Small Business Alliances and Group Health Care Plans:

If you have not been able to find an association group health care plan or a regular group health care plan for your employees, there is a new alternative that may provide a solution to your problems.

Small business alliances are similar to an association health plan, but they are governed differently and may be easier to find and qualify for. Here are some frequently asked questions about small business alliances.

1. What is a small business alliance? An alliance can be compared to a group pool that provides small business owners with greater purchasing power to find a better deal on group health insurance plans. Several small businesses can band together to purchase one large group health policy that will provide coverage to all members.

2. How is this different from an association plan? Although they are similar in nature, they are very different when it comes to regulations. Association group health plans are not governed the same as regular health plans and associations have particular benefits that insurance companies do not enjoy. Alliance health plans do not enjoy these special perks, but do offer small business owners a way to save money on their insurance, much like an association plan.

3. Why is it cheaper to purchase insurance through an alliance? When a group of small businesses purchase one large group health policy, the risk to the insurance company goes down. This means prices for a group health plan go down as well. Small businesses pose a risk to insurance companies and they typically make up this risk by charging higher premiums.

4. Will my employees have more options? Yes. Unlike association plans, alliance plans offer more alternatives for coverage and a great amount of benefits for members. In addition, premiums are typically much lower than they are for association plans.

5. How does an alliance work? An alliance is made up of three parties. The first party is called the owning company. This is the company that will function on behalf of its members. In the simplest terms, this is the large "company" that will be purchasing the group health plan for its smaller members. The second party is the health plan. This is the insurance company that will contract with the alliance, or the first party that is the owning company. The third party is called a neutral, third party administrator. This will typically be made up of a company that has experience in administrating group health plans. This party will be responsible for regular concerns, typical issues, as well as enrolling new members and offering customer service to existing members.

6. Is there an alliance in my area? Alliances are governed at the state level, which means you will need to contact your state's insurance regulation board to find out if there is an available alliance plan in your area. As these plans become more popular, more of them are becoming available throughout the United States.

7. Is the alliance a for-profit business? No. An alliance is considered a non-profit organization that works to unite small business owners to purchase one large, group policy. The company must be privately held and must work for the benefit of all of the members as a whole.

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