Ask HN: Patterns for handling stable but problematic client(s)

So one of my clients (for software development services) is a small agency that resells my services to another company in the insurance industry. Every now and then the owner indicates the her clients complain about the high amounts billed. Somehow I found out she makes about 66% on every hour I bill, and in any case my hourly rate is just average, so what I actually get is rather below industry average. I am in a position to demand a much higher rate (or move to per-feature, as opposed to hourly, billing) and walk away if she can't meet my demands, but she has been a very reliable client for years, a hedge against the occasional proverbial freelancer famine. The main issue as I see it that the ultimate client (the insurance company) does not really appreciate the value of the development services provided (think "software is an expense"; "we can always hire another dev from oDesk/India", etc., etc.) Should I: (1) Try to educate the agency and client, (2) Demand a higher rate or move to another billing model, or (3) Just cut them loose and focus on other higher-value clients? I suspect such issues are par the course for freelance/contract work, but what patterns of dealing with them have you found to be effective?