# What happens behind the scenes with your health insurance? Where each premium dollar goes, and what you can see.

Source: https://ethosbenefits.com/insights/what-happens-behind-the-scenes-with-your-health-insurance
Type: Insight
Topic: Benefits strategy and administration
Author: Donovan Ryckis, Founder and CEO
Reviewed by: Patrick Ansara, Partner and Director of Client Operations
Publisher: Ethos Benefits
Published: 2023-11-15
Last updated: 2026-11-03
Cite as: "What happens behind the scenes with your health insurance?," Ethos Benefits, https://ethosbenefits.com/insights/what-happens-behind-the-scenes-with-your-health-insurance, updated 2026-11-03.

**Summary:** Where an employer's health plan premium dollar goes, where costs hide in networks, PBMs and claims, and the plan data federal law says you can get.

## Key takeaways

- A premium dollar pays for claims first, then carrier or TPA administration, pharmacy, network access, stop-loss, broker compensation, and taxes and fees.
- Insurers must spend at least 80% (small group) or 85% (large group) of premium on care and quality improvement, but that rule does not apply to self-funded plans.
- Costs hide in network access fees, PBM spread and rebate terms, and claims nobody audits.
- Since the Consolidated Appropriations Act, 2021, your plan's contracts may not block access to its own cost, quality and claims data, and you attest to that every December 31.

## Where does your premium dollar go?

Every dollar an employer puts into a health plan is split among people who pay claims, people who process them, and people who arrange the deals in between. Most employers see one number on a renewal and never see the split. That split decides how much of your spend actually reaches care.

The order is roughly the same for every plan. Claims come first. Administration, pharmacy contracting, network access, stop-loss, broker compensation and taxes take the rest. How visible each piece is depends on how the plan is funded.

| Where the dollar goes | What it pays for | How visible it is |
| --- | --- | --- |
| Medical claims | Payments to hospitals, doctors and other providers | Visible in claims data, if your contracts let you get it |
| Pharmacy claims and PBM | Drug costs, dispensing fees and PBM administration | Often netted against rebates, so the true cost is hard to see |
| Carrier or TPA administration | Claims processing, customer service, care management programs | Usually a per-member fee in self-funded plans, built into premium in insured plans |
| Network access | Use of a carrier's or rental network's provider discounts | Sometimes a separate fee, sometimes a percentage of savings |
| Stop-loss | Protection against large claims for self-funded and level-funded plans | A separate premium, plus specific and aggregate contract terms |
| Broker and consultant compensation | Commissions, fees and bonuses paid to advisors | Disclosed to the plan fiduciary under ERISA since 2021 |
| Taxes and fees | State premium taxes on insured plans, the federal PCORI fee and similar charges | Usually built into premium or paid by the plan sponsor |

## What does the 80/85 rule cover?

For fully insured plans, the medical loss ratio rule sets a floor on how much of premium goes to care. Insurers must spend at least 80% of premium on clinical care and quality improvement in the small group market and 85% in the large group market, measured by state. If they fall short, they owe rebates. Administrative costs, marketing and profit sit in the remaining 15% to 20%.

Two limits matter. The rule measures the insurer's whole block of business in a state, not your plan. And it does not apply to self-funded plans at all. A self-funded employer pays claims directly and buys administration, pharmacy, network and stop-loss services separately, so the split is set by contracts the employer signs. If your plan does get an MLR rebate, see [what to do with an MLR rebate](https://ethosbenefits.com/benefits-101/mlr-rebates).

## Where do health plan costs hide?

The costs hardest to see usually sit in four places: network access fees, PBM spread, rebate terms and unaudited claims. Administrative fees are the easy part to compare.

- **Network access fees.** Some TPAs and rental networks charge a percentage of the "savings" off billed charges. A higher billed charge produces a bigger discount and a bigger fee, without lowering what the plan pays. Read how savings are defined before you sign.
- **PBM spread.** A PBM may charge the plan more for a drug than it pays the pharmacy and keep the difference. See [PBM spread pricing](https://ethosbenefits.com/benefits-101/pbm-spread-pricing) for how it works and what new federal reporting will show.
- **Rebates.** Manufacturer rebates can be defined narrowly, so administrative fees, price protection and other payments never reach the plan. The contract definition matters more than the advertised pass-through percentage. [How to choose a PBM](https://ethosbenefits.com/benefits-101/how-to-choose-a-pbm) covers the terms to ask for.
- **Unaudited claims.** Duplicate payments, billing errors and claims paid outside plan terms go unnoticed when nobody reviews the data. A claims audit right in your TPA contract only helps if it is used.

Broker compensation belongs on this list too. Commissions, bonuses and overrides paid by carriers and vendors are legal, but they should be known. Since December 27, 2021, brokers and consultants who expect $1,000 or more from an ERISA group health plan must disclose their direct and indirect compensation to the plan fiduciary. See [broker compensation disclosure](https://ethosbenefits.com/benefits-101/broker-compensation-disclosure).

