of these organizations who are trying to figure out all the various ways that they can make money off of other people's money.
Okay, so our number one surprising way that carriers can make money is basically using other people's money to either get interest or make an acquisition. That acquisition makes money, you know, we gain more market share. There's just a number of different, if you start really thinking about it, ways that other people's money could be used to further our own ends.
And again, even if it's just a 0% loan, that in and of itself is pretty meaningful, so I can see how that could easily top our list. Our first most surprising way that carriers are making money here that we could easily overlook. What's our second thing?
[00:17:34] Preston Alexander: The second thing I think about is intercompany eliminations.
So this is a probably a newer phenomenon, certainly in the last 15 years or so. These large carriers, primarily it's gonna be the large ones, are buying care delivery and then basically paying themselves. So if I'm a carrier and then I go buy a medical practice and I inflate the cost of that medical practices care that it's delivering, and I've just inflated my medical loss ratio and made a higher margin on my business.
The scale of it is actually pretty wildly high. So if we look at one example, not to get to bogged down in examples, but in 2025 United Healthcare made $151 billion in intercompany eliminations. I mean, that's a ton of money.
[00:18:27] Stacey Richter: A 151 billion they made off of intercompany eliminations. What they were doing there is the insurance carrier arm bought care from their other arm that was actually delivering the care.
So A, they're sort of negotiating with themselves, like how exactly do you figure out what the negotiated rate is when you are the buyer and the seller? But that aside, what you're saying is, what happened around that table is that the care could be very high cost, and then the carrier can say they're paying very high cost for this care.
Therefore, the medical loss ratio is very high. You're only allowed to have 15% profit or something like that. So the underlying costs have to be 80, 85, 90% of what they're paying out. But if the care is very expensive, then you can pay a lot out. Right? So in “your profit” is lower, except it's just basically the profit just moved over to the healthcare where there's none of these limits, right?
You're just kind of moving money around and you're saying that $151 billion got shuffled from the insurer, you know, the carrier side of the equation over to the healthcare side of the equation.
[00:19:43] Preston Alexander: That's right. So it's sort of just like taking, you know, money out of one of your pockets and putting it in the other one.
If you think about it from like just a simple math, like a hundred dollars. So if a carrier had a hundred dollars in premiums, it's the tiniest carrier on the planet, only a hundred dollars in premiums, one healthcare provider, and they charge them $70 and they're like, oops. I didn't spend enough money on my medical loss ratio.
[00:20:07] Stacey Richter: Right, because it's only 70%. So, whoops. I just made 30% profit. Oh no.
[00:20:12] Preston Alexander: Let's think about this. What should we do about it? Well, let's go buy that practice and then we'll negotiate with ourselves and say, cost magically went up to $85.
And so now I own both, I'm the carrier and I own the practice. The practice charges me. I charge myself $85. I pay it, but then the practices cost, the end of the day was only, I don't know, say $40. So realistically, I eliminate all the money in between. I got the a hundred dollars in premium and I only spent $40. So I went from making $30 to making $60.
[00:20:51] Stacey Richter: And that's where you're saying that 151 billion came from just in an example like that, when the care suddenly became more expensive, you can pretty much assume that that's the vertically integrated entity making money.
[00:21:04] Preston Alexander: Yeah. When you see that high of intercompany eliminations, that's like them paying all the care providers or all the other entities or all the PBMs that they own. They're paying them for a service, but then they're eliminating that cost on their side. And so whatever the cost of the downstream company is, that's the ultimate cost.
[00:21:24] Stacey Richter: And this has been brought up numerous times relative to plan sponsors and fiduciary responsibility because as you know, as we all know, fiduciary responsibility requires that plan dollars be spent prudently reasonable prices with no conflicts of interest.
And if you're hiring a carrier, an ASO to manage your plan dollars, and that entity is buying services from an entity it also owns, so it's sitting on both sides of the table like that's the, like pretty much the definition of conflict of interest.
That has been brought up any number of times in that context also just these inner company eliminations so that, sure, they're a surprising way for a carrier to make money, but that definitely does have implications for plan sponsors who are leaning into like, what does fiduciary responsibility actually mean?
