The hidden assumption in every benefits strategy

There is a quiet assumption embedded in almost every benefits strategy in America: We treat insurance companies as if they are healthcare companies.

That assumption influences the way brokers advise clients, the way employers structure plans and the way employees think about the ID card in their wallet. It shapes conversations about networks, plan design and cost control. And yet, when you step back and examine the system honestly, the assumption doesn't really hold up.

Insurance companies are not healthcare companies. They are financial institutions. That distinction may sound basic at first, but it has significant implications for how brokers and employers approach the healthcare system and more importantly, how we can begin to fix some of the problems that have been around for years.

If you or your child became seriously ill tonight, who would you call?

If you needed surgery, you wouldn't call your insurance carrier to get better. You wouldn't rely on an insurer to treat a chronic condition, either. When it comes to getting care, you would turn to physicians, hospitals and medicines produced by pharmaceutical manufacturers, etc.

Insurance companies, on the other hand, manage the money that pays for it. Like a bank, they collect money, pool it to manage financial risk and distribute funds across the system. They are financial intermediaries sitting between the people receiving care and the people providing it.

Interestingly, the financial markets seem to understand this dynamic quite well. When you look at the largest companies in healthcare by revenue, insurance-related organizations consistently appear near the top. Organizations like UnitedHealth Group, Elevance Health, CVS Health and Cigna sit alongside distribution giants such as McKesson and Cencora – companies that don't provide care directly, but manage the flow of money around it. In fact, these four mega insurance companies are four of the top Fortune 20 organizations.

And that's where things start to get interesting for employers and brokers.

If insurance companies are primarily financial institutions, then maybe we've been assigning them responsibilities that were never really theirs to begin with. Over time, the industry has gradually allowed insurers to sit at the center of the healthcare supply chain, designing networks, controlling access to providers and "negotiating" the prices employers ultimately pay.

The high price of widespread network coverage

The original idea behind insurance networks was relatively straightforward. By grouping large numbers of patients under a single plan, insurers gained negotiating power with hospitals and physicians. That leverage allowed them to secure discounted rates in exchange for patient volume. In theory, everyone benefited. But the reality in many markets today looks very different.

In several states, insurance networks have grown so large that nearly every hospital and physician group is included. When almost every provider becomes "in-network," the negotiating leverage that once drove prices down by offering steerage begins to disappear. Monopoly health systems now hold the bargaining power, enabling them to secure rates far above public benchmarks.

In fact, RAND researchers found that commercial health plans paid, on average, 254% of what Medicare paid for the same services. And once those higher rates are embedded into contracts, they can set the baseline for future negotiations.

Over time, that dynamic allows billions of dollars to be taken from the healthcare system before care is ever delivered.

Employers ultimately fund that structure

Which raises an important question: if employers are the ones financing the system, why are they so far removed from how it actually operates?

This is where the concept of fiduciary responsibility becomes important. Employers sponsoring health plans are not just purchasing an insurance product. They are managing healthcare benefits that their employees depend on. The decisions they make directly influence the care their workforce receives.

Brokers play a critical role in helping employers navigate that responsibility. But doing so requires us to rethink the role insurance companies should actually play. If we continue to treat insurers as healthcare companies, we will continue outsourcing the entire strategy to them. Network design, provider access and cost management remain inside the carrier ecosystem, even though the employer is the one funding the system. When they own the strategy, they benefit in the execution.

Insurers should be seen as one component of a much broader system rather than the central authority controlling it

This change could open up a number of opportunities.

First, it allows employers and brokers to properly assign the role of the insurance company. When the carrier functions primarily as a financial intermediary, employers gain the freedom to rethink other parts of the supply chain.

Second, it creates an opportunity to remove ineffective middle layers that add cost without delivering meaningful value. A lot of the complexity in healthcare exists because consumers are separated from providers by multiple intermediaries. Each layer captures a portion of the financial flow.

Third, it allows a true market to emerge.

One of the challenges in healthcare today is that it doesn't operate like a normal marketplace. Prices are hidden. Contracts are confidential. Patients rarely know the cost of care until after it has already occurred.

When employers take a more active role in structuring their healthcare ecosystem, they can introduce transparency and competition into the system. Providers that deliver high-quality care would become attractive partners. Those with inflated pricing structures would face pressure to adapt.

Value begins to matter again

The most interesting impact of this shift could be how it changes the way employees think about their benefits. Imagine if employees viewed their insurance ID card not as the organization responsible for their health, but as a financial tool that transfers money for care. In short: a bank. The focus would then move toward finding the best providers, the most effective treatments and the highest-quality healthcare available.

The card would represent financing, not care. For brokers, this perspective also represents an evolution in the advisory role. Historically, much of brokerage has centered on plan design and carrier negotiation. But as employers begin thinking more strategically about the healthcare supply chain, brokers have the opportunity to guide clients through a much larger conversation.

None of this eliminates the importance of insurance companies. But recognizing insurers for what they are — financial intermediaries rather than healthcare providers — helps clarify where their role should begin and end.

Sometimes the most meaningful change begins with a change in perspective

In this case, it may start with seeing insurance companies for what they really are: financial organizations (banks) within the healthcare economy.