“Why should health insurance companies negotiate lower prices with hospitals when, thanks to the federal government mandate known as the Minimum Loss Ratio, both get paid more through higher prices? There must be another reason”– Bill Rusteberg
By Madeleine Hall – Published: Jul. 24, 2025 – Article Referred By Kris Thoms
LUBBOCK, Texas (KCBD) – Covenant Health is warning South Plains patients that they could soon lose in-network insurance coverage.
The hospital system reports its negotiations with Blue Cross Blue Shield have resulted in a stalemate, with Blue Cross not responding to Covenant for nearly two weeks.
Covenant released this statement on Thursday:
Throughout these negotiations, Covenant’s goal has been to reach fair and equitable contract terms. Unfortunately, Blue Cross Blue Shield of Texas remains unwilling to offer adequate reimbursement for vital health care services. This will leave more than 140,000 individuals without in-network access to Covenant’s hospitals and providers in Texas after the contracts expire on July 31, 2025. This will impact individuals and families from 20 counties who seek care at Covenant Medical Group, Grace Clinic, and all Covenant hospitals.
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Why should health insurance companies negotiate lower prices with hospitals when, thanks to the federal government mandate known as the Minimum Loss Ratio, both get paid more through higher prices? A sign of a good business deal is when both sides walk away from the table happy.
Why should a health insurance company care what hospital prices are since they pay claims with Other People’s Money through premium charges? When consumers pay more for healthcare they are charged more by insurance companies. Insurance companies don’t lose.
Yet for years we’ve seen news articles like the one above repeated over and over again resulting in the same outcome every time. It’s a repeat article with a different dateline about a health insurance company “fighting” against presumably higher prices demanded by hospitals. The ending is always the same. Both sides kiss and make up and away we go again with another round of insurance cost increases.
There must be something else we are missing here. If higher prices benefit both insurer and hospital, why are they fighting over higher prices? Could they be fighting over lower prices? Or are they fighting over a “commission split?”
In the pharmaceutical industry a “commission split” is called a “rebate.” We like the former description as it conveys the full meaning of the truth, not a politically correct word assignment.
Commission splits between hospitals and insurance companies have been exposed in lawsuit after lawsuit over the years. Weslaco ISD vs Aetna is just one example. It’s worth a read. The pleadings allege Aetna was earning +9% of the discount in addition to other fees charged to a Texas public school district. There are hundreds of other lawsuits like this alleging the same practice.
Imagine hearing the following at the negotiation table. “We demand 50% of the discount “ says the insurer. “No, that’s outrageous! We can agree to 10% of the discount” counters the hospital administrator.
Only the hospital and the carrier know the truth behind their public dispute. We can only guess through the power of deduction based on common sense, reason and logic.
One thing is for certain…………..we will never know how much they have agreed to make us pay for health care. Which begs the question: How can any plan sponsor, especially a political subdivision, enter into a contract to which they have no idea of what the price will be for goods and services received until after purchase? Welcome to the insane world of American health care finance.
