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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.