3 Surprising Ways Carriers Make Lots of Money, With Preston Alexander of The Healthcare Breakdown

One carrier reported $4.8 billion in investment income in 2024. In 2025, United Healthcare recorded $151 billion in intercompany eliminations — payments from the insurance arm to subsidiaries it also owns. And as fee-for-service Medicare prices rise, Medicare Advantage capitation rates follow, creating a flywheel that rewards vertically integrated carriers for allowing underlying costs to climb. None of this is in the underwriting profit column. That's the point.

In this episode, Stacey Richter speaks with Preston Alexander, who writes The Healthcare Breakdown at thehealthcarebreakdown.com, about three financial mechanisms that most plan sponsors and policymakers don't see — and why understanding them matters for anyone trying to understand why healthcare costs keep rising.

WHAT YOU'LL LEARN
✅ How float works: carriers collect premiums and record the amounts owed to providers as liabilities — but they hold the cash, and the longer they delay paying it out via denials, requests for more information, and timely-filing rules, the longer that money can be invested or used for acquisitions; at current interest rates, this is not a rounding error

✅ How intercompany eliminations work: when a carrier owns a medical practice, a PBM, or a pharmacy, it can pay that subsidiary above fair market value, inflating the medical loss ratio on the insurance side while capturing the excess on the care delivery side — shifting profit from the regulated insurance column to the unregulated healthcare column

✅ Why the $151 billion in United Healthcare intercompany eliminations in 2025 represents a structural conflict of interest for self-insured employers using that carrier as an ASO: the entity managing your plan dollars is simultaneously sitting on the other side of the provider negotiation, paying itself

✅ How Medicare Advantage upcoding and risk-score inflation generate above-cost capitation payments — and why those payments arrive upfront, creating the same float dynamic as commercial premiums, with the added incentive to delay care through the quarter

✅ Why large carriers are not structurally incentivized to reduce healthcare costs: higher underlying costs mean higher premiums, a larger float, more investment income, and higher capitation payments — every mechanism works better when costs are high

✅ What Preston Alexander's actual advice is for plan sponsors who now know all of this: find an unconflicted expert who builds health plans for employers, ask them pointed questions about what they have built and what it saved, and bring data — because anyone who cannot or will not produce data to support their claims is telling you something important

WHY THIS MATTERS
Preston Alexander closes with a line worth sitting with: our economy is not going to survive healthcare. The three mechanisms in this episode are not obscure accounting tricks — they are the structural financial incentives that explain why costs keep rising, why denials keep climbing, and why vertically integrated carriers grow larger every year. Understanding them is the first step toward being a more sophisticated buyer.

=== LINKS ===
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08:29 What is float, and why is it a surprising way that carriers make money?

14:01 Summer Shorts on pharma rebates with Ann Lewandowski.

14:41 Why carriers really do denials and delays of payouts.

17:34 What are intercompany eliminations, and how do they make carriers more money?

22:21 How do carrier-owned pharmacies play into this?

23:19 How are carriers creating profit off of Medicare Advantage and Medicaid Advantage markets?

27:18 How the fee-for-service price increases affect Medicare prices.

28:12 Why aren't large insurance carriers motivated to make costs go down?

32:42 What is a potential way forward to fix the rising cost of healthcare?

33:36 As a plan sponsor, how do you address carriers making profit on your float?

35:07 EP478 with Andreas Mang and Jon Camire.

36:34 "Our economy's not gonna survive healthcare."