In this eye-opening episode, healthcare strategist Tom Quigley explains why small and mid-sized employers often pay significantly higher margins than large corporations — and why it doesn’t have to be that way.

For decades, business owners have been told that rising healthcare costs are simply unavoidable. But according to Tom, that belief is driven by emotion, outdated purchasing strategies, and commission-based sales models that reward higher premiums — not lower costs.

This episode breaks down the structural realities behind healthcare pricing and shows business owners how to level the playing field.

Many business owners assume large corporations pay more for healthcare because they offer richer benefits.

The truth?

Large corporations are using tax laws and structural plan designs that smaller businesses can legally use as well — but typically don’t.

The biggest gap is knowledge and implementation.

Large companies:

• Use Section 105 tax law structures

• Self-fund more efficiently

• Design plans strategically

Small businesses:

• Remain fully insured

• Accept renewal increases without transparency

• Rely on commission-based brokers

The result? Higher margins and inflated premiums for smaller employers.

Tom explains that Fortune 500 companies use Section 105 medical expense reimbursement plans to structure benefits more efficiently.

Small and mid-sized employers can use the exact same tax code — but most are either:

• Not using it at all

• Using inefficient structures like ICHRAs

• Or relying on traditional fully insured models

Section 105 allows employers to:

• Lower premium costs

• Reimburse employees tax-free

• Provide better benefits at a lower net expense

It’s not a loophole. It’s federal tax law.

Traditional fully insured plans with major carriers:

• Set rates at the state level

• Pool small businesses together

• Provide minimal claims transparency

• Offer limited strategic flexibility

Mid-sized employers lose pricing power because:

• They don’t receive meaningful data

• Renewal increases are based on opaque loss ratios

• Stop-loss retention math is often misrepresented

Tom explains how catastrophic claims (like premature birth cases) are often used to justify rate increases — even though reinsurance and retention limits already cap exposure.

One of the most critical issues discussed is lack of claims transparency.

Insurance carriers:

• Control the data

• Don’t provide full reporting

• Use gross claim numbers without adjusting for stop-loss retention

• Don’t disclose pharmacy rebates and backend profit margins

Example:
A $1 million claim with a $100,000 retention should not be used as a full $1 million loss in renewal calculations.

Yet it often is.

This creates artificially inflated loss ratios that justify premium increases.

Another margin driver:

Commissions and volume bonuses.

Brokers often earn:

• Per-head commissions

• Percentage-of-premium commissions

• Volume-based bonuses

• Overrides tied to premium growth

There is no financial incentive to reduce premiums.

The system rewards higher costs.

No.

Small groups are pooled within their own market segments under state insurance regulations.

However, small employers are:

• Subject to premium taxes

• Limited by state insurance department rules

• Restricted from using certain structural strategies

When employers shift to ERISA-based Section 105 structures, oversight shifts to federal Department of Labor rules — bypassing many state-imposed inefficiencies.

Tom outlines a simple strategic framework:

Step 1:
Request the lowest-cost, highest-deductible plan from your current carrier — same network.

Step 2:
Implement a Medical Expense Reimbursement Plan (Section 105) to cover deductibles and gaps tax-free.

Step 3:
Allow employees to voluntarily shift to:

• Spousal coverage

• Medicare

• Medicaid

• ACA-compliant individual plans (with or without subsidies)

• Military or parent coverage

Employer contributes a defined amount toward these alternatives.

Visit ClaimLinx.com and schedule a consultation with Tom and his team.