[00:22:21] Preston Alexander: Yeah, absolutely. I mean, you know, a conflict of interest and the inflation of cost because the carrier's interest, if it owns a company, is to charge itself more. You know, would always check for fair market value and things like that because they're often paying themselves far above fair market value and it benefits them on both sides of the table.
[00:22:43] Stacey Richter: Yeah, that's actually a really good point and that has been shown on the pharmacy side of the house actually, which is also often a part of these vertically integrated entities. They not only own an insurance carrier, but they also own a PBM and some of them own pharmacies, and it's just come to light so many times where they're paying their own pharmacies more than they're paying an independent pharmacy.
So I think that's just another side of that same coin.
[00:23:07] Preston Alexander: Yeah. Absolutely.
[00:23:08] Stacey Richter: Let's move on.
[00:23:09] Preston Alexander: All right.
[00:23:09] Stacey Richter: What's our number three here?
[00:23:10] Preston Alexander: Medicare and Medicare Advantage.
[00:23:13] Stacey Richter: Said with some ominousness. So let's talk about that.
[00:23:16] Preston Alexander: As one must. Yeah. So yeah, the third way. The third way I think is, and this is primarily gonna be for large carriers, to be fair, is the Medicare, Medicaid and Medicare Advantage markets.
So Medicare Advantage is highly dependent on risk scoring, risk adjustments, and basically saying how sick is the population that you are managing. There's all kinds of different ways that a carrier could suggest that the population it is covering is sicker than they are in actuality.
Because if they are sicker, they should be getting more money to help, you know, manage that person's care. The problem that we see is that, well, one, there has been some claims made. Are these patients actually that sick? And two, this ties back a little bit to the delay of care when we have large for-profit, publicly traded entities, and not just them, you know, but most for-profit entities are really managed quarter by quarter.
And so when they're getting upfront payments for patients who are much sicker or maybe aren't that much sicker. It is in their benefit to hold on once again to that money for as long as they can which in a capitated payment world means just trying to get that patient not to come back. And unfortunately, that will sometimes lead to poor clinical, not from the clinicians, but I'll call it poor clinical influence from the non-clinicians in those organizations.
It might suggest that a patient doesn't need to come back for four weeks when they really should come back in a week's time to check on some issue that they may have had. So we see, and you can look in some of the annual 10-Ks of these companies, really the total amount of dollars coming in from Medicare and Medicaid are very significant.
Most of the dollars and most of the growth that some of these carriers are realizing comes from Medicare and Medicare Advantage. While they may have a much less significant portion of total covered lives coming from those segments.
So I think a lot of people don't necessarily realize how much money the private carriers make off of these public programs and how much they can benefit from tax dollars going into the system.
[00:25:44] Stacey Richter: So the point that you're making in our number three surprising way that carriers or these vertically integrated entities can make money is figuring out Medicare Advantage. As you said, it's a value-based care program”. It's a capitated program.
So what that means is that based on some kind of risk adjusted framework. Some kind of math that somebody does, it figures out that this patient is this amount of sick. They have diabetes, they have like how many comorbidities they have and for a patient of this health status, they should cost this much every year.
And then those dollars are sent over prepaid. That they're sent over in advance. So, as you just said, reference the first thing that we talked about, which is these dollars are collected before they are spent. So same rules sort of apply. The longer you can hang onto the money, the more that money can work for you.
So in this particular case, we have the same financial incentives to try to, exactly like you just said, delay care, to not have patients come back to deny care, etc. And because it's a quarter by quarter business in the market, this is exacerbated by real short term thinking, like somebody doesn't come back and then therefore, there's a big expense a year from now, or even six months from now. That might not be top of mind.
So unless there is a kind of dyad leadership going on where you have a clinician who's like, whoa, if all we're thinking about are what the financial outcomes are, there's certainly some perverse incentives here, I think is the point that you're making.
[00:27:16] Preston Alexander: And I'll say one other thing about it. The rates that Medicare will come out with and they, you know, the percentages and the adjustments and tall the different things that they use to determine how much they're going to pay per patient. They base a lot of it for Medicare Advantage on fee for service costs.
And this came out last year, the conversion factor went way up because fee for service Medicare went way up. But so as fee for service goes up, they make those adjustments, commensurate with the increases in fee for service.
