May 8, 2026
By Jim Farley | CEO / Owner at J.P.Farley | Third-Party Administrator | Since 1979
Why the “Cheapest” Health Plan on the Spreadsheet is Costing You a Fortune.
If a TPA tells you they only need $20 per employee per month (PEPM) to run your plan, you need to ask yourself a very simple question: How are they staying in business?
I’ve been in this industry long enough to know the overhead. Between office space, specialized staff, and the tech required to process claims, it costs more than $20 just to keep the lights on. TPAs aren’t charities. If they aren’t getting a fair price from you on the front end, they are harvesting it from you on the back end.
Click here to watch the full video >>
The Spreadsheet Deception
Brokers have been spreadsheeting health plan deals for 50 years. They walk into your office, lay out the numbers, and promise they’ve found the absolute lowest administrative fee.
I know how this works because I sit on the other side of the table. I’ve had brokers tell me directly that their entire job is to beat me down on price just so they can look flawless on paper.
So, a Third Party Administrator (TPA) comes in at $20 per employee per month. You see the savings. You sign the contract.
Let me introduce you to the reality of that transaction: TPAs are businesses. We have payroll, office space, and technology costs. It costs significantly more than $20 a head just to keep the lights on and do the work. If a TPA is taking a loss on their administrative fee, they are absolutely making up that deficit somewhere else.
The Hidden Revenue Machine
The “missing” money is baked into the system. You pay for it through undisclosed revenue streams, kickbacks, and backdoor deals. Everyone is getting a piece of the action, and you are footing the bill.
The PBM Shell Game I once asked a Pharmacy Benefit Manager if they would lower their fees for my clients if I stopped taking my cut of the drug claims. They answered immediately: “Yes, we will, because we just add that on.” They inflate your bill to pay the middleman. So I refused to let my clients fund that shell game, so I decided to remove that revenue stream from my operations.
Stop-Loss Padding Carriers regularly bake a 15% commission into your stop-loss premium to pay the broker or TPA. Years ago, I asked a carrier to remove that commission so I could charge a transparent flat fee instead. The carrier dropped the client’s cost by 21%. The system literally penalizes you just for moving the money around. I realized how backward that was, so I made the conscious choice to strip stop-loss commissions out of my operations.
The 85/15 Rule Insurance companies are required to spend 85% of premiums on claims, leaving 15% for profit and overhead. They desperately want your claims to be as high as possible so their 15% slice grows. When your plan costs go up, the carrier wins. And because the broker’s commission is tied to the total premium, the broker gets a raise, too. At J.P. Farley, we decided to walk away from that conflict of interest entirely.
The Ticking Clock on Liability
Employers have played this game since 1968. You accept a low teaser rate, experience the friction of changing plans, and then absorb a 20% or 30% renewal increase the very next year.
The landscape is shifting rapidly.
New fiduciary responsibility and revenue disclosure rules are taking effect. The era of undocumented commissions is ending. Soon, employers will be held legally liable for signing off on these hidden revenue schemes. You are managing your employees’ money, and you can no longer afford to ignore where those dollars are actually going.
A Transparent Path Forward
I went on a ski trip a few years ago and spent a lot of time thinking about how pervasive this corruption had become. I get 50 vendor calls a week, and they all start by telling me exactly how much they will pay me to push their product onto my clients.
I decided to stop taking the bait.
A small group of us – maybe 15% or 20% of TPAs – now play it entirely straight. We charge a fair, transparent fee for the actual work we do. We refuse the hidden money from the PBMs and the stop-loss carriers. Our only goal is managing your plan efficiently and keeping you in business.
Everybody in the system deserves a fair price. The doctors, the hospitals, the brokers, and the TPAs. But nobody deserves to be unfairly gouged.
Ask Your Broker Today: “If we stripped away every commission, override, and rebate, what would this plan actually cost?”
If they hesitate, they aren’t working for you.
By Jim Farley | CEO / Owner at J.P.Farley | Third-Party Administrator | Since 1979
