Questions and Answers
What is a health insurance consortium?
A health insurance consortium is a group of businesses or organizations that join together to purchase group health insurance for their active employees, their dependents, and their retirees. Consortiums may be fully-insured or self-funded. They may also be a combination of the two.
What types of benefits do consortiums provide?
Plans typically provide a broad range of medical, prescription drug, and hospital coverage, although specific benefit plans offered to employees vary by the consortium. Dental and vision care may be added as ancillary benefits. An advantage of a consortium is that it can design a health plan that best matches the needs of its members.
wellness initiatives and programs.
Consortiums can potentially save money in various ways.
Health insurance consortiums pool the resources of several different businesses or organizations. Thus, they can leverage more significant purchasing power, aiming to obtain lower premiums for their members. A consortium’s health insurance claims tend to be much lower than in standard plans, so costs are lower overall. Consortiums can spread the risk among a more extensive number of policyholders, compared to individual businesses or organizations. Health insurance consortiums may also control costs by implementing health and wellness initiatives and programs. Since consortiums know the exact makeup of their membership and their medical histories, they can customize programs unique to their member needs.
Who governs consortiums? Who handles day-to-day functions?
Consortiums are usually governed by boards that meet periodically throughout the year. The composition of the board members depends on the specific kind of consortium. However, it often includes voting members from each participating business or organization. The roles and responsibilities of participating members are established in trust agreements or bylaws. Generally, a third-party administrator or a plan administrator runs the day-to-day operations of the consortium.
What factors make a consortium successful?
A combination of three factors that, when combined, can make a consortium viable include:
- The participating employers, businesses, or organizations are similar in nature
- Participating members tend to have similar claims experiences
- Members that participate in the consortium are located in the same geographical region
What are the different types of consortiums?
- Fully-insured health consortiums contract with insurance companies. The insurance companies collect the premiums from members, administers the plan, pays health care claims, and bears any financial risk if the cost of claims exceeds premium payments.
- Self-funded health consortiums collect premiums from their plan members. They also pay their claims directly. They typically purchase a “stop-loss” insurance policy, which can help them if claim costs exceed the number of premium dollars. This type of consortium may contract with a third-party administrator to process and pay insurance claims.
- Minimum premium consortiums are a hybrid of a self-funded plan. A third-party administrator is paid to operate the program. This administrator collects and reviews employee healthcare bills, negotiates rates with medical providers, gages the funding required to pay healthcare expenses, and bills the consortium for claims it has paid for members.
For further exploration of consortiums, or to find out if one is a good fit for you, contact an administrator or broker in your local area.