Your Insurance Company's Dirty Little Secret (And What to Do About It)
The uncomfortable truth about how your employee benefits actually work, and why your HR leader should care.
Are you frustrated with those annual open enrollment periods where you get slapped with double-digit premium increases?
Do you wonder why you're paying thousands per employee for benefits that still leaves your team struggling to afford healthcare?
Here's what nobody talks about: your insurance company might be making more money off healthcare costs going up than coming down. And they've built their entire business model around it.
This isn't a conspiracy. It's how the system actually works. Insurance companies have financial incentives directly opposed to yours. While you're trying to give your team better coverage at lower costs, they're structuring their entire operation to profit when premiums—and the costs embedded in them—grow.
The problem? Most HR leaders don't even know this is happening. They think their broker has their back. They think the plan design is neutral. They think the costs are just what they are.
But what if there's a medication your employees are paying $1,000/month for when it's available for $300? What if there are conflicts of interest hidden inside every renewal? What if the person handling your benefits actually has incentives working against you?
Once you understand how this works, you can actually do something about it.
(00:00) The Insurance Expert Who's Calling Out the System
Chris Hamilton is a partner at Hotchkiss Insurance in Texas, leading their employee benefits consulting practice. With over a decade of corporate finance experience advising private equity and oil and gas companies, Chris has seen how insurance companies maximize profits—and he's calling it out.
Unlike most brokers who just shop plans, Chris asks the uncomfortable questions: Where are the conflicts of interest? What waste are we paying for? How is your advisor actually making money?
His approach focuses on identifying where insurance companies are systematically overcharging employers and employees, then designing plans that align everyone's incentives toward better coverage at lower costs.
When you understand how insurance companies actually make money—spoiler: it's the opposite of what you want—everything changes about your next renewal.
(03:12) Why the System Is Broken (And Whose Fault It Is)
2024-2025 was brutal. National average increase: 9.5-10%. Mid-sized employers (100-2,000 employees)? Closer to 20% increases.
The Incentive Problem: The Affordable Care Act limits insurance company profits to 15% of premiums. If premiums stay flat, profits stay flat. If premiums grow? Their 15% is calculated on a much larger number.
They have a direct incentive to see costs rise.
How They Do It:
Major insurance carriers own:
Pharmacy benefit managers (PBMs)
Physician groups
Specialty pharmacies
They bill themselves inflated prices through these subsidiaries, shielding profits while making massive money elsewhere.
Hospital Consolidation:
Since the ACA, independent practitioners couldn't compete with hospital compliance costs. Hospitals became negotiating powerhouses. They tell insurance companies: you need us, here's what we're charging. Those costs go straight to your premiums.
(07:17) The Waste Hidden in Plain Sight
$1,000 medication available for $300. Same drug. Same coverage.
That's a 70% cost reduction.
How many exist in your plan right now? If you eliminate just these inefficiencies, you can increase coverage for the same cost.
The Legal Risk:
J&J's lawsuit highlighted a $1,000/month drug available for $38. The employee was forced to use the expensive option because the plan didn't offer the alternative.
The HR Leader was named personally for breach of fiduciary duty. Not the company. The specific people.
Your obligation:
Vet your benefits advisor
Understand your actual options
Choose the best plan available (not just what your broker brings you)
(29:12) What Winning Employers Are Actually Doing Differently
The Risk Problem:
100 employees can't diversify risk. One catastrophic claim ($1-1.5M for a premature baby in NICU) wipes out your annual premium budget.
The Solution:
Pool 1,000 employers together (10,000-15,000 employee lives) and spread the risk like mutual fund diversification.
The Strategy:
Winning employers are:
Pooling with aligned benefit philosophies
Aligning on plan design
Buying smarter as a group
This creates three simultaneous wins: Diversified risk + Aligned incentives + Lower costs AND better coverage.
(35:55) Your Nine-Month Action Plan
Start early. Benefits should be reviewed monthly or quarterly. By renewal, zero surprises.
Talk to multiple advisors. Three advisors = three different opinions on your actual options.
Your Timeline:
March-May: Strategic review Late spring/summer: Set plans July: Make decisions August-September: Final vetting
If you wait until August, you're out of runway.
Open enrollment sucks because your insurance company isn't trying to reduce costs. They're trying to grow them.
Start with one question: Where are the conflicts of interest in your current plan? Then root them out. Winning employers aren't accepting the mousetrap. They're redesigning it.
You have nine months.
The uncomfortable truth is that your insurance company isn't on your side.
They're designed to profit when costs rise. But you don't have to play by their rules. The employers winning right now aren't accepting the broken system—they're rebuilding it from the ground up. They're asking hard questions, talking to multiple advisors, and refusing to let conflicts of interest hide in plain sight.
The strategic groundwork you lay in spring determines whether 2026's renewal feels like relief or another gut punch.
Connect with Traci here: https://linktr.ee/HRTraci
Disclaimer: Thoughts, opinions, and statements made on this podcast are not a reflection of the thoughts, opinions, and statements of the Company by whom Traci Chernoff is actively employed.
Please note that this post may contain paid endorsements and advertisements for products or services. Individuals on the show may have a direct or indirect financial interest in products or services referred to in this episode.