Here is a question nobody has asked you: where does the money go after it clears? Not in theory. Specifically.
| Destination | Per Dollar |
|---|---|
| Claims, care actually delivered | 83¢ |
| Carrier operating costs | 8 to 10¢ |
| Broker commission | 2 to 4¢ |
| Carrier surplus, retained equity | 3 to 7¢ |
| What you retain | $0 |
The 83 cents that pays claims did what you thought the entire dollar was doing. Set it aside. The remaining 17 cents is more interesting.
A portion covers the carrier's operating costs. A portion pays your broker. What remains, 3 to 7 cents on each dollar, goes somewhere that never appears on any invoice you have ever received.
It becomes surplus. Surplus is the carrier's retained capital. It sits on their balance sheet as equity. UnitedHealth Group holds $25.5 billion of it. Elevance holds $40.3 billion. These are not fees. They are not costs. They are capital accumulation. Your premium dollar funded it. You own none of it.
"But surplus is only half the story. The more important half is timing."
Your premium arrives at the carrier on the first of the month. Claims are paid over the following 30, 60, 90 days. During that gap, the carrier holds your money. This is called float.
Float is not a technical term that matters only to actuaries. Float is the most powerful capital mechanism in modern finance. Warren Buffett did not build Berkshire Hathaway by picking stocks. He built it by acquiring insurance companies, not because insurance is a good business, but because insurance generates float. Berkshire's insurance subsidiaries held $168 billion in float by end of 2023.
The carriers processing your employees' claims run the identical model. They collect your premium on day one. They invest it immediately. They pay claims on day 45, day 60, day 90. The investment returns generated during that window belong to the carrier.
Generated from your capital. Invested by the carrier. Kept by the carrier. Every year.
3 to 5% of premium retained after claims and expenses. On top of float income. Every year.
Capital that left one 50-employee practice's balance sheet and built someone else's institution.
"It is the equivalent of loaning someone $1.6 million a year with no interest, no equity, and no upside, just for the privilege of being insured."
Your practice premium is only part of the picture. You are also the recipient of insurance payments. Your patients' employers write checks to carriers every month. Those checks fund the claims your patients generate when they come to your office.
The same mechanics apply at a scale that dwarfs what your practice pays in premium. The total cost of employer-sponsored health coverage in the United States exceeds $1.3 trillion annually. That capital flows toward carriers, builds their float, accumulates as their surplus, and funds the consolidation of the industry you practice in.
You are simultaneously a contributor to this flow as a practice owner and a subject of it as a physician whose patients' coverage is administered by the same carriers. Most physicians have never looked at it.
| Traditional Model | MedMerge | |
|---|---|---|
| Premium destination | Commercial carrier | Physician captive |
| Float | Carrier invests for carrier benefit | Collective retains investment returns |
| Underwriting surplus | Carrier equity | Physician collective equity |
| Insurance pricing | Retail, individual practice rate | Institutional, collective rate |
| Broker alignment | Compensated by the carrier | Infrastructure replaces the intermediary |
| What you build | Someone else's balance sheet | Your own |