Small business owners are constantly looking for ways to cut their costs and when it comes to insuring own employees there are certain alternatives to traditional group plans that may be quite costly for small enterprises. The two most common alternatives are purchasing alliances and association plans. The first are generally nonprofit organizations with private ownership that connect more small enterprises for purchasing group plans as a whole.
The concept behind this is quite obvious: the more the better. Because there are many people involved in insurance purchasing pools they usually have better rates and stronger negotiation abilities. There are pools allowing individuals to join, however in most cases they serve only small enterprises with 2 to 50 workers. Such pools have more attractive rates and premiums for their members if compared to typical group plans because the total number of underwriters can sometimes be of a big international corporation. So yes, size does matter.
Insurance purchasing alliances usually involve three parties:
1. Alliance company. Purchasing alliances are usually private companies by the form of ownership, which acts in the interest of smaller enterprises participating in the pool. The company is responsible for rules and regulations, requirements for new members and their eligibility. It is also the party responsible for negotiation the rates and premiums with the insurance provider. Quite often a local state agency or chamber of commerce works as an alliance company.
2. Health insurance providers. The alliance companies contact insurance companies for providing their members with coverage. Sometimes the company will contact several insurance providers to offer their pool members wider selection of plans and better coverage rates. Quite often you can find HMOs, PPOs, and POSs with the same alliance company but provided by numerous insurers.
3. Administrator company. This party usually deals with routine management duties and is often a company specialized in health care administration. It is usually the company that the members get all the services and instructions from.
Health insurance purchasing alliances are present in all states, where the legislation allows such practice. To learn what local purchasing alliances can help your enterprise in getting cheap health insurance call your state insurance department. The local chamber of commerce can also be a valuable source of relevant information.
In case there is no purchasing alliance in your area or state you can use an alternative in the form of association plans. The difference between purchasing pools and associations is that the latter are required to have purposes other than simply providing health coverage to its members. The most common examples of such associations are labor and credit unions; trade, professional and alumni associations; lodges.
This option usually has higher premiums than purchasing pools, and more limited selection of plan types. Moreover, association plans require the member to pay additional fees for participation in order to be eligible for coverage and other benefits.
So if you have the opportunity to take part in a purchasing pool, it’s better to go with it rather than participating in an alliance plan. However, alliance plans are still more beneficial to small business owners than separate group plans, so the choice is yours.
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