Weapons of Mass Corruption (Part 2, 2025 Series)
Wrap networks, spread pricing, revenue guarantees...and a complete lack of transparency.
If you’re an employer offering health benefits, you might think you’re doing everything right—partnering with a reputable third-party administrator (TPA), offering a PPO network, and trusting the system to manage costs. But behind the scenes, a complex web of wrap networks and repricing services may be quietly siphoning money from your plan—and padding the profits of large insurance carriers and their affiliated (or wholly owned) TPAs.
Let’s break down how this works.
What Are Wrap Networks and Repricing Services?
Wrap Networks are secondary networks used when employees receive care outside the primary PPO network. These networks claim to offer “discounted” rates with out-of-network providers, protecting you from the extremes of overbilling (e.g., billed charges versus negotiated prices).
Repricing Services take the provider’s billed charges and reduce them to an “allowed” amount using proprietary algorithms or reference pricing models thus getting your price closer to that of an in-network provider.
Sounds helpful, right? Not so fast.
The Profit Engine Behind the Curtain
Here’s how these tools, and others, are used to generate massive profits—often without employers realizing it:
1. Shared Savings Fees
When a repricer reduces an out-of-network provider’s bill from, say, $10,000 to $4,000, they might charge the employer a “shared savings” fee—sometimes 25% to 50% of the $6,000 “savings.” But here’s the catch: the original bill is likely inflated, and there was little genuine effort to include the provider in the network in the first place. The “savings” are often illusory and set up a veritable scam-like situation.
2. Nefarious Incentives
Let’s say the negotiated price of the service in question is actually $3,000. What incentive does the provider have to accept that if, when billing out of network, they can get $4,000? And for the carrier, how much incentive do they really have to enroll the provider in their network? When billed out-of-network and “repricing” the claim, they are pocketing $1,500 to $3,000 themselves (25% to 50% of the savings—the difference between $10,000 and $4,000). Everyone wins—except the employer and their employees. You are the big losers! And yet you are being told that the wrap network repricing has “saved” you money. Talk about perverse.
2. Spread Pricing
Just like pharmacy benefit managers (PBMs), TPAs may charge employers more than they pay providers and pocket the difference. This spread is rarely disclosed.
3. Revenue Guarantees
Some TPAs promise providers a minimum revenue, even if billed charges are lower. To meet these guarantees, they may use employer plan assets—not their own funds—shifting risk away from the insurer and onto the employer.
4. Cross-Plan Offsetting
This controversial practice involves using funds from one employer’s plan to pay claims for another. If a TPA finds that it has overpaid a provider under one plan and underpaid under another, it may use the credit “across plans.” It’s a legal gray area and raises serious fiduciary concerns, but happens often.
5. Opaque Contracts
Employers often sign contracts that prevent them from seeing the actual negotiated rates or understanding how repricing decisions are made. This lack of transparency makes it nearly impossible to audit or challenge the fees. While a 2021 law banned the use of gag clauses in insurance contracts, employers are still not receiving information on many of the above practices.
What Can Employers Do?
Demand transparency in contracts—ask for a breakdown of repricing fees and provider payments.
Audit claims regularly to identify spread pricing or excessive shared savings fees.
Consider direct contracting for certain services, removing unnecessary middlemen.
Work with truly independent advisors who do not receive commissions, fees, bonuses or other incentives from your medical plans and services.
Final Thoughts
The health insurance industry is a masterclass in complexity—and often, in obfuscation. Wrap networks and repricing services are just two tools in a larger playbook designed to maximize profits. Employers who want to protect their plans and their people need to dig deeper, ask harder questions, and demand better.
It’s not just a good idea. As the fiduciary of a self-insured employer’s plan, it’s an obligation.