Traditional wisdom leads employers to purchase fully insured health plans for their employees. These plans are sold by benefits brokers who make five to seven percent commissions on the cost of the plans they sell. This structure hardly incentivizes brokers to help companies control the rising costs of healthcare!
According to the National Business Group on Health, the average fully insured company’s annual cost per employee is around $15,000. While fully insured plans are simple to implement, employers are starting to explore alternatives that provide employees with quality care at more affordable costs.
The Solution May Be Association Health Plans
As an industry association, you exist for the benefit of your members. If a health plan is not currently part of your offerings, you may be missing out on a huge selling point and value-add for your member companies and their employees, while also depriving your own organization of an additional source of income.
With an Association Health Plan (AHP), member companies are pooled together to create a new self-funded health plan. This separate legal entity is governed by ERISA laws and is also large enough to secure economical Stop Loss Risk Coverage. While there are many benefits to AHPs, a primary factor is that average annual costs for health insurance often go down by 25-30% – a huge savings to your member companies and their employees!
How to get started with an AHP
With as few as 300 employees across any number of association member-companies, your association can get started and help your members and their employees reduce their healthcare costs. By pooling the risk of a large number of members, your association member companies can provide the value of a large self-funded plan to their employees which they would be unable to achieve on their own.
Financial Impact of an Association Health Plan
When we launch an AHP, we often see a reduction of $3,000-$4,000 per employee compared to the rates your member companies are paying for a fully insured plan with a major carrier like Blue Cross/Blue Shield, UnitedHealthcare, CIGNA, or Aetna.
This cost savings improves EBITDA and frees up money for companies to reinvest in their own growth, or even provide lower healthcare premium costs to their employees.
No Risk to the Association
When your member-companies join together to create an “Affinity Health Plan” they are reinsured by an “A-Rated” Stop Loss company that provides full protection against larger claims. The association (as the plan sponsor) is protected, as are the member companies and their employees.
Other Benefits of AHPs
- Aggregate your risk while enhancing member benefits
- Provide open access plans that offer freedom and choice to your members and their employees
- Help your members attract and retain talent by offering better benefits at lower costs
- Generate revenue for your association outside of membership dues
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