[00:27:47] Stacey Richter: So in other words, a Medicare Advantage carrier is gonna come in and say, look, it now costs this much to care for my multimorbid patient because they're looking at how much the fee for service rates are. Doing some math there and saying, well, I need more money capitated because the fee for service is going up.
But meanwhile, they also may own medical practices and are contributing to that rise of fee for service. Is that what I'm hearing?
[00:28:11] Preston Alexander: Yes, that is what you're hearing. So in so many ways, in all the different areas, maybe the big takeaway is that insurance carriers, large carriers aren't actually incentivized at all for medical costs to go down. In fact, and may be quite the opposite. It benefits them. The more costs go up.
[00:28:30] Stacey Richter: Just because of the float, the more when premiums go up. Again, the way Medicare Advantage works, if the underlying costs go up, the more money that a carrier could wind up being able to collect and then sit on for as long as they can manage to sit on it before they have to spend it out.
I can definitely see that that would be the case if they also own practices. It's pretty logical that if underlying costs go up, premiums go up. The higher the float, then again, just relative to the scale of the dollars that are able to be collected. I could also just see what you say is true.
[00:29:09] Preston Alexander: Yeah. I mean, and to be fair, like, I mean, I think we should be fair.
It's not like every carrier and every plan and every, this is like a nefarious, trying to not give people the care that they need. We often pick on obviously like the big and the bad and yeah, the system deserves a lot of that kind of thing, but it's not that everybody's out there, even sophisticated enough, frankly, to take advantage of all these different things. Buying practices and owning the largest surgery center group in the country, you know, it's, it's not feasible.
So it is consolidated among a few of the largest organizations, but it doesn't detract, I guess, from the fact that like those top five command, most of the premium dollars in all of healthcare and impact all of us and employers and fully insured plan everybody in between. If they're using them as TPAs, need to be aware of these mechanisms because that's how they're going to be able to come back to the table and step up and actually lower healthcare costs.
Knowing that the incentives are quite the opposite for these large, sophisticated organizations.
[00:30:11] Stacey Richter: Yeah, you're right. I mean, it, it's definitely one of those things where if you're a carrier at all, like even the most a hundred percent patient first carrier, like if the underlying costs are as high as they are, you have to collect premiums that are gonna cover those underlying costs.
So it's not like I can just kind of unilaterally decide to have low premiums. Right? Like everyone's kind of caught in this cycle. And also that being said, I was reading something that Phillip Holowka wrote the other day about captives. Captives and captive vendors also pay interest based on the premiums that are collected. They just pay interest directly back to plan sponsors instead of to the carriers.
So it's also, it needs to be said that this isn't a completely unknown unknown. There are some plan sponsors who are recognizing that there's a lot of dollars that are afoot here in this float, and they're in a captive so that they can get the money themselves, as opposed to having the carrier be the one to take the revenue off of the interest payments there.
[00:31:16] Preston Alexander: On the flip side, there's been lots of success. I would say probably less around reform and policy because one, we know that all these mega entities have a lot of influence and sway, and two policy's slow. And as obviously the good fight that you know, Ann Lewandowski brings to the table and what Chris Deacon posts about all the time, and a lot of this, great and important work that happens gets tied up in the judiciary that is still largely, I mean, based on laws and policy and etc, but also opinion. And it's a slow and hard process.
Again, some great things have happened locally in different states, the state level, but there's still been success when the employers step up because they represent a trillion dollars in health spend.
It's hard because there's so many employers who offer health plans and not all of them are self-insured and it's highly fragmented, but there are things that are working and bright spots that are emerging more and more, and the fact that you have this forum and have built it and have so many amazing people who work so tirelessly and fight for the betterment of the healthcare system. I mean, we just gotta keep going and I think we will eventually get there.
[00:32:32] Stacey Richter: So it definitely sounds like we have pivoted Preston from talking about what the ways are that carriers may be making money that are surprising. And now we're into your advice. The advice portion of this episode, one potential way forward that could offer some positive here, which as you said is, is policy.
