In the employee benefits industry, as a broker, we are always looking for ways to contain health insurance cost for our customers. While there is not an ‘easy button’ to accomplish this, there are certainly tools and funding arrangements available that can help. You just have to know where to look. However you must remember, if it looks too good to be true, it probably is………..
One area we are spending more time in is the ‘insurance consortium’ space. It is a blend of several funding arrangements put together including: level funding, benefit captive and association health plans.
A fully-insured arrangement may seem like an “easy” solution, but with the high fixed costs and lack of transparency, it doesn’t produce long-term savings. Stand-alone self-funding may seem like the “risky” solution, with too many variables to track and the unknown of trying to predict and manage claim costs. An insurance consortium could be a great solution.
An insurance consortium is a collaborative arrangement among multiple organizations that join together to share risks, resources, and expertise in order to achieve common goals. These consortia are typically formed to address specific challenges or opportunities within the insurance industry.
The primary reasons for forming an insurance consortium include:
- Risk Pooling: Members of the consortium pool their resources and risks, which helps in spreading the financial impact of losses among all participants. This can lead to greater stability for individual insurers.
- Expertise Sharing: Consortia allow participating companies to leverage the collective knowledge and expertise of their members. This can be particularly beneficial when dealing with complex or specialized risks.
- Cost Sharing: By working together, insurance companies can share operational costs, such as research and development, technology infrastructure, and marketing expenses. This can result in cost savings for all members.
- Market Access: Consortia may be formed to collectively enter new markets or offer specialized products that may be challenging for individual insurers to handle alone.
- Regulatory Compliance: Collaboration within a consortium can facilitate compliance with regulatory requirements by sharing information and best practices related to compliance issues.
- Innovation: Insurance consortia can be a platform for collaborative innovation, allowing members to collectively develop and adopt new technologies, products, or services to stay competitive in the market.
These consortia can be industry-specific, focusing on a particular type of insurance or risk, or they can be more general in nature. The structure and goals of an insurance consortium can vary depending on the needs and objectives of its members.
Jack Silberman | CEO Silberman Group
