How Can Association Health Insurance Make Providing Insurance To Employees More Affordable?

Business Blog

For small businesses, the cost of providing health insurance to their employees can be extraordinarily high. Small businesses simply don't have much bargaining power with insurers, and it's risky for insurers to provide insurance to a very small risk pool. Premiums are commonly high as a result. One way that businesses can lower their insurance premiums is to purchase health insurance through an association, which is a group of businesses and self-employed people who work in the same area or in the same industry. By joining together and switching to association health insurance, businesses are often able to lower their premiums. To find out how association health insurance plans can help make providing insurance more affordable for your business, read on.

How Can Small Businesses Save Money by Switching to an Association Health Insurance Plan?

Switching to an association health insurance plan can increase the size of a business's risk pool, which helps to lower premiums. When several small businesses join up and seek out an association health plan together, insurers look at them as one large, combined risk pool.

In health insurance, premiums are set to cover the expected cost of medical care. Rare events like motor vehicle accidents can have a dramatic effect on the cost of care, and they're taken into account when pricing premiums for the plan. With more people in the plan and a larger risk pool, the cost to guard against infrequent events like motor vehicle accidents is spread out among a larger group of people, so your health insurance premiums will be lower.

In addition, association health insurance plans have more flexibility in setting the benefits that they provide to members. If there are more than fifty people in the association, it's regulated as if it was a large employer, and large employers have significantly more freedom in choosing what benefits they provide to employees; they don't need to provide the same minimum benefits that insurance plans for small employers are required to provide. You're able to take advantage of the relaxed regulations, enabling you to find a health insurance plan that provides only the benefits that you and your employees need.

Does Increasing the Size of an Insurance Risk Pool Always Lower Premiums?

Increasing the size of the risk pool usually lowers premiums, but adding riskier members to the pool can actually increase them. Due to the relaxed regulations, association health plan providers are able to set premiums based on age, gender, and occupation. Small business health insurance plans can only adjust premiums based on age.

Adding members in risky industries (such as construction) can increase your premiums, as their expected cost of medical care will be higher than the expected cost for members in less risky professions. Similarly, adding more women to the risk pool may increase premiums, as the insurer will be expecting to pay out more for maternity costs.

If you're able to group together with other small businesses with an excellent risk profile, however, then you can save a significant amount of money by switching to an association health insurance plan. If you're interested, look for associations in your area or in your industry that your business can join. If none are available, contact an association health insurance provider and talk about the possibility of forming an association on your own with other businesses in your area who want to save money on health insurance premiums.


25 May 2021

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