And for example, Indiana is doing some interesting things relative to policy that are about hospitals, but they certainly have carrier implications. But then on the flip side, as you just said, policy A, it's slow. B, it can become a quagmire of regulatory capture and special interest. Like for example, Kevin Lyons posted on LinkedIn yesterday about a situation with the carrier in New Jersey who you know is a major campaign contributor.
Let me ask you something very specific. We talked about the three surprising ways that carriers make money. What's your advice to take that information on board? Like, okay, so now I know that my carrier is making money off of my money, right? Like they're making money off of my float. What do I do?
[00:33:45] Preston Alexander: I think the first thing that you do is honestly this, and I don't mean it to maybe also sound like lazy advice. It's not that.
Is go and find the right person or group who is skilled at building health plans for employers and have a conversation with them. To me, you could get lost in the days and weeks and months and years of what fighting to get your data and trying to parse things together, and you could look at your healthcare spend better.
Do you know what you're looking at? Why are you gonna call your broker? They're just gonna try to keep you renewing year after year. So I think it's good to understand the concepts and then go find that expert. Go get a consultant, an expert who builds health plans for employers, and ask them very straight, very forward questions about their costs, about the plans they've built, how much they've saved, how they build their plans.
Why they're successful. All of those, you know, why they shouldn't work with their broker anymore. Tell me what a TPA is. Ask all of the basic pointed questions, but go find that person who's done this before and works with other employers in your area and has been successful doing it.
[00:35:06] Stacey Richter: I think that's actually really sage advice. Andreas Mang and Jon Camire from Blackstone were just talking about this, in fact, a couple of weeks ago. Find someone who really understands exactly what's going on with you with your plan.
And then to your point, really dig in and, and you know, there's probably some red flags, which are out of the scope of this conversation, but like if you're working with a broker who's like, Nope, nope, you have to stay with your current carrier, they're probably getting a retention bonus, right? Like, this information is out there when 12% or 22% trend is something that you hear. It becomes even more and more important for the plan, it becomes absolutely vital for the plan to find the right person to be working with here. Someone who's unconflicted, who you really know.
What was it, Edward Deming “In God we trust all others must bring data” like you. You have to have someone who's actually bringing the receipts. As they say, not just telling you and, and just given the complexity of some of these games that are being played at this juncture if it's your exact point, if someone isn't transparently offering up data as evidence relative to back up what they're saying, like be very careful. It's, I think is clear.
[00:36:21] Preston Alexander: Yeah. Better stated than I made it sound, so I appreciate it and I mean, yeah. Listen, it's any business one of their single largest costs is healthcare these days. It's wild. Putting financials together and seeing what the cost is, our economy's not gonna survive healthcare, and one big way that we change that is employer groups to go take action because they are footing the majority of the bill.
They're also foisting costs on their employees that they can't afford.
[00:36:50] Stacey Richter: Well said. So Preston, where can people find the healthcare breakdown?
[00:36:56] Preston Alexander: You can find it on LinkedIn, you can hang out with me there, or just head to thehealthcarebreakdown.com.
[00:37:04] Stacey Richter: Preston Alexander. I have to say I love The Healthcare Breakdown and I would highly recommend that anyone who hasn't been there visit Preston Alexander's Substack, The Healthcare Breakdown.
Preston Alexander, is there anything I neglected to ask you that you would like to mention here?
[00:37:19] Preston Alexander: I think we pretty much solved all the problems in healthcare, so I think we good.
[00:37:23] Stacey Richter: You know what? I think we can, or I think we can wrap this up dot I and cross that team.
[00:37:27] Preston Alexander: Yeah. High five. Be like, man, healthcare is fixed.
[00:37:30] Stacey Richter: That's right. Easy. Mic drop. Preston. Alexander, thank you so much for being on Relentless Health Value today.
[00:37:36] Preston Alexander: Thank you so much. It was a real honor. Pleasure.
[00:37:38] Dr. Stan Schwartz: Hi, I am Dr. Stan Schwartz from ZERO.Health. Relentless Health Value has been a real source of insight and inspiration for me. Every episode feels like a thoughtful, informed conversation that really gets to the heart of what matters in healthcare.
If you're committed to moving the needle in this space like I am, I strongly recommend subscribing to Relentless Health Value newsletter. For me, it's the best way to keep up with new episodes and stay connected. Thanks for listening.