Private Health Insurance:

Cooperatives Offer Small Employers Plan Choice and Market Prices

HEHS-00-49: Published: Mar 31, 2000. Publicly Released: May 1, 2000.

Additional Materials:


William J. Scanlon
(202) 512-7114


Office of Public Affairs
(202) 512-4800

Pursuant to a congressional request, GAO reviewed small employer health insurance purchasing cooperatives, focusing on: (1) a bill that would establish Healthmarts; (2) studies of small employer purchasing cooperatives and the small group market; (3) GAO's interviews with health policy association officials and experts; and (4) experiences of five small employer health purchasing cooperatives.

GAO noted that: (1) small employer purchasing cooperatives have been an important component of several states' efforts during the 1990s to improve small groups' health insurance options; (2) purchasing cooperatives aim to provide small employers with some of the same advantages larger employers have in offering health insurance; (3) the five small employer purchasing cooperatives GAO examined have demonstrated that these cooperatives can offer two of these advantages--administrative services and a range of benefit options to participating small employers; (4) by participating in a cooperative, small employers have a single point of entry to multiple insurers' plans with standardized benefit packages; (5) furthermore, since cooperatives typically offer plans sponsored by a variety of insurance carriers with different benefit levels and managed care features, participating small employers can offer their employees a choice of multiple health insurance products; (6) these advantages have led some small employers that previously had not been offering health insurance to join a cooperative; (7) however, even the larger cooperatives cover only a small fraction of the small group health insurance market in their states; (8) the experiences to date of small employer purchasing cooperatives typically have not resulted in a third advantage--leverage in negotiating lower premiums; (9) the cooperatives' potential to reduce overall premiums is limited because: (a) they lack sufficient leverage as a result of their limited market share; (b) the cooperatives have not been able to produce administrative cost savings for insurers; or (c) their state laws and regulations already restrict to differing degrees the amount insurers can vary the premiums charged different groups purchasing the same health plan; (10) cooperatives can potentially offer lower premiums for firms with high-risk, high-cost individuals if they restrict the premiums insurers may charge individual firms more than restrictions already imposed by state statutes and regulations for all small groups; (11) to ensure their viability in the small group market, the purchasing cooperatives GAO examined have taken several steps to maintain a sufficient number of participating insurers and employers; (12) recognizing and countering insurers' perceptions that high-risk individuals and groups are likely to enroll through the cooperative is key to gaining insurer participation; and (13) furthermore, to increase employer participation, the cooperatives have maintained insurance agents' principal role in guiding employers to the cooperative.

Oct 19, 2020

Oct 8, 2020

Oct 1, 2020

Sep 30, 2020

Sep 23, 2020

Sep 21, 2020

Sep 17, 2020

Sep 16, 2020

Sep 14, 2020

Sep 3, 2020

Looking for more? Browse all our products here