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Purchasing Strategies
 Purchasing Alliances
Trade or Professional Associations
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. 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
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 businesses that 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 towards 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.
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.
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.
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 broker may not have an incentive to seek out these arrangements for you.
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In the tool box, you can find contact information for "Purchasing Alliances in California" and also for "Selected Trade/Professional Associations." |
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