They might as well offer deep discounts on the iPhones if they are going to loose that much money. I'm sure Verizon would prefer to give the money to their customers rather than to Apple.
And Apple may not like the deep discounts on their flagship product so Verizon may be able to extract some concessions from Apple
What "deep discounts"? Signing on to the most expensive network? They agree to a price per phone. If they want to take more of a loss, and say you can pick up a 5S as a "free" phone, that's called cutting off your nose to spite your face.