INSIGHTS

What Is a Health Insurance Consortium and Why Employers Should Care

Mid-sized employers face unsustainable healthcare costs, with family coverage at $25K per employee per year. What if there’s a better way to manage this? See how a consortium changes the game.

November 5, 2024

Employers today face a mix of threats: misaligned interests from big carriers, industry consolidation that limits their options, and ‘super-utilizers’ who drive up costs.

Today, the average per-employee, per-year cost for family coverage stands at an unsustainable $25,572, according to the 2024 Kaiser Report. For midsize businesses, managing these rising costs feels like a losing battle.

That’s why most mid-sized employers are exploring self-funding options for their health plans. You hear their advisers asking: “This group is performing well, can we self-fund? And if so, what’s the next step?”

Employers are actively seeking solutions, and instead of delivering bad news year after year, you have the chance to flip the script.

You’ve seen a lot of flawed solutions, but a properly structured consortium offers a way out.

So, what exactly is a health insurance consortium, and why should it matter to employers?

Let’s get into the details.

What Is a Consortium?

A health insurance consortium is a group where like-minded employers join forces to purchase the stop-loss policy collectively to pool resources and spread the risk across the entire group, which helps smooth out the financial impact of high-dollar claims.

In other words, a consortium lets employers navigate the unpredictable landscape of healthcare costs with more stability and control.

Unlike a traditional plan, where one large claim can skyrocket premiums, a consortium is designed to reduce that volatility, even in the so-called “bad years.”

5 Reasons Why a Consortium Is a Stable Choice for Employers

By joining a well-structured consortium, employers gain access to a stable model that controls costs without compromising benefits. Here’s why:

1. Significant Cost Savings
By joining a consortium, employers benefit from collective purchasing power, which drives down costs. Properly structured consortium models eliminate unnecessary expenses and provide flexible options for when to join or renew. Employers pay only for what they need, not a one-size-fits-all approach.

2. Shared Resources
A consortium often involves shared administrative resources, such as third-party administrators (TPAs) and pharmacy benefit managers (PBMs), which help optimize the management of claims and other administrative tasks.

3. Stability Through Cost-Containment
Members of a consortium typically implement cost-containment measures and best practices to manage and reduce healthcare expenses effectively. This collaborative effort leads to efficient use of resources and better control over high-dollar claims.

4. Reduced Volatility in Bad Years
Every employer experiences fluctuations in claims, and in traditional plans, a single high-cost year can be devastating. In a consortium, however, high-dollar claims are shared across the pool, reducing the financial impact on any employer.

5. Lower Upfront Financial Commitment:
If your clients are looking for a solution with lower upfront financial commitment and no collateral requirements, a consortium is ideal. It protects both the employer and broker from friction with clients.

Choosing the Right Consortium for Your Clients

Not all consortiums are created equal due to differences in structure, risk management, and eligibility requirements.

Here are 9 key factors to evaluate:

1. Private vs. Public Pool: Determine if the consortium operates as a private or public pool. Private pools exclude misaligned partners ensuring alignment and protection, while public pools are open to almost anyone, leading to higher abuse, and higher volatility in claims and premiums.

2. Program Integrity and Risk Management: Ensure the consortium has standards to exclude entities that could abuse the pool, such as the big three PBMs and carrier administrators known for inflating healthcare costs.

3. Cost-Containment Requirements: Check if the consortium enforces cost-containment requirements to control high-dollar claims. This can significantly impact the sustainability of premiums and the financial stability of the pool.

4. Policy Flexibility: Look for features like flexible entry times, no cash calls, no collateral requirements, and renewal options that accommodate employer needs without additional financial burden.

5. Transparent Underwriting: Evaluate if the consortium uses a transparent underwriting approach, whether through individual or pooled credits and how it aligns with the employers’ risk levels.

6. AI and Data-Driven Underwriting Tools: Consortiums using advanced tools for underwriting offer more accurate claims predictions, leading to better risk assessment and fewer surprises in premiums.

7. Long-Term Rate Stability: Review past performance in terms of rate stability, especially how the consortium handles year-over-year rate caps and premium increases. Lower volatility in premium increases signals effective risk management practices.

8. Quality of Partners and Vendors: Ensure the consortium collaborates with tested and reputable TPAs, PBMs, and specialty vendors that support the program’s cost-containment goals and provide value to members.

9. Surplus and Dividend Sharing: Understand the policy on surplus or dividends if any exists. This can affect potential returns to the employer and overall satisfaction with the consortium.

Why Mid-Sized Employers Join Virtue Health’s Consortium

At Virtue Health, we offer a private group stop-loss purchasing consortium designed by advisers for advisers, ensuring a group of like-minded employers who meet mandatory cost-containment requirements can join.

This eliminates the risk of poor financial management and high abuse seen in public pools.

Here’s what sets Virtue Health apart:

– No Collateral, No Cash Calls: Employers can join Virtue Health’s consortium without worrying about cash calls or financial surprises. Our model is designed to provide long-term stability, allowing businesses to focus on growth without being blindsided by unexpected costs.

– Flexible Entry: Employers can enter or renew at any time of the year.

– Cost-Containment Measures: Virtue Health enforces cost-containment requirements that other group purchasing models don’t, offering stronger financial control and lower renewals year after year. This keeps the pool stable and prevents abuse from misaligned partners like the big PBMs and traditional carrier administrators.

– Private Insurance Pool: Designed with the employer in mind, ensuring all participants who join the pool are aligned in their commitment to controlling healthcare costs.

– Track Record: Virtue Health boasts stellar loss ratios and, for the past 7 years, hasn’t experienced a financial loss, ensuring stable and low-cost renewals.

– Innovative Policy Features: We help employers with advantages like no new lasers, rate caps, and banded renewals.

– Sustainability: Provides stability with low-cost renewals in good years and protection in bad ones.

Start Reinventing How Midsize Employers Self-Fund Through Group Purchasing

Employers deserve a health plan that aligns with their goals, not one that leaves them vulnerable to rising costs and unpredictable claims.

By joining a well-structured consortium like Virtue Health’s, you’re not offering clients a way to manage costs; you’re delivering a sustainable path that protects their business and employees.

Ready to help your clients break free from the traditional insurance cycle?

Let’s work together to redefine what’s possible in healthcare. Reach out to explore how Virtue Health’s consortium will benefit your clients.