Besides contacting insurance companies to learn about which products they offer, there are other ways to approach the process of shopping for a group plan. In addition to buying directly from the insurance company, employers can purchase health coverage products through purchasing alliances (also called purchasing pools) and through associations such as trade or professional groups. In addition, the Patient Protection and Affordable Care Act requires health insurance exchanges—a new way of shopping for health insurance—be made available by 2014. We discuss these options below and point out the advantages each may offer your business.
Generally speaking, knowing where to look for insurance products is a broker’s job. Even if you will be using a broker, it’s smart to familiarize yourself with the options we explain below. Of course if you don’t use a broker, knowing these tricks of the trade is essential.
Purchasing alliances are businesses (either for-profit or nonprofit) that offer a range of insurance products to employers. The purchasing alliance acts as an intermediary between insurance companies and employers, allowing employers to purchase a coverage “package” that can include products from more than one insurer. The main benefit of purchasing through an alliance is that employers can offer a range of choices to their employees, yet pay only one bill to the purchasing alliance. Besides the simplicity of paying just one bill for a range of insurance products, purchasing alliances offer more purchasing power to small business owners who wouldn’t otherwise be able to offer more than one insurance product to their employees.
As with traditional health coverage plans, employers generally have a set amount they contribute toward employees’ (and possibly dependents’) premiums under a purchasing alliance, and employees pay any remainder from their paychecks. The difference with purchasing alliances is that employees may pay different amounts depending on which coverage product they’ve chosen. For example, an employee who chose a HMO plan might have a higher premium than another employee who chose a PPO product with a hefty deductible. Because the employer pays just one set amount for everybody, the employee with the HMO will pay more per paycheck than the employee with the PPO.
Keep in mind that while purchasing alliances offer greater choice and flexibility to small employers, the overall costs of the products they sell may or may not be lower than purchasing an insurance policy directly from an insurer.Purchasing alliances generally offer a health plan administrator that handles many service issues for the alliance’s members. The purchasing alliance will also generally be a good source of information about the quality of different plans, details about services and benefits, and other insurance issues.
Trade or Professional Associations
Another way you may be able to increase your purchasing power is to buy group coverage through a trade or professional organization. Contact your trade association or professional organization to see if it participates in any group purchasing plans.
One thing to keep in mind about purchasing through an association is that you’ll likely need to approach them yourself. If you’re using a broker, he or she may not be familiar with the associations in your industry. Because each association is likely to have an established relationship with a broker or benefits consultant, your own broker may not have an incentive to seek out these arrangements for you.
Health Insurance Exchanges
By January 2014, the option to participate in a health insurance exchange should be available to small employers. That’s when the Affordable Care Act requires states to establish an online marketplace where small business owners can purchase health insurance. These marketplaces will allow employers to pool their buying power and drive down the cost of insurance coverage. California has already passed legislation establishing the Small Business Health Options Program (SHOP) exchange and is in the process of setting it up.
The exchange will offer employers a choice of tiered categories of insurance packages, each with essential minimum benefits. This will allow easier comparison among plans. As an employer, you will decide what level of coverage to offer, and your employees may pick any plan offered within the exchange at your chosen coverage level.
The Department of Health and Human Services will define specific services that must be covered within these packages. This provision is designed to make sure everyone participating in the exchange has access to sufficient coverage.