## What plan data are you entitled to?

Your plan is entitled to its own provider cost and quality information and de-identified claims data. Section 201 of the Consolidated Appropriations Act, 2021 bars group health plans and insurers from signing contracts with providers, networks, TPAs or other service providers that restrict the plan from:

- getting and sharing provider-specific cost and quality information
- electronically accessing de-identified claims and encounter data for each participant, including financial amounts, provider names, service codes and other claim data
- sharing that information with business associates

Plans and insurers confirm compliance every year through the gag clause prohibition compliance attestation, filed with CMS by December 31. The first was due December 31, 2023. A self-funded employer can have its TPA file the attestation for it, but the plan remains responsible, so keep the delegation in writing. If a service provider will not give you access, that is a contract problem to fix. See the [gag clause attestation](https://ethosbenefits.com/benefits-101/gag-clause-attestation) for the filing steps.

Other rules add to what you can see. The plan also reports prescription drug and health care spending to the federal government each year through [RxDC reporting](https://ethosbenefits.com/benefits-101/rxdc-reporting). And the PBM reform enacted in 2026 will require regular PBM reports to employer plans, as explained in [PBM reform is now law](https://ethosbenefits.com/insights/pbm-reform).

## What can employers do with plan data?

Access to data does nothing until someone asks for it and reads it. A practical sequence:

1. **Request your claims data.** Ask your carrier or TPA for de-identified claims and encounter data, and note how long it takes and what is missing.
2. **Map every fee.** List what each vendor is paid, how, and from what source, including network access fees, PBM fees and broker compensation.
3. **Read the definitions.** Check how your contracts define rebates, savings, and audit rights.
4. **Audit before you renew.** Review claims and pharmacy data ahead of the renewal, when you still have room to change terms.
5. **Record your review.** Keep notes on what you asked for, what you received and what you decided. That record is part of prudent plan oversight.

Ethos Benefits does this work through its [claims analytics service](https://ethosbenefits.com/services/claims-analytics).

Nothing about health insurance has to stay behind the scenes. The law now gives employers the right to see where the plan's money goes. Using that right is up to the plan.

## On the podcast

- [Benefits Consultant Fees Are Only Part of the Price: Chris Deacon on paying more and getting less](https://ethosbenefits.com/podcast/benefits-consultant-fees-chris-deacon), The Business of Benefits, Episode 68

## Frequently asked questions

### How much of a health insurance premium goes to medical care?

For fully insured plans, federal rules require insurers to spend at least 80% of premium on clinical care and quality improvement in the small group market and 85% in the large group market, or pay a rebate. Self-funded plans are not subject to that rule, so the split depends on your contracts.

### Does the medical loss ratio rule apply to self-funded plans?

No. The 80% and 85% medical loss ratio minimums apply to insurers, and they measure the insurer's whole block of business in a state, not your plan. A self-funded employer pays claims directly and buys administration, pharmacy, network and stop-loss services separately, so the share that reaches care is set by the contracts it signs.

### Can an employer get its own health plan claims data?

Yes. Section 201 of the Consolidated Appropriations Act, 2021 bars contracts that restrict a group health plan from electronically accessing de-identified claims and encounter data, including financial amounts, provider names and service codes. Ask your carrier or TPA for it in writing, and treat a refusal as a contract problem to fix.

### What is the gag clause prohibition?

It is a rule from section 201 of the Consolidated Appropriations Act, 2021 that bars group health plans from contracts that restrict access to provider cost and quality information or to de-identified claims data. Plans and insurers confirm compliance in an attestation filed with CMS by December 31 each year.

### Who is responsible for the gag clause attestation in a self-funded plan?

The plan is. A self-funded employer can have its TPA or another service provider file the attestation with CMS by December 31, but the legal responsibility stays with the plan. Keep the delegation in writing, and confirm each year that the filing was made and covers your plan.

### Do brokers have to disclose how they are paid?

Yes. Since December 27, 2021, brokers and consultants who expect $1,000 or more in direct or indirect compensation from an ERISA group health plan must disclose it to the responsible plan fiduciary, generally before the contract is signed, renewed or extended.

## Sources

1. [45 CFR § 158.210, Minimum medical loss ratio](https://www.law.cornell.edu/cfr/text/45/158.210), Legal Information Institute, Cornell Law School
2. [Medical Loss Ratio](https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-market-reforms/medical-loss-ratio), Centers for Medicare & Medicaid Services
3. [Gag Clause Prohibition Compliance Attestation](https://www.cms.gov/marketplace/about/oversight/other-insurance-protections/gag-clause-prohibition-compliance-attestation), Centers for Medicare & Medicaid Services
4. [Field Assistance Bulletin No. 2021-03: Disclosure of Compensation by Brokers and Consultants to Group Health Plans](https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2021-03), U.S. Department of Labor, Employee Benefits Security Administration
5. [Patient-Centered Outcomes Research Trust Fund Fee, Questions and Answers](https://www.irs.gov/affordable-care-act/patient-centered-outcomes-research-trust-fund-fee-questions-and-answers), Internal Revenue Service