Small Businesses Win With New Healthcare Purchasing Option

Small Businesses Win With New Healthcare Purchasing Option

Historically, small businesses have been limited in their healthcare purchasing decisions due to a number of factors: small group legislation that varies by state; more limited plan design selections than large groups get; and the inability of individual small businesses to negotiate rates with insurance carriers. But that’s all about to change. 

Against the backdrop of healthcare reform and a still sluggish economy, small businesses increasingly have more options for purchasing healthcare.  

Co-ops Catch On In Massachusetts

This week, the Retailers Association of Massachusetts unveiled its new group purchasing co-op for its 4,000 members.  

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The co-op is allowed under a state law passed in 2010 that permits small business employers to band together as a large group to negotiate its own healthcare rates. By joining the co-op, small employers can expect to see premium discounts of between 12-20%. The catch? It offers a limited network with just one health system, Steward Healthcare System, and one insurer, Fallon Community Health Plan.  

The Retailers Association isn’t the only group considering a co-op. To date, five other co-ops are in the works in Massachusetts, including one for the Chambers of Commerce.  

State Exchanges Available in 2014

State exchanges will offer a new marketplace for small employers to purchase insurance. Designed to make it easier for these businesses to compare health plans and offer their employees choice in coverage without higher premiums, the exchanges also offer employers an out by empowering employees to purchase coverage individually.  

The growing interest in co-ops, however, suggests small businesses still believe there is strength in numbers and will want to continue to provide the insurance to their employees.  

PEOs a Growing Option

Exchanges and co-ops aren’t the only options for small businesses. Professional employer organizations (PEOs) are a $50 billion dollar industry and are catching on quickly – currently growing 20% per year.  

With a PEO, workers become co-employees of both the employer and the PEO. The employer maintains direction over activities like hiring, setting job responsibilities and managing workers’ actions while the PEO handles employee administration functions, such as HR, payroll, benefits, workers’ compensation and retirement plans.  

The benefit? Small employers lower their risk exposure, save on staffing expenses and reduce their administrative burden. And, because a PEO aggregates all of its clients’ employees together, it can secure better pricing so employers can offer a more competitive benefits package. 

Amidst all the change, one thing is certain: small businesses are being heard. And the market is responding with more options, not less. 

Amy Gallagher has over 19 years of healthcare industry experience.  As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.

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