What Congress banned in finance and real estate, health insurers have turned into a business model.

 Self-dealing is illegal in banks, real estate, and investment firms, but in health insurance, it’s not only legal, it’s widespread. Large insurers have spent decades consolidating the U.S. health care system, acquiring medical practices, pharmacies, and pharmacy benefit managers, all while sidestepping rules meant to protect patients and taxpayers.

Self-dealing: Illegal in Most Industries, Rampant in Health Insurance

What Congress banned in finance and real estate, health insurers have turned into a business model.

Rachel Madley, PhD

Aug 20, 2025

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For example, UnitedHealth Group has 2,694 subsidiaries, as documented in the Center for Health and Democracy’s Sunlight Report on UnitedHealth Group. 

• Within this conglomerate, there are 589 clinician practice locations across 32 states acquired between 2007 and 2023. 
• UnitedHealth Group also has 24 subsidiary pharmacy benefit managers and over 30 subsidiary pharmacies. 

Data and insider accounts suggest that UnitedHealth Group and other vertically integrated insurers engage in self-dealing to increase profits. The ways these subsidiaries interact closely resembles self-dealing practices that are prohibited by law in other industries, such as banking, real estate, and investment firms.

As Dr. Seth Glickman and I have explained in earlier pieces, when a health insurer owns or controls medical practices, pharmacy benefit managers, or pharmacies, it can circumvent medical loss ratio (MLR) regulations. 

MLR rules require insurance companies to spend 80–85% of premium dollars on medical costs, leaving the remainder for administrative fees and profits. 

Unitedhealth Group, for instance, reportedly pays its own subsidiary providers above-market rates for medical services. 

• These payments count as “medical costs” under MLR rules, yet the subsidiaries retain the excess as profit. 
• Similarly, when a patient uses Optum Rx, a UnitedHealth Group subsidiary, or a subsidiary pharmacy, the fees added by the PBM are counted as medical costs, even though they are retained as profit by the parent company.

Above is a clip from C-SPAN during Wendell Potter’s testimony before the U.S. Senate Health, Education, Labor, and Pensions (HELP) Committee. You can see Senator Roger Marshall, M.D. (R-Kansas) raise his eyes when Wendell, discussing health insurers circumventing the MLR requirements, says: “In banking, this kind of self-dealing is illegal.”

In banking, such actions are expressly prohibited. Consider a bank CEO who owns a real estate development company and seeks a loan for a risky project. If the bank lends to the CEO’s company at a below-market interest rate, the loan violates federal law and could trigger millions in fines as well as civil and criminal charges for both the CEO and the bank. This scenario parallels UnitedHealth Group’s current operations. In both cases, customer money (depositor funds in a bank; premium dollars in insurance) is used to funnel profit to insiders or affiliates, bypassing the market discipline that governs arm’s-length transactions.

Real estate law similarly prohibits self-dealing. Imagine a real estate agent hired to sell a client’s home who secretly buys the property through an affiliate at a lower price than the market reflects. By underrepresenting the home’s value, the agent enriches themselves at the client’s expense. This violates state real estate laws and common law fiduciary duties. The parallel in Insurance is clear: insurers pay inflated prices to their owned practices, driving up care costs and premiums. In both cases, the fiduciary is using client assets (property or premium dollars) to generate hidden profits for themselves or their affiliates, avoiding fair-market competition.

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Investment advisers are also prohibited from similar practices. If you hire a broker to get the best price for a stock trade, the broker cannot quietly route the trade to an affiliate at a worse price so the affiliate profits. Even small losses per trade scale into substantial gains for the broker’s affiliate, all at the client’s expense. These actions violate the Investment Advisers Act of 1940, the Securities Exchange Act of 1934, and SEC rules when proper disclosure or consent is not obtained. Similarly, insurers use premium dollars to channel profits to subsidiaries instead of relying on competitive market pricing.

The stark parallels between self-dealing in banks, real estate, and investment brokerages, which Congress regulated decades ago, and health insurance are damning.  

1. Health insurance conglomerates have built empires on paying themselves to the detriment of patients and taxpayers. 
2. Congress must act to regulate this type of self-dealing in insurance as it does in other industries. 
3. Moreover, the depth of insurer control over the patient care system necessitates regulations to prevent vertical monopolies, where insurers dominate every stage of care delivery.

Rachel Madley, PhD, is Director of Policy and Advocacy at the Center for Health & Democracy. She previously worked for Congresswoman Pramila Jayapal. She received her PhD from Columbia University and has written for publications including The New York Times.

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