Purchasing Alliances

Small businesses have a particularly hard time finding good, reasonably-priced insurance coverage. Often, insurance companies are not eager to insure small businesses because the risk pool is small and they tend not to make big profits on them.

If an insurance company insures a three-person business and takes in $6,000 in premiums over a year's time, but one of the three insured people has a heart attack, the medical claims that the insurance company will have to pay will easily surpass what they took in premiums and they will post a loss on the account.

When small businesses band together into larger groups, however, they enjoy more purchasing power and they have a larger risk pool, which makes them more attractive to insurance companies. You can usually get more competitive rates for insurance when the groups are larger in number.

Where can you find purchasing alliances? Some communities have Health Purchasing Alliances. These are local, private non-profit groups that get small businesses together and offer them health care benefits at competitive prices.

To find out if your state has health purchasing alliances and how to contact them, check online or your phone directory in the state government listings or check with your chamber of commerce.

Health care reform. Under the Patient Protection and Affordable Care Act and related legislation, beginning in 2014, small businesses will be able to purchase private health insurance through a state-based insurance exchange program specifically designed for them. The Small Business Health Options Program (SHOP) aims to make it affordable for small employers to offer employees a variety of health plans.